Partner-in-Chief: interview with R. Gil Kerlikowske
R. Gil Kerlikowske spent four decades in law enforcement. As head of U.S. Customs and Border Protection, he's added trade compliance and facilitation to his portfolio and has made building stronger relationships with the trade community a priority.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
When R. Gil Kerlikowske was nominated as commissioner of U.S. Customs and Border Protection (CBP) in 2014, international traders were concerned that he might give short shrift to trade facilitation and slow the wheels of commerce by focusing mainly on CBP's other key responsibility, law enforcement and security. Those worries weren't surprising; after all, he had spent four decades in law enforcement, including stints as chief of police in Seattle and police commissioner of Buffalo, N.Y. At the federal level, the U.S. Army veteran had served as deputy director for the U.S. Department of Justice's Office of Community Oriented Policing Services and director of the White House Office of National Drug Control Policy. All relevant for someone who would head the largest law enforcement agency in the federal government, with responsibility for border security, immigration, and the interdiction of smuggled drugs, merchandise, and people.
That concern was soon laid to rest. Kerlikowske began meeting with importers and customs brokers within days of his confirmation hearing. CBP's top officers started speaking about the agency's role in promoting economic prosperity and of its commitment to making trade processes more efficient. An increase in outreach programs, strengthened partnerships with industry advisory groups, and initiatives like CBP's industry-specific Centers of Excellence and Expertise are among the reasons more than one customs broker has said that the trade community's relationship with the agency is the best it has ever been. Granted, disagreements remain and there is still much work to be done, particularly in regard to the implementation of new technology, but Kerlikowske is confident that CBP's improved relationship with the trade community will help ensure those and future initiatives succeed.
The commissioner sat down with DC Velocity for a one-on-one interview in mid-April at the Coalition of New England Companies for Trade's (CONECT) Annual Northeast Trade and Transportation Conference in Newport, R.I. Here's what he had to say.
Q: What are some of the most important provisions of the Trade Facilitation and Trade Enforcement Act of 2015, also known as the Customs Authorization Act, and how will they enhance CBP's ability to carry out its mission?
A: Prior to the Customs Authorization bill, all of the necessary authorities for CBP rested in different laws. For the first time, all of that has been put together in one law, which will be very helpful in a number of respects.
There are quite a few important aspects of the law, but there are a couple in particular I can mention. One is that it enshrines the COAC (Advisory Committee on Commercial Operations) and puts into force of law the fact that we have a partnership with private sector stakeholders. A different administration in the future might say we don't need that. I don't think anyone ever would, but the law ensures that we will always have this beneficial relationship.
The law also strengthens our enforcement capabilities; for example, in antidumping cases for steel, and in preventing child and slave labor. NGOs (nongovernmental organizations) are sharing information with us, and [in early April] we refused two Chinese shipments of potash because we had a reasonable suspicion that both had been loaded by prison labor, a clear violation of U.S. law.
Another is the change in the de minimis, which reflects the growth of e-commerce. Also importantly, the law fully funds ACE (Automated Commercial Environment) for the first time. (Editor's note: The de minimis change exempts the first $800 of imported merchandise from customs fees and duties, as well as from most compliance requirements; the previous threshold was $200. ACE is CBP's comprehensive new information management system now being implemented.)
Q: Earlier this year, CBP announced a phased implementation of the Automated Commercial Environment (ACE) because many companies would not be ready by the original deadline. Have you seen a measurable increase in readiness since then? If not, what is holding companies back, and what can CBP do to get more of them on board?
A: Over the last six to eight months, it became apparent that for various reasons, the developers of the software the industry uses [for filing customs documents] were unable to deliver changes as rapidly as needed. We wanted to be attentive to their concerns. I spoke to the TSN (Trade Support Network, an industry forum that discusses CBP's modernization and automation efforts), and everybody recognized that the end results would all be for the better, but people needed more time, an extra 30 to 60 days. ... Currently, 72 percent of cargo releases and 92 percent of entry summaries are being submitted through ACE, so there has been a notable increase.
The changes we made in ACE several months ago had the greatest impact on the process. There were some glitches during implementation, and they have been addressed relatively quickly. We needed to address problems with air cargo immediately, and we did. I think the initial implementation problems have been pretty much resolved. We have a "strategy room" in our IT organization that will quickly deal with anything else that arises.
Q: CBP is the lead agency for the "Single Window," which will allow companies to submit data once and automatically share it with multiple federal agencies. Why are some of the other agencies still not ready, and what can CBP do to help move them forward?
A: I don't think we've taken our foot off the gas on this for the past two years. I give a lot of credit to COAC for its work on this issue. The Food and Drug Administration (FDA) and Consumer Product Safety Commission (CPSC) attend every COAC meeting and are well along in their plans. But the PGAs (participating government agencies) all have a huge number of other responsibilities. They have to carve out time and resources, and that direction has to come from the top of the organization. ... They have to balance the requirements with the resources they have.
We have 60,000 employees, and most of the PGAs don't ... so we can be very helpful to them. For example, on the southwest border, we may find bugs in imported produce, and if the U.S. Department of Agriculture doesn't have someone right there, we'll take a photo and send it to the USDA, and they'll tell us what to do. I think that as the PGAs recognize that we're there 24/7 at the large ports of entry and can help them, we'll build stronger relationships and more trust. Toward that end, we're doing more training on other agencies' rules and regulations so we can better support the other agencies.
Q: With the recent events in Western Europe and the increasing volatility in the Middle East and Africa, the threat of terrorism is understandably on many people's minds. How is CBP helping to address those concerns?
A: I went to four countries in Africa last year to help build relationships with their customs organizations. It was very clear that the model the United States has developed—combining the resources of trade enforcement, immigration, and border security to leverage finite resources—would be very helpful there. But in one country, customs officials told us that although they wanted to combine agencies, the ministry of finance wanted to keep them separate because they saw customs only as a revenue collector. They didn't recognize how much customs can help with security.
Supply chain disruptions can have a significant impact on an economy. We spend a lot of time sharing with other customs agencies the lessons we've learned about security that they could apply in their own countries. The World Customs Organization supports this kind of openness and mutual assistance. It's a good resource for technical assistance and best practices for securing the supply chain.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.