Gary Frantz is a contributing editor for CSCMP's Supply Chain Quarterly and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
One lesson that has stuck with ocean containership operators from the pre-COVID years of slack profits is the value of aggressively managing capacity. By one industry estimate, that focus (coupled with two years of COVID– and e-commerce–fueled volumes) helped the world’s major containership lines generate more profits in the past two years than in the previous 20 years combined.
Moving into the second half of 2022, that focus remains as intense as ever, particularly in the face of rising bunker fuel (also known as fuel oil) costs, persistent inflation, and wavering demand, which is beginning to swing pricing power back to the shipper.
“It’s a murky picture,” admits Lars Jensen, principal at consulting firm Vespucci Maritime. “But it does look like the market is softening. The [ship] alliances are very good at managing capacity. I expect they will try and do the same if the market takes a major downturn in demand.”
However, Jensen notes that the makeup of providers working the Pacific trades has changed from what it was a couple of years ago, which likely will influence available capacity—and pricing. In 2017, some of the major shipping container companies formed three separate alliances: 2M, The Shipping Alliance, and the Ocean Alliance. Members of an alliance operate services jointly and pool their resources. For years, the alliances dominated the North America–Asia trade lane.
“What is different [today] is that we have seen the introduction of a large number of nonalliance carriers coming into the market, with mostly smaller vessels,” Jensen observes. “That’s 30% of overall capacity that’s operating outside of the services provided by the alliances themselves.”
That’s an X factor that could affect rates and the alliances’ ability to blunt the impact of weak demand through blank (canceled) sailings, he notes. In a softening market, “the newcomers will keep those ships going; these are smaller vessels taken on at expensive charter rates. If a downturn occurs, we will see those carriers reducing rates to keep their ships full,” he says.
These dynamics add a fresh layer of unpredictability for shippers as they seek to secure reliable capacity at reasonable rates. At the same time, they face lingering congestion concerns at ports, many of which are facing record volume levels.
West Coast: Gearing up for peak
As peak shipping season gets underway, port officials are working hard to avoid a repeat of last year, but issues still remain. Volume is already ramping up at the ports of Long Beach and Los Angeles, which are the gateway for 35% to 40% of the seaborne containerized cargo coming into the United States. At the Port of Long Beach, Mario Cordero, executive director, says June volumes reached 835,412 TEUs (twenty-foot equivalent units), up 15.3% from the same month last year and surpassing the previous record set in June 2018. For the first half of 2022, the port moved 5,007,778 TEUs, up 5.3% from the same period last year. The second quarter also was the port’s best quarter overall, with 2,547,119 TEUs moved from April 1 to June 30, breaking the previous record set during this year’s first quarter.
Meanwhile progress has been made getting ships through the port. The number of vessels waiting in San Pedro Bay, which was as high as 109 in January, had been worked down to 18 in July. The port had also been making progress in getting containers out of terminal yards and onto trucks or trains. Earlier in the year, long-dwelling containers at both the Long Beach and Los Angeles ports had declined by about 25% compared to last October. But the number of excessively delayed containers is on the rise again. As of mid-July, there were nearly 29,000 containers dwelling at Long Beach nine days or more, an increase of 9% from October 2021.
The problem is especially worrisome on the rail side. “Lack of rail capacity is impacting the movement of IPI [inland point intermodal] cargo, those containers earmarked to move by rail,” says Cordero. “That’s a primary concern. The average dwell time is up to about 10 days for a rail container.”
Nevertheless, Cordero is optimistic about the remainder of the year. Southern California’s ports move some 20 million containers annually, “and one thing we know for sure is that number is not going to get any smaller,” he says.
East Coast: A “staggering” increase
Volumes are also increasing at a high rate at East Coast ports. The Port Authority of New York & New Jersey is handling 33% more containers than it was during the same period in 2019, according to Beth Rooney, who was recently named director of the port department. “That staggering increase … is a picture of what it is that the entire supply chain and all of the various nodes and links are trying to handle and absorb,” she noted.
One factor that Rooney says likely contributed to the port’s volume growth in May was shippers rerouting freight from the West Coast out of concern about potential labor disruptions there. The International Longshore & Warehouse Union and the Pacific Maritime Association are currently in the midst of contract negotiations. Rooney notes that by her staff’s calculation, 6.5% of the port’s growth through May represented cargo rerouted from the West Coast. “When you look at the total import volume growth of 11.5%, that’s a good chunk,” she says.
That volume increase is having a significant effect on the port’s operations. In May, some 107 ships had to wait at anchor for a berth. The average wait time was 4.5 days, up from the year-to-date average of 3.8 days. Container dwell time remains an issue, with some import containers sitting in the terminals two and three times the three- to four-day average. “Empties are piling up at the terminals,” Rooney said. “Ocean carriers are working to reduce the number of empties in the facilities, but it’s not enough and it’s not fast enough.” The port’s trucking partners are sitting with empties with no place to return them, “so the chassis is not available to pick up the next import container,” she said.
The port is getting creative in finding off-terminal space for empty containers. One new empty container depot was created by relocating automobiles formerly stored there. Another was developed by consolidating multiple areas where commodities were staged into one, freeing up more space for empties.
Ship lines have added more empty loaders as well, with 13 coming into service through May. Additionally, Rooney and her team have successfully convinced some of the ship lines to do more load balancing. Under this practice, for example, “if a ship line takes off 1,000 [loaded import] containers, it will put on 1,000 [loaded exports and empties],” she explained, thereby lessening the amount of port space those empties take up.
Proactive steps
Other ports are also taking steps to improve efficiency and alleviate congestion. For example, the Port of Virginia at Norfolk handled a record-setting 3.7 million TEUs for its 2022 fiscal year, an increase of nearly 15% compared to fiscal 2021. One way the port is responding to this volume increase is by investing in its own chassis pool. The port planned to add 600 new chassis a month from June through September, which will bring the total to 16,000. Additionally, in May, the port commissioned two new ship-to-shore cranes at Norfolk, increasing lift capacity by some 200,000 units annually, and added 15 new shuttle trucks. According to Port Spokesperson Joe Harris, ships typically are turned in 12 to 16 hours (depending on the volume to be handled), and turn times for drayage drivers “are best in class, less than 40 minutes.”
The Port of Oakland meanwhile is hoping to rebound from the congestion issues that it experienced last year by working closely with all stakeholders. “We are working proactively with the ship lines, terminals, and truckers to reduce container dwell [times],” says Maritime Director Bryan Brandes. “We’ve adjusted free time at the terminals and made tariff changes to incent faster movement of containers.”
Be prepared
What can shippers do to survive and compete in these unsettling times? According to Brandes, many BCOs (beneficial cargo owners) are spreading out their volumes over the remainder of the year “so they won’t get caught short in peak.”
Others are adopting a strategy centered around flexibility and increased visibility. Nicholas Najjar, director of transportation and distribution planning for the dairy products cooperative Land O’Lakes, says that his team have rewritten processes, adopted new tactics, taken over some activities once done by their forwarders and customers, and offloaded others to those partners with an eye toward more collaborative, efficient, and timely execution. He advises other shippers to follow suit and “be prepared to change your script.”
“We’ve pulled out all the stops to see where we have success,” he says. “Everything is moving so fluidly, you have to stay on top of it daily.”
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”