You may think you have supply chain security worries now … and with some cause. As the government seeks to foil terrorists intent on smuggling radioactive, explosive or biologically hazardous materials in the bellies of aircraft, on ships' decks or secreted in trailers and railcars, it's trained its spotlights on the shippers that own the cargo and the carriers that move it. Importing and exporting takes longer today than it did two years ago, and costs have soared. But the worst may be yet to come.
In a post-Sept. 11 world, the U.S. government needs to ensure that its transportation systems aren't being used as a vehicle for terrorism. That's no small task. In 2002, according to the World Shipping Council, around 202,800 U.S. importers received goods from more than 178,200 foreign exporters via ocean liner shipping. On average, something like $1.4 billion worth of goods are moved through U.S. ports every day, most of it in shipping containers—6 million a year. At the same time, U.S. airlines are moving around 22 billion ton-miles of freight annually.At any given hour, 61,000 people are airborne over the United States. There's no way of making all of that 100 percent safe any time soon—45 pounds of Semtex fits in the trunk of a car and can blow the front off a three-story building. Securing the international supply chain, or even just the bit of it that snakes through the United States, is a tall order. But then, some argue, so was eradicating smallpox.
Over the last two years, the U.S. and other governments have started to implement what they hope are solutions—an intimidating array of international initiatives known mostly by their acronyms. To name but a few, there's the Container Security Initiative (CSI), the Advance Manifest Rule (AMR), Smart & Secure Trade Lanes (SST), the Customs-Trade Partnership Against Terrorism (C-TPAT), the U.S. Customs' Automated Targeting System (ATS) and the International Maritime Organization's International Ship and Port Security Code (the IMO ISPS Code)—some of them voluntary, most mandatory. And if you think that all this is the transportation companies' problem, think again. Although the U.S. authorities are currently concentrating on ship and port security, cargo security is next on the docket and legislation about to go into force could affect you soon.
Take the ISPS Code, for example. The U.S. version of it, the Maritime Transportation Security Act, was introduced in 2002, and its requirements will be enforced beginning on July 1 of this year. Under the act, all U.S. ports and all ships visiting U.S. ports must have trained their staff in awareness, drawn up a security assessment document that includes plans for responding to a terrorist emergency, and have had those plans assessed and approved by the U.S.Coast Guard. Failure to do so will result in their being turned away, in the case of a ship, or locked down completely, in the case of a port.
That may sound like the carriers' problem, but it will most assuredly become your problem as well. For one thing, ocean shipping will cost more. Adrian Gonzalez, supply chain analyst at ARC Advisory Group in Dedham, Mass., reckons compliance will cost carriers some $1 billion in the first year and $4 billion over the next five years. It's a given that carriers will pass these costs on to their customers.
But the more immediate problem is the threat of delays. Even if the carriers and the ports you use are fully ISPS compliant, your cargo could still be held up. Christopher Koch, president and CEO of the World Shipping Council, brought this up during his testimony before the Senate Committee on Commerce, Science and Transportation on March 24. What will the U.S. Coast Guard do if an ISPScompliant vessel has called at a non-compliant port on its way to an ISPS-compliant U.S. port? That issue remains unresolved, he pointed out. "Vessels calling between such ports and the cargo on those vessels are caught in the middle," said Koch. "It is not yet clear what a vessel can expect in those situations."
Earl Agron, director of port and container security for APL Ltd., based in Oakland, Calif., shares Koch's concerns. "Authorities are reluctant to share any details because they don't want to let anyone off the hook," says Agron. "That's vessel related, but another question is: What happens to cargo that comes from a non-compliant port?"
Koch's feeling is that, at the very least, such cargo would be held up for inspection. Partly, it's about politics, and the tricky business of the United States' imposing security standards on the rest of the world. "While the government may be highly reluctant to stop trade with such countries [that have non-ISPS compliant facilities], we expect it is likely to undertake measures designed to impose pressure on such ports and governments to comply, and those consequences may become more substantial as time passes and the government becomes less tolerant of foreign ports that are not compliant with the Code," Koch said.
Naming names
If the image of a tightening noose comes to mind here— one that's putting a stranglehold on your supply chain— brace yourself. There's more to come. Another international program, the Container Security Initiative—designed to foster cooperation between trading countries in allowing U.S. officers to screen cargo in foreign ports—is still in its infancy, with details yet to be spelled out. But you can be sure there will be shipper involvement somewhere.
Meanwhile, U.S. Customs is wrestling with the problem of what actually constitutes a "shipper" for the purposes of ATS security screening, and whether the 14 cargo manifest data elements currently required are sufficient for the security task at hand. Koch describes this as a "significant pending question," and one that affects importers directly. One way or another, whether or not such information appears on a bill of lading, the U.S. authorities want the names of the original vendors, suppliers and manufacturers for all cargo. Koch urged the Senate Committee to recognize that this information is not the responsibility of the carriers but of the importers. Although importers provide much of this info to the Customs data system in the merchandise entry process, it's not currently filed before vessel loading and is therefore of no use to ATS, Koch said. He warned that importers should expect the equivalent of the Advance Manifest Rule under which carriers have to file cargo information 24 hours before the ship sails from a foreign port, bound for the United States.
"There is in fact an overarching and broader question that underlies this issue and the effort to make ATS as effective a cargo security screening system as possible, namely: What information does the government need, from whom, when, and filed into what information system?" Koch said. That raises yet another question: If importers will be required to provide extensive and detailed lists about their foreign vendors, do they want that information broadly distributed via carrier manifests, where competitors might see it? It's virtually certain that all these questions will be addressed in the next year or so, and they will directly affect U.S. importers.
Getting ready
What to do? Gonzalez and others have some suggestions for shippers that want to secure their supply chains as well as prepare for the future. Gonzalez says the first thing to do is appoint a chief security officer, today, and establish a team with members from the full range of company departments.
He also suggests joining voluntary security programs, notably C-TPAT, which will help get you thinking about security issues. To obtain C-TPAT accreditation, you have to convince Customs that you have rigorous security measures in force along your entire supply chain. That takes time, but it cuts the risk that your containers will be singled out for costly and time-consuming inspections. (Bob Perez, director of the C-TPAT program, says Customs now inspects around 6 percent of all containers entering the United States, and 100 percent of those considered "high risk.") Alan Hicks, director of business development and governmental policy at P&O Nedlloyd North America, based in East Rutherford, N.J., also endorses C-TPAT. "[C-TPAT] gets flak for being a voluntary program and having no teeth but it's made people aware of the risk and it's been hugely successful in that regard,"Hicks says. "Making people aware of the risk is the single most important weapon we have, having people looking in terms of the normal course of business saying: this doesn't look right."
Third, Gonzalez suggests you incorporate trade security requirements into your vendor and carrier qualification processes, and ask your existing vendors and carriers to comply with them as well. Furthermore, you should investigate the technology being developed to guard cargo once it leaves your loading dock—smart seals for containers, RFID and satellite tracking systems. Keep in mind you'll also need software to help you trawl through tracking data. "You have to worry about the database management and software applications," says Agron. "Very few companies are investing a lot of time on the application side."
Software capable of automatically separating the security wheat from the chaff is going to be increasingly crucial as shippers and carriers install more smart tags on cargo—whether they're passive or active RFID chips, or GPS tags that can send out messages about position and status to earthcircling satellites. It might appear that an ideal solution to the cargo security problem would be to tag every one of the world's 12 million to 15 million containers in active use with a whiz-bang transmitting device. But, Agron points out, that would result in a flood of information of biblical proportions. Ten million containers sending out signals once an hour would produce a quarter of a billion messages a day to be evaluated, swamping the receivers' systems.
Others urge shippers to get involved in the ongoing legislative process. Hicks at P&O echoes the sentiments of many when he says he's found working with the U.S. Coast Guard and Customs on a voluntary basis has led to a lot of useful debate. For example, he says, the authorities have already backed down on a requirement that advance manifest information be sent for empty containers on ships. Koch and the World Shipping Council, among other trade groups, also made Customs back off from a proposal to make the carrier responsible for naming parties other than the one that had contracted for the transportation service as the cargo's responsible "shipper." Importers should be getting involved too, lobbying national and international representatives, and participating in shipper groups. The Toy Association of America is one that's particularly active in this regard. Barry O'Brien, its chairman, announced at a security panel at a conference in Cleveland in March that he intended to pool the accreditation and inspection of all toy manufacturers in China used by Toy Shippers Association Inc. members in order to cut down on duplicate effort (and expenditure), and is working with the Toy Association of China to make that happen. Other vertical industries should take note. Importers are increasingly going to have to provide information about their business partners abroad. Starting now, and pooling resources to do so, is simply good supply chain policy.
Lastly, don't confuse supply chain efficiency with supply chain security. For example, with RFID tags, there's been no clear industry distinction so far between that technology's uses for container security and for supply chain management objectives. "These are not trivial issues," said Koch. "The issues, the challenges and the requirements involved in addressing the two are not the same. The purposes and the use are not the same. A failure to clearly distinguish between security requirements and commercial supply chain management objectives will create confusion; will impede progress on these issues; and may in fact create significant security vulnerabilities."
The German forklift vendor Kion Group plans to lay off an unspecified number of workers as part of an “efficiency program” it is launching to strengthen the company’s resilience and maintain headroom for future investments, the company said today.
The new structural measures are intended to optimize Kion’s efficiency, executives said in their fourth quarter earnings report.
“While internal programs to continuously improve product, production, and services costs were already up and running throughout 2024 and will continue, further structural measures will address a more efficient setup for Kion in Europe. This is expected to have an impact on personnel requirements subject to consultations with the respective employee representative bodies as required by local laws,” the report said.
“The efficiency program is addressing developments in the macroeconomic environment. European economies are struggling to gain momentum – this affects key customer industries in the Industrial Trucks & Services segment, where Chinese competitors have been improving their market position in the aftermaths of the recent pandemics,” Kion said.
The move comes as Kion reported that it finished its 2024 financial year with slightly improved revenue of $11.9 billion (over $11.8 billion in 2023), and profitability (measured as earnings before interest and taxes (EBIT)) that significantly increased to $951 million (over $820 million in 2023).
The company now plans to pay $249 to $269 million in financial year 2025 to implement the cost saving measures. Following that one-time charge, it expects to achieve sustainable cost savings of $145 million to $166 million per year, beginning in 2026.
“In order to maintain headroom for investments ensuring our future, to further strengthen our competitiveness and our resilience, we must manage our cost base. This requires structural and sustainable measures,” Christian Harm, CFO of Kion, said in a release.
By the numbers, fourth quarter shipment volume was down 4.7% compared to the prior quarter, while spending dropped 2.2%.
Geographically, fourth-quarter shipment volume was low across all regions. The Northeast had the smallest decline at 1.2% with the West just behind with a contraction of 2.1%. And the Southeast saw shipments drop 6.7%, the most of all regions, as hurricanes impacted freight activity.
“While this quarter’s Index revealed spending overall on truck freight continues to decline, we did see some signs that spending per truck is increasing,” said Bobby Holland, U.S. Bank director of freight business analytics. “Shipments falling more than spending – even with lower fuel surcharges – suggests tighter capacity.”
The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment, which processes more than $43 billion in freight payments annually for shippers and carriers across the U.S.
“It’s clear there are both cyclical and structural challenges remaining as we look for a truck freight market reboot,” Bob Costello, senior vice president and chief economist at the American Trucking Associations (ATA) said in a release on the results. “For instance, factory output softness – which has a disproportionate impact on truck freight volumes – is currently weighing heavily on our industry.”
Volvo Autonomous Solutions will form a strategic partnership with autonomous driving technology and generative AI provider Waabi to jointly develop and deploy autonomous trucks, with testing scheduled to begin later this year.
The announcement came two weeks after autonomous truck developer Kodiak Robotics said it had become the first company in the industry to launch commercial driverless trucking operations. That milestone came as oil company Atlas Energy Solutions Inc. used two RoboTrucks—which are semi-trucks equipped with the Kodiak Driver self-driving system—to deliver 100 loads of fracking material on routes in the Permian Basin in West Texas and Eastern New Mexico.
Atlas now intends to scale up its RoboTruck deployment “considerably” over the course of 2025, with multiple RoboTruck deployments expected throughout the year. In support of that, Kodiak has established a 12-person office in Odessa, Texas, that is projected to grow to approximately 20 people by the end of Q1 2025.
Businesses dependent on ocean freight are facing shipping delays due to volatile conditions, as the global average trip for ocean shipments climbed to 68 days in the fourth quarter compared to 60 days for that same quarter a year ago, counting time elapsed from initial booking to clearing the gate at the final port, according to E2open.
Those extended transit times and booking delays are the ripple effects of ongoing turmoil at key ports that is being caused by geopolitical tensions, labor shortages, and port congestion, Dallas-based E2open said in its quarterly “Ocean Shipping Index” report.
The most significant contributor to the year-over-year (YoY) increase is actual transit time, alongside extraordinary volatility that has created a complex landscape for businesses dependent on ocean freight, the report found.
"Economic headwinds, geopolitical turbulence and uncertain trade routes are creating unprecedented disruptions within the ocean shipping industry. From continued Red Sea diversions to port congestion and labor unrest, businesses face a complex landscape of obstacles, all while grappling with possibility of new U.S. tariffs," Pawan Joshi, chief strategy officer (CSO) at e2open, said in a release. "We can expect these ongoing issues will be exacerbated by the Lunar New Year holiday, as businesses relying on Asian suppliers often rush to place orders, adding strain to their supply chains.”
Lunar New Year this year runs from January 29 to February 8, and often leads to supply chain disruptions as massive worker travel patterns across Asia leads to closed factories and reduced port capacity.
Women are significantly underrepresented in the global transport sector workforce, comprising only 12% of transportation and storage workers worldwide as they face hurdles such as unfavorable workplace policies and significant gender gaps in operational, technical and leadership roles, a study from the World Bank Group shows.
This underrepresentation limits diverse perspectives in service design and decision-making, negatively affects businesses and undermines economic growth, according to the report, “Addressing Barriers to Women’s Participation in Transport.” The paper—which covers global trends and provides in-depth analysis of the women’s role in the transport sector in Europe and Central Asia (ECA) and Middle East and North Africa (MENA)—was prepared jointly by the World Bank Group, the Asian Development Bank (ADB), the German Agency for International Cooperation (GIZ), the European Investment Bank (EIB), and the International Transport Forum (ITF).
The slim proportion of women in the sector comes at a cost, since increasing female participation and leadership can drive innovation, enhance team performance, and improve service delivery for diverse users, while boosting GDP and addressing critical labor shortages, researchers said.
To drive solutions, the researchers today unveiled the Women in Transport (WiT) Network, which is designed to bring together transport stakeholders dedicated to empowering women across all facets and levels of the transport sector, and to serve as a forum for networking, recruitment, information exchange, training, and mentorship opportunities for women.
Initially, the WiT network will cover only the Europe and Central Asia and the Middle East and North Africa regions, but it is expected to gradually expand into a global initiative.
“When transport services are inclusive, economies thrive. Yet, as this joint report and our work at the EIB reveal, few transport companies fully leverage policies to better attract, retain and promote women,” Laura Piovesan, the European Investment Bank (EIB)’s Director General of the Projects Directorate, said in a release. “The Women in Transport Network enables us to unite efforts and scale impactful solutions - benefiting women, employers, communities and the climate.”