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.
In late February, AP Moller-Maersk Group CEO Soren Skou laid out perhaps the most audacious strategy in the container shipping industry's 62-year history. Within three to five years, the Danish giant would become a provider like FedEx Corp., DHL Express, and UPS Inc., delivering reliable end-to-end service across an integrated transportation network, with Maersk the customer's sole point of contact.
It will be a tall order. Integrators spend billions of dollars each year on infrastructure, technology, and manpower. This yields a stunning degree of delivery reliability across their global networks, all the while keeping custodial control of each shipment. The liner industry, focused on just keeping its head above water amid prolonged periods of overcapacity and rock-bottom freight rates, is not even close to meeting that benchmark.
Still, one has to start somewhere. Perhaps the best place is ensuring that customers' cargo is moved as booked, a discipline that's fundamental to all transportation but one where the liner trade's supply chain execution falls woefully short. The process has two components: getting the cargo to the right ship at the right place and time, and then monitoring its transit so the end customer has visibility into the shipment's arrival. But the real problems occur before the vessel leaves the dock.
Shippers, freight forwarders, and non-vessel-operating common carriers (NVOCCs) will reserve slots, only to abandon the booking. Maybe they've found cheaper rates elsewhere, the forwarder couldn't get the box to the carrier on time, or there wasn't sufficient freight to be stuffed in the box to justify the cost of tender. To compensate for the lost business, carriers use a practice called "rolling," where a shipper's cargo is abruptly moved to another sailing in favor of a more-profitable customer. Shippers respond by double-booking their shipments, reserving slots, sometimes on two sailing strings, just to get space aboard one. Carriers aid and abet the process by overbooking their capacity.
About one-quarter of all ship bookings never materialize because users find cheaper rates elsewhere, according to the New York Shipping Exchange (NYSHEX), which has created a digital capacity-allocation platform supported by real-time market data and binding contracts with incentives for shippers to ship on the contracted vessel and carriers to make the contracted capacity available. No-shows cost carriers about $23 billion a year, NYSHEX has estimated. The cost of repositioning empty containers to locations where they can be filled with cargo represents another $15 billion to $20 billion hit, according to consultancy BCG (formerly Boston Consulting Group).
Much container volume moves under contract. However, contracts have proved difficult to enforce, and as a result, there are no repercussions for violating them. Though steamship lines may be convinced their customers are at fault, suing them and risking the loss of future business is another matter. "No one wants to end up in court to live up to the contractual obligations," said Craig Fuller, founder of TransRisk, a digital platform expected to be rolled out later this year that would allow participants to trade futures contracts for spot truckload pricing. Like the liner trade, the U.S. truckload market suffers from delivery variability caused by shippers and truckers kicking one another to the curb in search of lower or higher rates.
COMMON-SENSE STUFF
One obvious approach to ending the chaos is to develop ironclad and enforceable contracts that hold shippers and carriers financially accountable for failing to live up to their obligations. At a recent industry conference, Patrick McGrath, a senior vice president at German liner Hapag-Lloyd A.G., said that financial incentives should exist, but that carriers must first be in a stronger position to insist on them.
A tailwind might be found in the development of blockchain technology, a distributed ledger that creates a transparent and indelible trail of each transaction. At the core of the blockchain concept is so-called smart or self-executing contracts that are converted to computer code, stored, and supervised by a network of computers running the blockchain. A smart contract has binding enforceability and has a built-in financial escrow that pays out to the damaged party whether it be shipper or carrier, according to Fuller of TransRisk, who also co-founded the "Blockchain in Transport Alliance" (BiTA), a multi-industry group tasked with developing blockchain standards.
BiTA members are working to perfect smart contracts that would govern the penalties and commitments from ship lines and NVOCCs, Fuller said. A first draft of the language should be published sometime in the third quarter, he said.
Liners could take a page from other industries like airlines and hotels and offer discounts in return for shipper flexibility on sailing times, said Philip Damas, head of supply chain advisers at U.K.-based consultancy Drewry, who spoke at the conference along with McGrath. At the same time, users could also pay more for guaranteed space, Damas said.
Artificial intelligence (AI), machine learning, and predictive analytics represent fertile areas as well, experts say. William Rooney, vice president, strategic development for Swiss third-party logistics (3PL) giant Kuehne + Nagel, said at the same conference that the advanced technologies could analyze shipper behavior from their booking histories to differentiate between legitimate and "phantom" bookings. In this area, Rooney said he is particularly excited by analytic technology being developed by startup ClearMetal Inc.
Inna Kuznetsova, president and chief operating officer of Inttra, a Parsippany, N.J.-based digital marketplace that tracks the status of 45 percent of the world's containers, said that, at baseline, technology makes it faster and easier to change a booking on the fly. In the event a container is delayed getting to the vessel or the shipment is smaller than the shipper had forecast, an intermediary can use digital tools to amend or cancel bookings and to save 40 percent of the time it would take to perform the task manually, Kuznetsova said. Beyond that, users can leverage forecasting technology to improve their ability to allocate containers more efficiently and, in the case of carriers, get richer insight into booking patterns at different ports and more efficiently utilize their equipment, she added.
Some experts, like Zvi Schreiber, chief executive officer of Freightos Ltd., a Hong Kong-based online rate quote pOréal, said turbocharged IT (information technology) investments are not necessary to resolve the no-show problem. "All that's required is better two-way communication," he said. However, with too many vessel slots still chasing not enough freight, the question is whether shippers and BCOs (beneficial cargo owners) have any incentive to communicate. Another challenge for carriers is persuading customers to pay higher rates to offset the costs of significant IT investment, according to Philippe Salles, head of e-business, transport, and supply chain for Drewry.
Ira Breskin, a long-time maritime author, journalist, and senior lecturer at the State University of New York's Maritime College, said changing market conditions will eventually force shippers to pay more than lip service to their contractual obligations. The combination of carrier consolidation, the lingering effects of the August 2016 collapse of Korean liner company Hanjin Shipping Co., and the growing impact of shipping alliances where carriers reconcile capacity and reduce costs that soared during a prolonged period of vessel over-ordering, will squeeze capacity to the point where carriers will begin to have the upper hand, according to Breskin. This, in turn, will change the shippers' shoulder-shrugging mindset toward the problem, he predicted.
Editor's note: Toby Gooley, former editor ofCSCMP's Supply Chain Quarterly, a sister publication to DC Velocity, contributed to this report.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.