Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
It's not every day that trade association executives talk candidly about the economic pressures facing the industries whose interests they are paid, often handsomely, to represent. But Jeff Bergmann, chief operating officer of the Cincinnati-based Toy Shippers Association (TOYSA), could not sugarcoat his response to a query about the outlook for toy sales this winter.
"It's not going to be a very good holiday season for our members," he said in a late October interview.
Bergmann has valid reason for concern. According to a mid-October survey from the National Retail Federation (NRF), the typical U.S. consumer will spend $682 on holiday items this year, down 3.2 percent from 2008 and the lowest level since 2003. (The survey didn't solicit responses specific to purchases of toys.)
Not surprisingly, a separate NRF paper that tracks U.S. containerized ocean traffic entering U.S. ports has reported the weakest activity since 2003, as worried retailers pare back new orders in response to tepid end demand.
"We see stock levels (at retailers) that are significantly lower than in previous years," Eric Levin, executive vice president of Techno Source, a Hong Kong-based toy and game manufacturer, said in late October.
Levin said the financial crisis stands to reshape the entire supply chain landscape for the toy business. Traditionally, retailers placed their orders early in the year and suppliers shipped holiday stock throughout the summer for delivery to stores by early September. This year, retailers concerned about buying too much too soon spread their orders over a five- to six-month period that began in July and ran through November, Levin said. This has wreaked havoc on many supply chains, which were ill-prepared to make the adjustment, he said.
The executive said it's too early to tell if the shifts in order patterns are a one-time event in response to the downturn, or the start of a long-term trend. If it's the latter, "it will change a lot of the business flow in Chinese factories going forward," he said.
The retailers' cautious stance is not new. In 2008, toy import tonnage from China—by far the main source for U.S.-sold toy and game products—declined 8 percent over 2007 levels, according to consultancy IHS Global Insight. By contrast, import tonnage from China in 2007 rose 14 percent over 2006 levels, the firm said. It has not made projections for 2009's import activity.
Tight capacity
Weak demand is not the only challenge facing the toy industry. Another is a shortage of ocean liner capacity. In response to the global downturn and a non-compensatory pricing climate, a number of ocean carriers have taken ships out of service, leaving toy shippers and importers hard pressed to secure cargo space when they need it. TOYSA's Bergmann lauded the steamship lines for being flexible and accommodating to his industry's needs, but acknowledged the group has fielded "a few calls" from members looking for capacity during peak season and not finding it.
Should the space become available—and steamship lines can quickly get mothballed vessels back in the water if demand warrants—it will likely cost more to procure. Or at least it will if the carriers have their way. In August, the toy supply chain was hit with a $500 rate increase per forty-foot equivalent unit container (FEU); most of that increase has stuck. That increase was followed by a peak-season surcharge and "equipment repositioning" charges, as carriers look to shore up their bottom lines any way they can.
The third-party logistics service providers (3PLs) have been the main targets of the carriers' rate hikes. That's because so-called beneficial cargo owners—typically manufacturers or retailers—had language in their contracts barring rate increases or absorption of peak-season surcharges.
Bergmann noted that 3PLs are absorbing the increases or trying to pass them on to their customers. Some shippers have accepted relatively small increases from the 3PLs, he added.
Bergmann said TOYSA believes carriers just want to return to some level of pricing normalcy and are not looking to gouge his members. But that's little solace to an industry already facing sluggish demand during its most important selling period. "It's quite a conundrum for us," he said.
Get in gear!
The toy industry's challenges won't stop when Santa Claus packs it in for another season. In August 2008, President Bush signed legislation requiring that by this February, manufacturers and importers must certify that their toys have been tested and are in compliance with mandatory safety standards. Importers are required to have compliance certifications available to inspectors at the time the products are examined.
The legislation arose from several incidents in recent years involving the safety of U.S. toy imports, notably a 2007 incident when Mattel Inc. had to recall nearly 1 million Fisher-Price toys after discovering its supplier had coated their surfaces with lead paint.
David J. Evan, a New York-based attorney who advises companies on the new law, said the testing process and the potential for negative test results could disrupt the supply chain at any point. If inspectors snag a non-compliant product or product component, the goods can't be distributed until the affected item is removed or replaced. This could result in shipment delays, product recalls, and stockouts, Evan warned.
The New York-based Toy Industry Association has developed what it calls an industrywide process—which includes extensive product testing—to ensure compliance. In October, the group announced that manufacturers could start applying for certification under its new "Toy Safety Certification Program." Toys certified under the program are expected to appear on store shelves in 2010, the association said.
Amy Magnus, district manager at A.N. Deringer Inc., a St. Albans, Vt.-based customs broker, freight forwarder, and 3PL, said manufacturers and importers should expect government inspectors to be aggressive in enforcing the law. Magnus added that other agencies aside from the Consumer Product Safety Commission (CPSC) now have the power to place manifest holds on cargo to satisfy their own requirements. She suggested that companies seek the help of a broker or an import specialist to avoid stiff fines for non-compliance.
Evan said the CPSC is adding staff at U.S. ports, which will result in more inspections. If a product is stopped at a port due to compliance issues, the CPSC and the U.S. Bureau of Customs and Border Protection will conduct a field test and send samples to CPSC facilities, where examiners can place a hold on the goods until they determine if the product is in compliance. Goods that fail the compliance test will not be released into U.S. commerce.
Levin of Techno Source said toy manufacturers must balance the ability to test thoroughly with the need to quickly move products through the process so they can hit store shelves on schedule. They must also convince retailers to accept testing reports that manufacturers already have on file so they can avoid paying for the same tests to be re-run for each retailer, he added.
"If every retailer begins to require tests be re-done just for them, it will create significant unwarranted expenses and delays," Levin warned.
Regardless of the different issues that could potentially fracture industry interests, Levin said all the players are on the same page as to the overriding priority.
"We as an industry are all aligned in wanting to ensure that toys are safe for kids," he said.
As the old adage goes, everything old is new again. For evidence of that, you need look no farther than cargo ships, which are looking to a 5,000-year-old technology as an eco-friendly source of propulsion—the sail.
But today’s sails bear little resemblance to the papyrus or animal-skin sails used in ancient times or the billowing cotton or linen sails of 19th-century clipper ships. These are thoroughly modern, high-tech devices designed to reduce ship operators’ reliance on costly marine fuels and help curb greenhouse gas emissions—and they’re sprouting up on freight vessels around the world.
One example is the “rotor sail,” a cylindrical unit that’s mounted inside a flagpole-shaped device. When installed on a cargo ship’s deck, the sail can reduce the vessel’s fuel consumption and carbon dioxide emissions by 6% to 12%, users say. Last month, the Japanese marine freight carrier NS United Kaiun Kaisha Ltd.announced plans to install five rotor sails manufactured by Anemoi Marine Technologies Ltd. on the 1,184-foot-long iron ore carrier ship NSU Tubarao over the next year.
But the story doesn’t end with rotor sails. Companies are experimenting with other types of high-tech sails as well. For instance, the Dutch heavy-lift cargo ship Jumbo Jubileehas been outfitted with two mechanical sails known as wind-assisted ship propulsion (WASP) units in a bid to boost fuel efficiency and cut carbon. And the Dutch maritime gas carrier Anthony Vederhas deployed two “VentoFoil” sails made by Econowind on its ethylene carrier Coral Patula, with plans to add two similar sails to its sister ship Coral Pearl later this year.
When it comes to logistics technology, the pace of innovation has never been faster. In recent years, the market has been inundated by waves of cool new tech tools, all promising to help users enhance their operations and cope with today’s myriad supply chain challenges.
But that ever-expanding array of offerings can make it difficult to separate the wheat from the chaff—technology that’s the real deal versus technology that’s just “vaporware,” meaning products that don’t live up to their hype and may even still be in the conceptual stage.
One way to cut through the confusion is to check out the entries for the “3 V’s of Supply Chain Innovation Awards,” an annual competition held by the Council of Supply Chain Management Professionals (CSCMP). This competition, which is hosted by DC Velocity’s sister publication, Supply Chain Xchange, and supply chain visionary and 3 V’s framework creator Art Mesher, recognizes companies that have parlayed the 3 V’s—“embracing variability, harnessing visibility, and competing with velocity”—into business success and advanced the practice of supply chain management. Awards are presented in two categories: the “Business Innovation Award,” which recognizes more established businesses, and the “Best Overall Innovative Startup/Early Stage Award,” which recognizes newer companies.
The judging for this year’s competition—the second annual contest—took place at CSCMP’s EDGE Supply Chain Conference & Exhibition in September, where the three finalists for each award presented their innovations via a fast-paced “elevator pitch.” (To watch a video of the presentations, visit the Supply Chain Xchange website.)
What follows is a brief look at the six companies that made the competition’s final round and the latest updates on their achievements:
Arkestro: This San Francisco-based firm offers a predictive procurement orchestration solution that uses machine learning (ML) and behavioral science to revolutionize sourcing, eliminating the need for outdated manual tools like pivot tables and for labor-intensive negotiations. Instead, procurement teams can process quotes and secure optimal supplier agreements at a speed and accuracy that would be impossible to achieve manually, the firm says.
The company recently joined the Amazon Web Services (AWS) Partner Network (APN), which it says will help it reach its goal of elevating procurement from a cost center to a strategic growth engine.
AutoScheduler.AI: This Austin, Texas-based company offers a predictive warehouse optimization platform that integrates with a user’s existing warehouse management system (WMS) and “accelerates” its ability to resolve problems like dock schedule conflicts, inefficient workforce allocation, poor on-time/in-full (OTIF) performance, and excessive intra-campus moves.
“We’re here to make the warehouse sexy,” the firm says on its website. “With our deep background in building machine learning solutions, everything delivered by the AutoScheduler team is designed to provide value by learning your challenges, environment, and best practices.” Privately funded up until this summer, the company recently secured venture capital funding that it will use to accelerate its growth and enhance its technologies.
Davinci Micro Fulfillment: Located in Bound Brook, New Jersey, Davinci operates a “microfulfillment as a service” platform that helps users expedite inventory turnover while reducing operating expenses by leveraging what it calls the “4 Ps of global distribution”—product, placement, price, and promotion. The firm operates a network of microfulfillment centers across the U.S., offering services that include front-end merchandising and network optimization.
Within the past year, the company raised seed funding to help enhance its technology capabilities.
Flying Ship: Headquartered in Leesburg, Virginia, Flying Ship has designed an unmanned, low-flying “ground-effect maritime craft” that moves freight over the ocean in coastal regions. Although the Flying Ship looks like a small aircraft or large drone, it is classified as a maritime vessel because it does not leave the air cushion over the waves, similar to a hovercraft.
The first-generation models are 30 feet long, electrically powered, and semi-autonomous. They can dock at existing marinas, beaches, and boat ramps to deliver goods, providing service that the company describes as faster than boats and cheaper than air. The firm says the next-generation models will be fully autonomous.
Flying Ship, which was honored with the Best Overall Startup Award in this year’s 3 V’s competition, is currently preparing to fly demo missions with the Air Force Research Laboratory (AFRL).
Perfect Planner: Based in Alpharetta, Georgia, Perfect Planner operates a cloud-based platform that’s designed to streamline the material planning and replenishment process. The technology collects, organizes, and analyzes data from a business’s material requirements planning (MRP) system to create daily “to-do lists” for material planners/buyers, with the “to-dos” ranked in order of criticality. The solution also uses advanced analytics to “understand” and address inventory shortages and surpluses.
Perfect Planner was honored with the Business Innovation Award in this year’s 3 V’s competition.
ProvisionAi: Located in Franklin, Tennessee, ProvisionAi has developed load optimization software that helps consumer packaged goods (CPG) companies move their freight with fewer trucks, thereby cutting their transportation costs. The firm says its flagship offering is an automatic order optimization (AutoO2) system that bolts onto a company’s existing enterprise resource planning (ERP) or WMS platform and guides larger orders through execution, ensuring that what is planned is actually loaded on the truck. The firm’s CEO and founder, Tom Moore, was recognized as a 2024 Rainmaker by this magazine.
Global forklift sales have slumped in 2024, falling short of initial forecasts as a result of the struggling economy in Europe and the slow release of project funding in the U.S., a report from market analyst firm Interact Analysis says.
In response, the London-based firm has reduced its shipment forecast for the year to rise just 0.3%, although it still predicts consistent growth of around 4-5% out to 2034.
The “bleak” figures come as the European economy has stagnated during the second half of 2024, with two of the leading industry sectors for forklifts - automotive and logistics – struggling. In addition, order backlogs from the pandemic have now been absorbed, so order volumes for the global forklift market will be slightly lower than shipment volumes over the next few years, Interact Analysis said.
On a more positive note, 3 million forklifts are forecast to be shipped per year by 2031 as enterprises are forced to reduce their dependence on manual labor. Interact Analysis has observed that major forklift OEMs are continuing with their long-term expansion plans, while other manufacturers that are affected by demand fluctuations are much more cautious with spending on automation projects.
At the same time, the forklift market is seeing a fundamental shift in power sources, with demand for Li-ion battery-powered forklifts showing a growth rate of over 10% while internal combustion engine (ICE) demand shrank by 1% and lead-acid battery-powered forklift fell 7%.
And according to Interact Analysis, those trends will continue, with the report predicting that ICE annual market demand will shrink over 20% from 670,000 units in 2024 to a projected 500,000 units by 2034. And by 2034, Interact Analysis predicts 81% of fully electric forklifts will be powered by li-ion batteries.
The reasons driving that shift include a move in Europe to cleaner alternatives to comply with environmental policies, and a swing in the primary customer base for forklifts from manufacturing to logistics and warehousing, due to the rise of e-commerce. Electric forklift demand is also growing in emerging markets, but for different reasons—labor costs are creating a growing need for automation in factories, especially in China, India, and Eastern Europe. And since lithium-ion battery production is primarily based in Asia, the average cost of equipping forklifts with li-ion batteries is much lower than the rest of the world.
Companies in every sector are converting assets from fossil fuel to electric power in their push to reach net-zero energy targets and to reduce costs along the way, but to truly accelerate those efforts, they also need to improve electric energy efficiency, according to a study from technology consulting firm ABI Research.
In fact, boosting that efficiency could contribute fully 25% of the emissions reductions needed to reach net zero. And the pursuit of that goal will drive aggregated global investments in energy efficiency technologies to grow from $106 Billion in 2024 to $153 Billion in 2030, ABI said today in a report titled “The Role of Energy Efficiency in Reaching Net Zero Targets for Enterprises and Industries.”
ABI’s report divided the range of energy-efficiency-enhancing technologies and equipment into three industrial categories:
Commercial Buildings – Network Lighting Control (NLC) and occupancy sensing for automated lighting and heating; Artificial Intelligence (AI)-based energy management; heat-pumps and energy-efficient HVAC equipment; insulation technologies
Manufacturing Plants – Energy digital twins, factory automation, manufacturing process design and optimization software (PLM, MES, simulation); Electric Arc Furnaces (EAFs); energy efficient electric motors (compressors, fans, pumps)
“Both the International Energy Agency (IEA) and the United Nations Climate Change Conference (COP) continue to insist on the importance of energy efficiency,” Dominique Bonte, VP of End Markets and Verticals at ABI Research, said in a release. “At COP 29 in Dubai, it was agreed to commit to collectively double the global average annual rate of energy efficiency improvements from around 2% to over 4% every year until 2030, following recommendations from the IEA. This complements the EU’s Energy Efficiency First (EE1) Framework and the U.S. 2022 Inflation Reduction Act in which US$86 billion was earmarked for energy efficiency actions.”
Many AI deployments are getting stuck in the planning stages due to a lack of AI skills, governance issues, and insufficient resources, leading 61% of global businesses to scale back their AI investments, according to a study from the analytics and AI provider Qlik.
Philadelphia-based Qlik found a disconnect in the market where 88% of senior decision makers say they feel AI is absolutely essential or very important to achieving success. Despite that support, multiple factors are slowing down or totally blocking those AI projects: a lack of skills to develop AI [23%] or to roll out AI once it’s developed [22%], data governance challenges [23%], budget constraints [21%], and a lack of trusted data for AI to work with [21%].
The numbers come from a survey of 4,200 C-Suite executives and AI decision makers, revealing what is hindering AI progress globally and how to overcome these barriers.
Respondents also said that many stakeholders lack trust in AI technology generally, which holds those projects back. Over a third [37%] of AI decision makers say their senior managers lack trust in AI, 42% feel less senior employees don’t trust the technology., and a fifth [21%] believe their customers don’t trust AI either.
“Business leaders know the value of AI, but they face a multitude of barriers that prevent them from moving from proof of concept to value creating deployment of the technology,” James Fisher, Chief Strategy Officer at Qlik, said in a release. “The first step to creating an AI strategy is to identify a clear use case, with defined goals and measures of success, and use this to identify the skills, resources and data needed to support it at scale. In doing so you start to build trust and win management buy-in to help you succeed.”