The online shopping market now accounts for almost a fifth of all purchases in some developed markets, and is growing at anything between 15-20% a year in Europe and the US and around 75% a year in China. Fortunately for the logistics industry, the online shopping model means that consumers’ trips to the shops are being substituted by delivery direct to the home.

However at the same time, the market is enduring growing pains of many different types. Take China for example. The express and logistics industry has just not been able to keep pace with the growth in demand. Quality has become a critical issue, with delivery deadlines across the holiday season being missed. This undoubtedly will slow the take up by Chinese consumers.

The economic shift towards consumption rather than export driven production seems to have caught the Chinese logistics industry by surprise. The domestic sector is primarily serviced by local players without the systems or maturity to cope with the growth. In addition to this, the high level of fragmentation has made the market hyper-competitive, a factor, along with an uncertain regulatory regime, which led DHL to withdraw from the domestic market last year. Turning the massive growth prospects into tangible profits has proved to be elusive.

It is not just the logistics service providers which have faced problems in China. There has been speculation in the press that Foxconn’s online shopping website is on the verge of shutting down. With 30% of customers located in rural areas, the company has been losing money on each delivery.

Alibaba – which owns the dominant player in the market, Taobao – has responded to the lack of supply side provision by establishing its own logistics operation, investing $4.6bn. Jingdong, the second largest player, established its logistics operations in 2009 and has recruited more than 6,000 people delivering in about 180 cities throughout the country. According to figures published by the State Post Bureau of China, each Chinese consumer ordered an average of two items for express delivery in 2010, half the global average of 4.1 and far behind the 26 items ordered by each US online shopper. The incentive to overcome these problems is obvious.

In the US a different challenge to the industry has arisen, one which will have a fundamental impact on online retailers’ distribution strategies.  In the past, many distribution centres’ locations were driven by factors such as access to transport infrastructure, ports, airports as well as proximity to consumer markets. Now there is another factor to take into account: state taxation policies. It seems that although one part of local government may be trying to attract giant logistics sheds to their vicinity (not least because of the employment opportunities they bring), state tax collection agencies have a very different focus.

For example, tax collectors in Arizona have just handed internet retailer Amazon a $53m bill for uncollected sales taxes. Amazon has stated that it intends to fight the case vigorously. The argument revolves around where a transaction can be considered to have taken place and whether this can be considered to be at the site of order fulfilment. In the case of Arizona, Amazon has four distribution centres, positioned to take advantage of the good links with the West Coast ports. Amazon clearly does not believe it should be taxed wherever it has distribution centres, instead lobbying for a nationwide tax regime for online retailers to be established. In fact, this is not only a US issue, with governments right across the world trying to work out how to capture missed sales tax revenue.

Online problems do not stop there. According to press reports, over the holiday period bricks-and-mortar retailers such as Best Buy, Target Corp, Wal-Mart and Barneys all struggled to meet demand. Some of these problems were as result of technology glitches while others were due to companies placing lower priority on their online offering than on their traditional distribution channels.

Europe was not immune to the problem of fulfilling customers’ expectations either. One survey shows that last year, in the UK, a quarter of online shoppers received their goods “later than expected”; while 13% said they received nothing at all.

There is no doubt that the online shopping phenomenon has given the express and logistics industry a welcome shot in the arm. However, in many respects the sector is still maturing, with development issues on both the supply and demand side. These challenges may slow momentum temporarily, but even in developed markets, prospects for future growth are still exceedingly strong.

10. Entering the “era of big data” – Leveraging data as a competitive advantage .

9.  Supply Chain “clock speed” – Need to think about speed on two dimensions: the speed of the initial IT implementation and the decision-making to support the ongoing business.

8. In-Memory technology enters supply chain space - When speed meets big data, the need to analyze massive amounts of data for instant business insights is required to transform organizations into a real-time business.

7. Supply chain visibility and analytics - The old adage of “you can’t manage what you can’t measure” certainly holds true when it comes to predictions.

6. Social supply chains – Its time has come.

5. Supply chains in the cloud – Access across networks

4. Collaboration is key - As supply networks become more global and more organizations turn to outsourcing, networked business environments are becoming the norm . To improve performance, businesses will continue to strategically partner with suppliers and other supply chain participants to collaborate and share information.

3. The customer is (still) king! - With the world population now past seven billion – with 20% of those having access to the internet and social networks – the global end consumer is now more connected, informed and demanding than ever.

2. Sustainable and compliant supply chains - Government and industry to step-up process standards and corrective mitigation efforts” in 2012.

1. Supply chain risk will not go away - Mitigating risk across global supply chains

Washington, D.C. — Ex-Im Bank is celebrating its successful first year of Global Access for Small Business (Global Access), the agency’s small business outreach initiative. This ambitious public-private partnership to engage more companies in exporting was launched at the U.S. Chamber of Commerce last January as a part of President Obama’s National Export Initiative (NEI).

“If my company can’t offer credit terms, we can’t close deals with many foreign buyers. Ex-Im Bank financing gives us peace of mind — we would not be as successful as we are today without it,” said Andy Malcolm, president of Advanced Protection Technologies in Clearwater, Fla.

Malcolm’s comment represents what experienced exporters told attendees at dozens of Ex-Im Bank’s Global Access forums across the country during the past twelve months.  At these company owners learned how the Bank’s financing, along with other government resources, is a critical tool to increase their foreign sales.

“The forums are very good – they provide small businesses the answers to their questions,” stated Malcolm. “This would have helped my business when we were small. It is good to ask questions to those who have been through the ‘excporter wars.’”

The financing that Ex-Im provides to small businesses is contributing to a significant increase in overseas sales. In fiscal year 2011 alone, the Bank increased small business transactions to a record $6 billion, up $1 billion from the previous year. Over 85% of all Ex-Im transactions directly benefit small business exporters.

Global Access Goals

Ex-Im Bank aligned its Global Access program goals for increasing small business export financing with NEI’s objective, doubling U.S. exports by 2015. By 2015, Ex-Im Bank aims to double its annual small-business export-finance volume from $4.5 billion to $9 billion, add a total of 5,000 small businesses to its portfolio and approve cumulatively at least $30 billion in small-business transactions. To date, Ex-Im Bank has added a total of over 1,600 small businesses to its portfolio and authorized $15.5 billion in small business transactions.

“Ex-Im Bank’s Global Access for Small Business is not just a brand, it’s a mindset for us at Ex-Im Bank,” explained Chairman and President Fred P. Hochberg. “It is the Bank’s top priority to dramatically increase the number of small businesses exporting and in the process help them create more jobs. We want to help them gain a competitive edge so they can sell to more countries and expand sales into existing ones.”

“Global Access for Small Business program is equipping small businesses with the tools and resources needed to reach more customers around the world and expand foreign sales,” said Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce. “Creating growth in U.S. exporting will help lead the U.S. to economic recovery and this partnership will continue to give small business the assistance needed to harness that growth.”

New Small Business Products

To further support small business exporting, Ex-Im Bank is offering new financing and insurance products that complement existing Bank programs, as well as streamlining product delivery. For example, Express Insurance was launched in April, 2011, a streamlined application for a policy quotation and two foreign-buyer credit indications up to $300,000 within five business days. In the first six months, Ex-Im Bank approved over 100 Express Insurance policies.

Direct Outreach 

Chairman Hochberg and members of the board of directors traveled across the country to meet with small business owners to discuss the benefits of exporting. On average, over 100 representatives from local companies attended each event. Global Access so far has reached approximately 5,000 small businesses that participated in the forums and in 12 on-line webinars over the last year.

Ex-Im Bank hosted 32 Global Access forums in 2011 at which representatives from local businesses, elected officials, and partner government agencies shared their expertise on how to successfully enter the global marketplace. A.R. Chem Tex Industries LLC of Edinburg, Texas, is a small business that exports chemical treatment products and equipment for gas wells. The company attended a Global Access forum in Weslaco, TX because it wanted to expand into new foreign markets but didn’t have the ability to finance its product. After being approved for both an Ex-Im Bank working capital loan and small business multi-buyer insurance policy, the company not only expanded sales into existing markets in Mexico and Venezuela, but now is able to expand into Argentina and Colombia. Additionally, the company hired one new employee and plans to hire more as sales increase.

The following companies are also among those that are now Ex-Im Bank customers after attending a local Global Access forum – D.O. Weaver and Company (Aurora, Co.), Francis Torq Lite (Luling, La.), Richard S. Sternberg Metropolitan Washington Law Consortium (Washington, D.C.), Segway (Bedford, N.H.), Skelley Medical (Hollis, N.H.) and Southwest Windpower Inc. (Flagstaff, Ariz.).

Ex-Im Bank is continuing to hold Global Access forums across the country in 2012.  To see where and when the next forum is being held, go to the Global Access events page (http://www.exim.gov/sbgport/SB_eximU.cfm).

Statements from Other Global Access Partners:

“Providing export financing to help more small- and medium-sized businesses reach buyers overseas is key to creating jobs here at home and strengthening the recovery,” U.S. Commerce Secretary John Bryson said. “The more American-made goods and services U.S. companies are able to sell abroad, the more jobs will be created in communities across the country. It’s just that simple.”

“Small businesses in particular need the support of both the federal government and private sector to compete in the global market,” commented United States Trade Representative Ron Kirk. “Small- and medium-sized businesses benefit greatly from global trade.  With 95 percent of the world’s customers living outside our borders, we need to help small businesses face the challenges presented in a competitive market and win deals abroad.”

“Manufactured goods exports represent more than 60 percent of all U.S. exports of goods and services and are essential to job creation,” said NAM President and CEO Jay Timmons. “The Global Access Initiative provides small and medium-sized manufacturers with the resources to begin exporting or to expand sales overseas, resulting in more jobs here at home.”

“By working with other federal agencies, we can help level the playing field for small businesses that want to begin exporting,” said SBA Administrator Karen Mills. “U.S. small businesses have the innovative, high quality products that these countries are demanding. The Global Access initiative, along with SBA programs, is providing the financing to make these exports possible.”

About Global Access:

32 Global Access forums were hosted in fiscal year 2011 in Manchester, NH; Philadelphia, PA; Minneapolis, MN; Kansas City, MO; Lafayette, LA; Los Angeles, CA; Denver, CO;  Long Island, NY; New Orleans, LA; West Long Branch, NJ; Miami, FL; Wilmington, DE; San Leandro, CA; Wichita, KS; Charlotte, NC; Providence, RI; San Juan, PR; Fresno, CA; Houston, TX; Milwaukee, WI; Weslaco, TX; Baltimore, MD; New Haven, CT; Cleveland, OH; Beloit, WI; Chicago, IL; Phoenix, AZ; Grand Rapids, MI; Detroit (Novi), MI; and New York, NY. 

Ex-Im Bank’s Global Access partners were an integral component to Ex-Im Bank’s small business outreach. New partnerships were forged over the last year including FedEx, PNC, Wall Street Journal, Bank of America, HSBC, and Wells Fargo.

About Ex-Im Bank:

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. In the past six years, Ex-Im Bank has earned for U.S. taxpayers $3.7 billion above the cost of operations. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase U.S. goods and services.

Ex-Im Bank approved $32.7 billion in total authorizations in FY 2011 — an all-time Ex-Im record. This total includes more than $6 billion directly supporting small-business export sales — also an Ex-Im record. Ex-Im Bank’s total authorizations are supporting an estimated $41 billion in U.S. export sales and approximately 290,000 American jobs in communities across the country. For more information, visit www.exim.gov.

Capacity shortage likely to keep pressure on rates in 2012, consultancy says.

Freight rates in the $350 billion to $500 billion-a-year truckload market have started 2012 by heading in the same direction as they did for most of 2011: higher.

According to analysts at Portland, Ore.-based TransCore Freight Solutions, spot market and contractual rates in January for the three main types of livery—dry van, refrigerated, and flatbed—are rising at close to the same pace they were at the end of 2011. Last year, spot rates rose 7.4 percent over 2010 levels, while contract rates increased by 6.5 percent, according to the consultancy, which tracks rates on 18,000 lanes in 135 U.S. markets and an additional 2,000 lanes in 14 markets in Canada.

TransCore analysts expect contract rates in 2012 to rise between 5 and 6 percent, and spot rates to increase by nearly the same level as in 2011. They caution, however, that forecasting full-year data in mid-January is an inherently risky exercise.

Most striking about the TransCore data is the unusually strong growth in flatbed rates. As of Jan. 9, the spot market rate for flatbed equipment stood at $1.68 per mile, a 9.1-percent increase from $1.54 a mile at the same time in 2010. Flatbed rates historically gain strength in the spring and peak around mid-year. Flatbed spot rates in 2011 peaked in June at $1.76 per mile.

What’s unusual here, according to TransCore analysts, is that flatbed rates remained strong well into the fall of 2011 and showed strength again in January, a seasonally soft month. TransCore analysts say reasonably mild January weather in much of the nation could be contributing to the January gains. However, given that flatbeds are mostly deployed to carry freight used in housing and construction, the rate strength could be a sign of firming demand in those economically battered sectors.

Another factor driving up rates for all three equipment types is the continued scarcity of supply. TransCore analysts say shippers and brokers continue to have trouble finding consistent supply sources. Users are increasingly being forced to look to the fourth or fifth carrier choices because they can’t obtain capacity at reasonable prices from their top three carriers. They’re also being pushed into the spot market due to surges in demand that their contract carriers cannot accommodate, the consultancy said.

Capacity crunch continues
The tight capacity situation is unlikely to loosen up anytime soon. Transport advisory firm Transport Capital Partners said Tuesday that nearly three-quarters of carriers surveyed during the fourth quarter planned to add between zero and 5 percent capacity for the foreseeable future. This comes after a near 20-percent reduction in fleet capacity during the recession.

For the past half-year, carriers have been consistent in their refrain that, without a significant bump in rates to offset higher operating and investment costs, the most they can do is replace aging equipment—as opposed to expanding their fleets.

“Carriers tell us that rates are not covering investment risks nor are they close to covering the cost of the record prices of new trucks,” said Richard Mikes, a TCP Partner and survey co-coordinator.

As the supply chain grapples with tight capacity, demand remains solid. TransCore reported about 60 million postings on load boards in 2011, the second-busiest year since it began keeping records in 1996. Only 2005, a period of relatively strong economic growth fueled by a credit and housing bubble, saw more postings, TransCore said.

Based on conversations with shippers and intermediaries over firming freight demand, TransCore analysts surmise that the nation’s gross domestic product may grow at a 3- to 4-percent clip in 2012, faster than the 1- to 2-percent growth rate many analysts and economists expect.

Every year transportation experts make predictions about their industry trends. Many predictions don’t always hit the mark, but they do stir up ideas and conversation. We have compiled five of the most predictable 2012 trends.
Trend#1: More companies will explore vested outsourcing for supply chain and logistics requirements forming closer alliances with transportation and logistics providers specializing in customizable cloud computing solutions. The increasing demand for better collaborative business processes, rate management, and logistics procurement with greater execution capabilities is beyond the knowledge base, response time, and budgets of most in-house I.T. departments.
Trend#2: Dynamic Customer Engagement will become a high priority between shippers and transportation service providers. Seamless, time-sensitive information flow is rapidly becoming essential for everyone in the loop to be informed simultaneously will create greater demand for event management, information visibility, collaborative what-if solutions, and data security.
Trend#3: The convergence of cloud, mobile and information technology into a unified set of forces is shaping IT decisions and marketplace competitiveness. More companies will adopt cloud computing and mobile applications within their supply chain and logistics processes. The trends for cloud computing and mobile applications are creating faster collaborative sharing of information top down and bottom up creating teamwork synergies improving processes, financial results and quicker solutions to customer requirements.
Trend#4: Strategic Transportation Procurement is coming Board of Directors decision. Transportation Procurement is no longer only about freight rates and service parameters. The procurement footprint is quickly expanding to include carbon footprint, security compliance, reduction of non-core costs, acceleration of business value, collaborative cloud-based analytical platforms, and more global environmental awareness.
Trend#5: Response Management drives demand for quicker, timely decision-making, rapid planning and predictive analytics to scenario responses of unplanned events. Logistics in if ever-changing environment combined with marketplace competitiveness can impact fiscal results in hours not days. The goal of What-If scenarios is proactive anticipation instead of reaction. It equates to delivering the most timely knowledge and insights to ensure informed decision-making.

How is your organization prepare to take advantage of these Supply Chain trends to optimize your results?

Happy New Year!

Over the past few weeks the freight economy has seemed almost bullish even as the Economic Cycle Research Institute and others warn of impeding recession. Can we really be headed back into recession when freight demand at both truckload and less-than-truckload companies was reportedly increasing in the third quarter and North American railroads broke records for intermodal loadings? Yes, we can, says transportation analyst and consultant Satish Jindel, president of SJ Consulting Group, Pittsburgh. Jindel says cargo watchers are missing a growing disconnect between the freight-based economy and the economy as a whole.

“I think people are living in the past,” Jindel says. Trucking executives watching loaded trailers roll out of their terminals may not see signs of impending economic retrenchment because they “touch” less of the economy than they once did, he says.

“The trucking industry is only touching about 40 percent at the maximum of the total GDP,” Jindel told me Wednesday as we discussed carrier earnings. “The other 60 percent relates to the service sector, which doesn’t ship or produce freight.”

The balance is actually more lopsided than that. Goods accounted for about 35 percent of personal consumption expenditures in the second quarter of 2011 and services 65 percent, according to the U.S. Bureau of Economic Analysis. Jindel says that underscores the growth of the “Facebook Economy,” in which businesses such as Facebook and Google (which saw revenue expand 24 percent last year to $29.3 billion) generate billions of dollars in revenue making … nothing. No product that can be packaged and shipped, at least. Add to the Internet giants the banking and insurance industries and other professional services — even transportation, which accounted for about 4 percent of services spending.

The more GDP shifts toward services, the less relevant freight shipping may become as an overall economic indicator, Jindel argues. “The goods sector may not be showing weakness, but the services side may show weakness that outstrips it.” He believes public trucking companies will produce some positive results when third-quarter earnings are released, with higher revenue and profit. But domestic carriers may have a harder time sustaining volume in the fourth quarter.

“There’s a time lag” for domestic truck and rail carriers handling imported consumer goods, he said. Even if orders and port volumes drop, “the supply chain is already filled with goods moving and they can’t stop them.”

Bank exceeded $32 billion in financing to support $42 billion in exports

The Export-Import Bank of the United States posted its third straight record year in 2011 for financing exports from U.S. companies, the bank announced Tuesday.

The bank exceeded $32 billion in financing that supported $42 billion in exports, according to the bank’s annual report. More than 3,600 companies employing some 290,000 workers received financing.

Small business financing in 2011 was $6 billion, up 70 percent since fiscal 2008. The bank financed $23 billion in infrastructure-related projects and $13.2 billion in the transportation sector.

“Our financing of U.S. exports supports good-paying American jobs that sustain communities,” said Ex-Im Chairman and President Fred P. Hochberg “We are driven by dedication, leadership and expertise that produced a record-breaking year.”

Retailers lured millions of Americans out of bed to snap up bargains on Thanksgiving weekend. But will consumers stay awake long enough to boost to inventory restocking during the slack winter season?

Transportation carriers hope ringing cash registers and online sales will produce a boomlet in post-holiday restocking that boosts containerized imports during what’s normally the slowest period of the year.

It wouldn’t take much. Wary of being stuck with unsold goods that require markdowns, retailers entered the holiday season with minimal stockpiles. Retailers’ seasonally adjusted inventory-to-sales ratio in September was 1.39, the lowest for the month in more than two decades, according to Commerce Department data.

“I expect a bit of restocking through the Lunar New Year, but after that we’re likely to see only modest growth,” Journal of Commerce Economist Mario O. Moreno said. He forecasts overall U.S. containerized imports to rise 2.8 percent next year after 2 percent growth this year.

The timing of 2012’s Lunar New Year, which falls earlier than usual on Jan. 23, could push shippers to rush import shipments before Chinese factories shut down for the holiday. The ripples will show up in trans-Pacific import volume, which depends heavily on retail shipments.

Ocean carriers appear to be banking on the tight calendar to pump up rates that have declined steadily since August, and have approached freefall on Asia-Europe lanes. Several trans-Pacific carriers have announced rate increases between Christmas and the Lunar New Year.

The Transpacific Stabilization Agreement last month said its members plan to impose a minimum increase of $400 per 40-foot container on U.S. imports starting Jan. 1. The TSA said the moves are being taken in advance of annual contracting guidelines that likely will be influenced heavily by the state of demand on the Pacific. That demand will hinge on the consumer activity running up to the holidays and on the strategies retailers adopt for restocking goods or maintaining lean inventories.

Moreno expects trans-Pacific imports to rise just 2.7 percent after an increase of no more than 0.2 percent this year. Import volume has trended down in recent months. Trans-Pacific imports fell 5.8 percent in October, the fifth straight month of year-over-year decline.

More shoppers this year are also interested in shopping online as a direct result of free shipping offers – 36.3 percent will spend more online this year if shipping comes free.