You’ve seen the opinions of Chris Ferrell, transportation expert and Associate Director of Tompkins Supply Chain Consortium, a couple of times already on this blog. Today, he shares his insight into some floundering international transportation capacity issues.

--- Jim

I ran into my good friend David Croft at a restaurant last week. David purchases global freight for CHEP (the blue pallet guys) to the tune of about 25,000 TEUs across 46 countries. He was having lunch with two reps from one of the major NVOCCs (or, Non-Vessel Operating Common Carrier – a consolidator or freight forwarded that doesn’t own its ships) and discussing the recent capacity crunch that international shippers have been experiencing.

He invited me to sit down and, after the obligatory discussion of families and football, we got down to business – specifically talking about the state of the steamship industry.

Well, as you can imagine, the four of us had an exciting discussion. Here is a top level summary of our conversation, which I think you will find very enlightening.

There are a lot of RFQs going out right now due to panic over the lack of capacity, which is being further complicated by shippers' renewed dedication to inventory management, specifically to holding inventory levels down – both attributed to fall out from The Great Recession. It was the consensus that this panic has been created by the steamship industry.

But unless you're the largest of the large among shippers, you're probably better off waiting to lock in your capacity. The current environment is being fueled by last year's rate crash that made it more economical for the steamship lines to simply dock their vessels and has been further exacerbated by the steamship lines' motivation to recoup some of 2009's losses.

So, with the big retailers conducting their holiday season RFQs right now, one of two outcomes is likely:

1. Either they make enough volume commitments to revive the steamship lines’ capacity, and in turn, rates will stabilize and shippers will benefit in both price and commitment; or

 

2. A combination of conservative projections and tight inventory policies will compel the steamships to keep capacity sidelined, and space commitments will continue to take place on a near transactional basis, with the spot going to the highest bidder.

But since the latter is pretty much what's already happening, there's no major risk to waiting and seeing how things play out.

At this point, shippers need to be sharpening their pencils on their forecasts and volume commitments and be prepared to send out an information-rich, commitment-laden RFQ in late May when the big retailers are done, and everybody understands what this year's rules are going to be.

When the Supply Chain Consortium published its members-only International Transportation Report earlier this year, many of the same industry weaknesses were identified, but we saw the steamship lines putting capacity back into play at the first sign of volume.

These industry experts I spoke with, who interact with and depend on steamships on a daily basis, have made me more cautious now. I still believe capacity is coming back, but it will be a controlled release, rather than an opening of the flood gates. Even if the capacity doesn't return, the experts were able to convince me that there is little risk of things getting worse than they already are.

But that's my opinion, what do you think?

-- Chris

More Resources:

Tompkins Supply Chain Consortium, www.supplychainconsortium.com - the Supply Chain Benchmarking and Best Practices Forum

 

Transportation Optimization

 

Ports and Maritime Freight

 

Supply Chain Logistics

 

Guest Blogger: Shibesh Banerji, Principal, Global Supply Chain Services, Tompkins Associates

I asked one of Tompkins Associates’ global supply chain gurus, Shibesh Banerji, to talk about some recent shifts in China that are affecting supply chains in high-tech industries. Shibesh has extensive experience in global high-tech operations, including manufacturing, distribution, retailing, production planning and reverse logistics, as one of our high technology supply chain consultants.

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China’s high-tech sector has always received significant media attention, but this past week, it has found itself even more in the limelight. Why? Because China has just softened its stance on qualifying requirements for government high-tech product procurement policies.

Everyone is aware of the currency situation with China. There has been mounting pressure on China for revaluation of the Chinese Yuan (also called the Renminbi), which has been causing an implicit strain on US-China trade relationships. The argument has been that by not allowing the Yuan to float more freely with world markets, Chinese exporters have an undue advantage over foreign exporters.

However, this is not the only Chinese policy being blamed for creating a protectionist barrier against free trade practices. The country’s long standing government procurement policies for high-tech products, which mandated "indigenous innovation," have also shared a similarly infamous distinction.

But now, China has taken steps to soften its stance as indicated by updated policy guidelines released earlier this month. The new rule states that companies seeking to have computer, energy, communications, and other technology qualify for consideration in government procurement must "possess registered trademark exclusive rights or usage rights in our country for the product." Here is a link to the report detailing modifications to the policy.

In addition, products "must have intellectual property rights or intellectual property right usage permits in our country."

This move is viewed as a sign that China recognizes the importance of fair competition and the role played by foreign companies in developing its high-tech capabilities. Therefore, it definitely sends a positive message to foreign companies who have invested in the high-tech sector in China that their valuable contribution is being acknowledged.

It will be interesting to see if this is a turning point, and as pundits may call it, "a move in the right direction." Or will it turn out to be a washout intended to quiet the critics, at least temporarily?

What are your thoughts? If you are in the high-tech industry, have a question about high tech supply chain consulting, and/or deal with China or China sourcing, we would like to get your input on these new guidelines.

More Resources

High-Tech Landscape and Supply Chain Trends

Technomic Asia - China Sourcing

Strategic Sourcing and Procurement

 

We mark the 40th anniversary of Earth Day (April 22) this year. Although we’ve been hearing a lot about sustainability for a long time, from what I’ve seen, companies are finally beginning to understand the potential for "green" improvements and sustainable business.

As a recent Tompkins Supply Chain Consortium survey report on Waste and Recycling Sustainability notes, "improvement ideas come in all shapes, sizes and colors. The key is to find ideas that work and engrain them in the company culture." Another key is realizing that going "green" can also translate into cost savings and more efficient operations.

I agree with the recent New York Times article noting that it is often businesses who lead the way today in environmental innovation. Unlike the early years of Earth Day celebrations, companies are partnering with environmental groups to help reduce the nation’s carbon footprint.

Companies are still coming up with the best solutions for business sustainability, and a large effort is being made to set goals for waste reduction. The EPA estimates that the percentage of materials recycled has nearly tripled since 1990.

One area that is growing is disposal of obsolete electronics. The good news is that the Tompkins Supply Chain Consortium report shows that less than 10% of those who responded to the survey dispose of their electronics in landfills. Instead, they:

Recycle (70%)

 

Donate (45%)

 

Sell to be used as parts (18%)

 

Return to provider (18%)

 

Refurbish and sell (13%)

 

Store in homes and offices (12%)

Going even further, some companies allow employees to bring obsolete electronics from home to work for recycling or donation. This is really cool!

Businesses in all industries and of all sizes can contribute to waste reduction and reduce the associated GHGs, as well as help alleviate overflowing landfills. What are some unique or low-cost business sustainably techniques that your company has implemented?

Did you do anything special for Earth Day?

Go!Go!Go!

Jim

Learn more about waste and recycling sustainability in the report from the Tompkins Supply Chain Consortium.

Additional resources are available at the Tompkins business sustainability and greening supply chain operations web page.

Photo credit (1): woodleywonderworks

Photo credit (2): aussiegal

Have you ever read something that makes you shout, out loud, "Yes! Right on! This is exactly what I have been saying!" That happened to me the other day with the Harvard Business Review’s perfectly on-target article, "Roaring Out of Recession."

We know that some companies survive recessions and come out even stronger on the other side, others tread water and then slowly sink, and then others just simply tank. Since few empirical studies have been done on which strategies work best during an economic recession, I was very pleased to see their findings in this study of some 4,700 companies.

I was even more pleased to discover that their research echoes much of what I have been saying in my reports, blogs, and podcasts about The Great Comeback over the past two years.

Here’s my Top 5 insights based on the article:

1. "Great leaders know that how they fight a war often decides whether they will win the peace." I love this quote, as it tells the whole story of what I have been calling The Great Comeback. It is not what you do after the Great Recession, but what you do during The Great Recession that spurs the Great Comeback.

 

2. "Only a small number of companies flourish after a slowdown." About 9%, their research shows. Yes, and this is so disappointing, because most lead changes occur during the slowdown. Are you still worried about The Great Recession or are you participating in The Great Comeback? Now is the time to pour on the gas!

 

3. "According to our research, companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after a recession." Absolutely, I have said over and over and over to maintain talent, maintain strategy, and cut all other costs. Right on!!! But "cut, cut, cut" alone is not a good strategy for cost reduction.

 

4. "Prevention Companies" (cut, cut, cut strategy) average a post-recession 6.3% growth in sales and 4.4% growth in EBITDA, as compared to "Progressive Companies" that average 13% and 12.2%, respectively. So, this is clearly in line with Tompkins Associates’ plan for economic recovery and growth in The Great Comeback.

 

5. "During recessions, Progressive Companies develop new markets and invest to enlarge their asset bases. These companies also judiciously increase spending on R&D and marketing, which may produce only modest benefits during the recession, but add substantial sales and profits afterwards." Definitely, the Progressive Companies are the ones with a Comeback Plan, who understand when to slow and when to put the pedal to the metal.

 

Economic growth, capital spending, consumer spending, factory output, etc., are all gaining strength. The Great Recession is behind us, the question is what is ahead of you? Do you have a Comeback Plan?

More Resources

Go here for a sample from the "Roaring Out of Recession" article: http://hbr.org/2010/03/roaring-out-of-recession/ar/1

Download the Great Comeback Executive Briefing

Photo Credit: SEP Blog

I don’t know about you, but when I want to understand what’s going on in a location in which I am not currently residing, I ask someone who lives and works there daily.

Take China, for example. There’s a ton being written today in this sphere – how the business climate is there, what to expect in the future for the China market, and, naturally, speculations on when China’s property bubble will burst.

Just the other day, I saw an item in the news about China’s property market. It declared that "China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos. According to Chanos, this will put China’s economy, 'on a treadmill to hell . . . ' when the real estate bubble bursts later this year or sometime in 2011."

"Treadmill to hell." Those are some strong words, but are they based on solid knowledge and experience? Dr. Kim Woodard, a global business expert who has worked in China for the past 30 years, disagrees with this assessment on China’s property market. Kim, who helped successfully lead some of America’s first companies into Asia, talks more about this in his recent blog post, The China Property Bubble, Myth and Market Reality on the China Business Blog and Podcast. As one of the preeminent "deal guys" in Asia, Kim recently joined Technomic Asia and Tompkins International to make sure that we are not missing the boat in China.

Now more than ever, it’s essential for global companies to have folks on the ground in China who understand how to interpret the economic signals around them and how to react. Sure, you can read news reports and interviews, but it is always smart to hear from those who are on the ground.

Go!Go!Go!

Jim

More Resources  

Tompkins Associates White Paper: Global Trade Management Technologies Tame the Beast

More on Asia sourcing

Photo credit: John Haslam

"Time is Money." This phrase is about as timeless as the movement of goods from Point A to Point B. And it’s especially true for Global Trade Management, a topic of growing importance that companies need to become more familiar with today.

As our new Global Trade Management Technology (GTM) white paper suggests, "Speed at a competitive cost is the goal for the flow of goods through the global supply chain."

The benefits of using GTM and Supply Chain Event Management (SCEM) applications are clear – they improve global companies’ abilities to handle regulatory complexities, increase visibility and flexibility, manage finance, and optimize the use of technology and supply chain software.

As the paper notes, robust GTM applications provide three key capabilities to the supply chain:

1. Compliance – Automating customs and regulatory compliance activities:

a. Import/export licenses;

 

b. Proper product classification;

 

c. Restricted party screening; and

 

d. Automate customs filings;

2. Content – Regulatory, duty/tax, and classification information for each pertinent country to comply with trade regulations and prevent any delays in customs.

3. Connectivity – Linking all trading partners and external parties (customs, brokers, freight forwarders, financial institutions, etc.) together to complete a transaction.

Without a way to connect internally and externally, your company may be operating blind. And with the current high levels of global trade, supply chain visibility for all partners is essential.

GTM and SCEM technologies help provide real-time information through a single source. As your supply chain becomes more complex, isn’t it time that you simplified your processes?

Lean more about how these technologies can help you same time and money by reading the recent white paper, Global Trade Management Technology, Lowering the Barrier to Gain Control of Your Supply Chain.

Go!Go!Go!

Jim

More Resources

From Supply Chain Brain: Closing Talent Gaps for Global Supply Chain Management

Read and Subscribe to the China Business Blog and Podcast from Technomic Asia

The Global Supply Chain Podcast

 

 

Photo credit: gittsy

Eighteen months ago, I began writing and talking about The Great Recession and my view of The Great Recovery.

A few of my major points included:

The recession was not just another recession, but it was The Great Recession.

 

Companies needed to maintain their talent and stay focused on their business and supply chain strategy.

 

Companies needed to be wise about supply chain cost reduction and reduce all other costs while planning for their Great Recovery.

 

Different industry segments would bottom at different times and recover at different paces.

 

The bottom to The Great Recession would be in the second quarter of 2009.

 

Growth in employment would occur in the first quarter of 2010.

Now looking back, we know that:

The recession was really, really bad.

 

Companies that maintained their talent and their strategy are returning to prosperity much better than firms that only cut, cut, cut.

 

Companies that reduced all costs, other then talent and strategy, while planning for their Great Recovery are ahead of their competitors and gaining momentum.

 

As predicted, the recession was much less severe for the pharmaceuticals, food & beverage and cosmetics industries and much more severe for the housing and automotive industries.

 

The Great Recession bottomed in June 2009.

Here’s the really good news: The Good Friday report showed that employment for March 2010 grew by 162,000 jobs!

Let me present a little more detail on this Good Friday report. This past Friday, the Labor Department reported that in March the U.S. economy added 162,000 non-farm jobs. In fact, this is the third month out of the last five in which the employment number was positive.

However, it is the first month since November of 2007 that the growth number was more than 100,000, which is widely believed to be higher than the number we need to absorb all new workers entering the job market.

Looking at the employment numbers over the last year is even more interesting. In the first quarter of 2009 the economy lost an average of 753,000 jobs per month. By the fourth quarter of 2009, this was down to a loss of an average of 90,000 per month. For the first quarter of 2010, we see a growth in the number of jobs of 54,000 per month.

This is very, very good news that we can now confirm the growth in employment in the first quarter of 2010.

There remains two amazing things to me about The Great Recovery:

1. Washington, DC seems to be surprised by the recovery and still is uncertain about it really being the recovery.

 

2. The recovery took place on the backs of American consumers, workers and business people without much help from Washington.

So, congratulations to the American consumers, workers and business people for the great job they have done in bringing about this Great Recovery.

Let me reiterate why this recovery is real and why it is The Great Recovery:

Corporate profits are up.

 

Corporate capital expenditures are up.

 

Consumers are both saving and spending.

 

The Consumer Confidence Index, the Present Situation Index and the Expectations Index were all up in March.

 

Growth in employment in March was up across all major industries, except for trailing financial and information industries.

Sure, housing is still down and unemployment is still at an unsatisfactory rate, but we are seeing The Great Recovery take place. Of course, it would be great if Washington got in the game. But even if they do not, The Great Recovery is occurring as predicted, and I see a long string of good Fridays unfolding before us.

GO! GO! GO!

Jim

Photo credit: kevinzhengli

Here’s a simple phrase that may result in some real misunderstanding: "Emerging markets."

Calling a country "an emerging market" is no longer an accurate description. So let’s dust this concept off, consider what has changed, and see how we should be using this phrase today.

Once in a while in this blog, I take business jargon words and phrases and consider what they used to mean and what they mean now.

Currently, the concept of emerging markets is an especially interesting one to size up. This is because merger and acquisition strategy is on the verge of becoming hot, hot, hot and is impacting the status of emerging markets themselves. This could affect your company in a big way, and you need to be ready.

In the traditional sense, what we used to call emerging markets – such as Brazil, Russia, India and China – are so economically massive and important to the world now, and they’re growing so quickly, that the term really doesn’t apply any more. But, maybe we need to dig a little deeper.

Defining a market as emerging implies that the opportunity for intense, rapid growth exists, but has not yet begun. Some force – whether an innovation or an acquisition – has to knock over the first domino to turn potential energy into rapid growth.

Once this happens, the market’s status changes from emerging to high growth and eventually to mature status. At some future point in time, this cycle can turn to a redefinition state, where changes to the market or to the industry result in a whole new set of dynamics.

You see, I now believe that within a given country’s market, it is important to consider what growth exists by industry, not overall. For instance, where in one market a given industry is still emerging, for another industry, that same market could be high growth.

How does this work? Consider that in a specific country, the food and beverage industry can be mature, but in this same country, the pharmaceutical supply chain is being established and the industry is just emerging. Each industry in each country or region needs to be defined based on its unique characteristics.

Emerging markets may be crowded but also fragmented, and thus huge opportunities exist for growth. And often this growth can be initiated via an acquisition.

The key points that you should keep in mind when considering entry into these markets: Have a rigorous definition for your industry and base your acquisition strategy on your company’s opportunity for growth.

Do you agree that the term emerging markets needs to be viewed on an industry by industry basis and not be applied broadly to a country? What is your company doing in the way of defining emerging markets and laying a claim to capture this high growth potential?

More Resources:

M&A Podcast Series on the Global Supply Chain Podcast: Learn more about the series and subscribe to receive updates when a new podcast is available.

 

Executive Briefing: Sales, Inventory and Operations Planning: Crossing Organizational Boundaries

 

Photo credit: Dave Bleasdale