The global e-commerce unit of transport and logistics titan Deutsche Post DHL is piloting a program designed to facilitate the returns process for international e-commerce, a segment that is expected to grow as international e-commerce expands.
Charles Brewer, CEO of DHL eCommerce, said today that the program, which began about a month ago, is being tested in both directions on the U.S.-United Kingdom and U.S.-Australia trade lanes. The plan is for the unit to cover all aspects of cross-border returns, including a straight return to the product seller, consolidation of return shipments at the warehouse and distribution center level, disposal of low-value returned items, and the recovery, repair and repurposing of returns deemed to have a shelf life, Brewer said in an interview at DHL eCommerce's offices in Norcross, Ga., an Atlanta suburb.
The program aims to leverage all parts of the DHL enterprise, Brewer said. For example, DHL Supply Chain, one of the world's largest operators of contract warehouse and DC space, will be involved in the consolidation process, according to Brewer. DHL Express, the unit's express operations, will be involved in the transportation. DHL Global Forwarding, the company's freight forwarding, will be brought in to provide forwarding services, if necessary, Brewer said.
It is unclear whether the program will go live in time for the post-holiday returns period, which in many countries typically occurs during the first 10 days of January.
Brewer said that while other providers offer cross-border returns of products from the buyer to the seller, no one to date has come to market with a cross-border returns program to match the scope of development underway in domestic markets. Among the challenges is determining how customs authorities will process e-commerce returns when many countries are already swamped with what World Customs Organization (WCO) Secretary General Kunio Mikuriya earlier this year described as a "tsunami of small packages" that customs administrations, structured to clear business-to-business commerce between established trading partners, were not set up to process.
Brewer said his unit has not experienced problems getting its customers' shipments cleared through Customs in a timely manner. However, he said it is an issue that must be addressed, especially as cross-border e-commerce activity increases.
Brewer said there is merit to the concept of free-trade zones dedicated to e-commerce patterned to some extent after the "Foreign Trade Zone" model long in place for manufacturing. Brewer also endorsed an idea advanced by Jack Ma, co-founder and executive chairman of the Chinese e-marketplace Alibaba Group, of a "World Commerce Organization" that could be structured along the lines of the World Trade Organization (WTO).
Brewer said DHL has an inherent advantage in global e-commerce because it serves 220 countries, is the leading express delivery company in many markets, and has deep relationships with the many different customs authorities. DHL, based in Bonn, is a unit of Deutsche Post, which for decades functioned as the German postal system but which over the last 20 years has aggressively expanded into logistics and transportation. DHL marks its 50thyear in business in 2019.
According to DHL data, the value of all worldwide e-commerce is about US$3.7 trillion. Of that, $2.7 trillion moves entirely within countries, while the rest is cross-border in nature. The cross-border segment grew by 27 percent last year, while the larger "domestic" trades grew by 9 percent, according to the data.
Brewer said that the dominant markets like China, the U.S., France, and Germany will continue to see expanded e-commerce activity but that the pace of growth in those countries will level off due to the law of large numbers. E-commerce accounts for about 13 percent of U.S. retail sales, but when factoring out industries like gasoline where product is not ordered online, e-commerce's percentage is closer to 18 percent, Brewer said. In China, the latter figure is about 24 percent, he added.
Emerging markets offer huge potential, according to DHL. For example, in Indonesia, a nation of more than 276 million, e-commerce accounts for just 0.5 percent of retail sales. In Africa, that figure is about 1 percent, DHL estimates. Brewer reckons that there are only 10 to 12 shopping malls in all of Africa north of Johannesburg. This means millions of Africans will have little, if any, choice but to shop on line; as Internet connectivity improves and disposable income increases, they will, Brewer said.
Ironically, one country that DHL e-Commerce does not serve domestically is China, which is the king of intracountry e-commerce activity. Brewer said the company believes that it would take too much time and cost too much money to serve such a massive country, either through an acquisition or organic growth. DHL provides services supporting the international e-commerce market to and from China.
Brewer said his customers so far have been unperturbed by threats of a U.S-China trade war, which escalated today as each side implemented 25 percent tariffs on $16 billion worth of the other's goods. The National Retail Federation (NRF) has warned that the latest round of tariffs would directly hit U.S. consumers because they would be aimed at everyday consumer goods rather than industrial products and technology, which has mostly been the case up to now. For example, a 25 percent tariff on Chinese furniture imports would cost Americans $4.6 billion more for furniture even if retailers switched their sourcing to other foreign countries, many of whom already charge more than their Chinese counterparts, NRF said.
For DHL, which along with many of its customers has withstood many geopolitical threats through the years, it is business as usual, according to Brewer. "Whatever is going on, most companies tend to find a way to do business," he said.
Residents and businesses along the Florida panhandle today are keeping a close eye on Tropical Storm Helene, which is forecasted to strengthen into a major hurricane by the time it strikes the northeast Gulf Coast on Thursday.
Hurricane and storm surge watches are already in effect for that area, which could see heavy rain and flash flooding across portions of Florida, the Southeast U.S., Southern Appalachians, and the Tennessee Valley, according to predictions from the National Hurricane Center.
The storm would come a month after Hurricane Debby delivered drenching rainfall for days over Florida in August and after Hurricane Beryl hit Houston in July, knocking out power across the region.
As Helene continues to gather strength from the warm waters of the Gulf of Mexico, experts are warning that the storm’s impacts could include the Port of New Orleans, agricultural operations throughout the Southeast, and additional citrus and fruit farming business in Florida, according to a report from Everstream Analytics’ chief meteorologist Jon Davis.
From a supply chain perspective, additional disruptions could include rail and road transportation stoppages, closures of interstate highways I-10 and I-75, widespread power outages, and shutdowns of offshore energy operations in the eastern portion of the Gulf of Mexico, Davis said.
As the third potential hurricane to hit the area within as many months, the arrival of Helene shows that extreme weather events aren’t just anomalies, but rather they’re the new normal for shipping companies and port authorities, according to Frank Kenney, Director of Industry Strategy at the technology consulting firm Cleo.
To cope with that constant battering, businesses need to adopt a new mindset, he said. “The only way to keep supply chains running smoothly is to build resilience into every aspect of operations. This starts with diversifying logistics strategies. If a shipper is dependent on a single route or port, they’re setting themself up for trouble. Instead, it’s crucial to have multiple backup routes and options ready to deploy when the unexpected happens,” Kenney said.
Following that strategy, inland ports such as Savannah and Macon, Georgia, will likely gain importance in coming years since their locations offer proximity to ocean ports while also providing access to major highways and some protection from coastal flooding. “In short, the storm isn’t going away, but by embracing diversification, leveraging technology, and ensuring supply chain visibility, U.S. ports and shipping companies can stay ahead of the curve. The companies that prepare for these challenges now will be the ones that continue to thrive, no matter how extreme weather events rock the boat," Kenney said.
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”