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.
If vocal cadence is evidence of a person's demeanor, J. Christopher Lytle, executive director of the giant Port of Long Beach, is a calm customer. Lytle's even-handed replies to a reporter's phone queries about his port's relevance suggest the temperament of a man not likely to lose his head even if everyone else around him does.
That's a good thing, because Lytle is running the 102-year-old port, the nation's second busiest, at a time of unprecedented change in North America's competitive seafaring landscape. To the north, the Port of Prince Rupert in British Columbia has positioned itself as the fastest way to deliver goods from Asian manufacturing centers to consuming markets in the U.S. Midwest and mid-South. Prince Rupert officials claim that goods arriving there can reach Chicago three days faster than if they were routed through Long Beach.
To further enhance Prince Rupert's geographic advantages, Canadian National Railway Inc., which provides rail service linking the port to the U.S. heartland, has been aggressively cutting freight rates on service to Chicago and Memphis, according to David Howland, vice president of land services for third-party logistics giant APL Logistics.
To the south on Mexico's Pacific Coast lies the Port of Lázaro Cárdenas, located within hailing distance of Houston and Kansas City. Lázaro Cárdenas holds itself out as a cost-effective alternative to Long Beach and its big sister, the adjacent Port of Los Angeles, especially in serving the vast Texas market. Lázaro Cárdenas's lone container terminal handled 1.2 million twenty-foot equivalent unit containers, or TEUs, in 2012 and currently has enough capacity to process 2.2 million TEUs a year. The port plans to build a second container terminal that will increase overall TEU capacity to 3.4 million by 2015 and 6.5 million by 2020.
Though Lázaro Cárdenas is closer in rail miles to key Texas points than is Long Beach, the substandard track conditions in Mexico have always been a drag on transit times. However, due to track improvements by Kansas City Southern, the exclusive rail provider between the port and the U.S., transit times to Texas through the center of Mexico are now about the same as they are from Long Beach, according to Howland. Shippers and beneficial cargo owners (BCOs) using Lázaro Cárdenas realize savings from the shorter distance in rail miles as well as the lower operating costs at the Mexican port, he said.
Further south and to the east of Lázaro Cárdenas is the well-publicized Panama Canal expansion project, set for completion in 2015. The widened and deepened passage will accommodate the "megaships"—vessels capable of carrying up to 12,500 TEUs—seen as the future workhorses of global trade. It has also fueled a multiyear debate as to whether an all-water route through the canal to the East and Gulf coasts will be more cost-effective for U.S. importers than having their goods offloaded on the West Coast and trucked or railed inland.
Jones Lang LaSalle, a Chicago-based logistics and industrial services giant, caused a stir in mid-2009 when it predicted the canal's expansion would result in West Coast ports' losing up to 25 percent of their existing traffic base to eastern rivals over the next few decades. The firm still stands by that projection, said John Carver, director of port, airport and global infrastructure, in a February interview.
Besides the growing competition from Canada and Mexico, there are the "doing business" issues like cost, congestion, and labor that Lytle wakes up to every day. Shippers and carriers have grown accustomed to the expensive and crowded conditions that are part of life in Southern California. They've also coped with three labor-related disturbances at Long Beach in the past decade, the latest being an eight-day strike late last year by a clerical workers unit that curtailed operations at Long Beach and effectively shuttered Los Angeles after union dockworkers honored the picket lines.
Carver said users of the twin ports face a myriad of obstacles that seem to coalesce into one big and constant headache. As a result, they have been searching for alternatives, he said.
Cathy Burrow, global transportation manager for Kansas City-based Hallmark Cards, said Hallmark today uses Long Beach and Los Angeles for about 60 percent of its waterborne imports from Asia. The other 40 percent transits through the Panama Canal to the East and Gulf coasts. About 10 years ago, 90 percent of Hallmark's imports entered through the West Coast. Hallmark imports about 10,000 TEUs a year.
Burrow said Hallmark diversified its import gateways because the many challenges at the Southern California ports threatened the reliability of the company's supply chain. "We knew we had to create more consistent leadtimes for our inventory in order to do a better job of managing it," she said.
Burrow said she has toured Lázaro Cárdenas, but as of now, Hallmark doesn't ship through the port. "It's on our watch list," she said.
DEFENDING THE CASTLE
In a mid-February interview with DC Velocity, Lytle said that Prince Rupert and Lázaro Cárdenas represent "critical threats" to Long Beach and acknowledged that shippers and beneficial cargo owners have more choices than ever before. Yet he believes Long Beach remains the prime location for those seeking to get international cargoes from Asia to their destinations in a cost-effective manner.
In Lytle's view, no other North American port provides shippers and BCOs with so many options to get their goods to multiple U.S. markets. "You need a gateway that gives you the ability to get to other inland destinations," he said. In a jab at Prince Rupert, Lytle added, "there's a lot more to goods movement than the ocean transit times and to get to Chicago."
Long Beach has 96 weekly ship calls—about 19 of those being containerships—and operates 60 train departures a week. It is also surrounded by a population of between 25 million and 40 million, and one of the world's great distribution rings: the so-called "Inland Empire" directly east of Los Angeles. The Inland Empire is home to 1.7 billion square feet of warehouse and distribution center space, and currently has a 2-percent vacancy rate.
Lytle said the port is in the second year of a multibillion dollar program to upgrade its facilities. It is spending $1 billion to expand and improve its on-dock rail capabilities. It is nearly two years into a nine-year, $1.2 billion project known as the "Middle Harbor" container terminal, designed to renovate and combine two aging container terminals into one modern facility. Last April, Hong Kong-based ship line Orient Overseas Container Line (OOCL) signed a 40-year, $4.6 billion lease to be the terminal's sole occupant. It is the largest deal of its kind in seaport history, according to the port. The terminal will also have the most sophisticated IT system ever installed at any port, according to Lytle.
Lytle said the U.S. supply chain is undergoing a subtle yet profound change that bodes well for both Southern California ports. About three-quarters of all containerized imports entering Long Beach are bound for points outside the region. However, fewer containers are being loaded on intermodal trains at the port for direct transit to markets like Chicago. Instead, more shipments are being trucked to a DC in the Inland Empire, where they are eventually transferred from a 40-foot ocean container to a 53-foot domestic box for delivery to a local DC, and then onward distribution to the store or the customer.
As this trend intensifies, it will be a boon to a port like Long Beach that enjoys direct access to a leading distribution network, Lytle said.
Howland said Long Beach and Los Angeles benefit from the economies of scale afforded by their geography. It is very cost-effective to build full truckloads at the ports, deliver goods locally in the Southern California region, and continue on with cargo to interior points in the U.S. Southwest and Midwest, Howland said. The ability to commingle local and regional shipments is a value proposition that's "very hard for any other port to match," he said.
As for competition from an expanded Panama Canal, Lytle seems unconcerned. Every week, Long Beach handles ships with a 13,500-TEU carrying capacity, vessels too wide to transit through even an expanded canal. "People ask me all the time if we're afraid of the canal taking our business," he said. "The answer is no."
Will a new ag export run bear fruit?
Five of the seven biggest steamship lines and a large western railroad are in talks to tap into underutilized capacity at the nation's two busiest ports in an effort to expand global markets for U.S. agricultural exports.
The proposed initiative involves hauling intermodal containers to the ports of Los Angeles and Long Beach from California's Central Valley, a 450-mile swath of fertile land extending from Redding in the north to Bakersfield in the south. At the ports, the containers of agricultural products would be loaded aboard containerships for the trip across the Pacific.
The move from the Central Valley to the ports would actually be the second leg of a round-trip starting at the ports' docks. Containers carrying import merchandise into Los Angeles and Long Beach would be transferred to a "loop train" for the northbound moves up the coast, with the train stopping at various intermodal ramps to unload the cargo. Large retailers, produce growers and packers, and the railroad would synchronize their schedules so the railroad could accept containerized shipments of agricultural products for the return move to the docks.
Informal discussions with the ship lines and the railroad began about seven months ago and took on a more serious tone at the start of the year, according to Curtis D. Spencer, president and CEO of Webster, Texas-based IMS Worldwide Inc., a consulting company that specializes in supply chain, industrial real estate, and foreign trade zone management. Spencer and his firm are coordinating the initiative.
Spencer would not identify the railroad. Nor would he disclose the names of the ship lines, though he said they are five of the world's top seven carriers based on containers transported. There have been no pricing or capacity commitments made at this point, Spencer said. However, at least two unidentified shippers that combined account for 20,000 import "lifts" have expressed strong interest in the service, he said.
A lift is defined as a trailer or container being lifted onto or off of a railcar. One intermodal movement can consist of multiple lifts depending on how many transportation modes handle a piece of equipment.
The initiative would capitalize on attractive pricing for westbound container movements off the southern California coast, according to Spencer. He said about half of the containers leaving the ports for Asian destinations depart empty. Most of the equipment sailing westbound heads for Asian ports to be loaded with import cargoes returning to the U.S.
Because of the demand imbalance, westbound container space is priced inexpensively, according to Spencer. He estimated it is cheaper to load an export container at Los Angeles or Long Beach than at Oakland and Seattle/Tacoma, ports that have a better balance between imports and exports.
Spencer said the so-called "match-back" process at the heart of the initiative appeals to ocean carriers because it helps offset container repositioning costs that can run into the hundreds of millions of dollars. If properly executed, the project will allow empty containers to be placed near an area with revenue-producing cargo instead of returning empty to the ports, he said.
According to Spencer, the project will save the ports money by reducing the number of empty containers in their environs and will give exporters access to equipment at a local container yard rather than at a port 150 to 450 miles away. Additionally, the program will benefit the environment because truckers won't have to burn fuel driving empty miles returning the containers to port.
The fact that the program is being considered speaks to the growing popularity of converting export traffic historically moved in bulk shipments to containerized loads, which are easier and less expensive to handle.
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”