March Supply Chain Industry News

Our wrap up of all things supply chain industry related from March

APICS & Michigan State University asked supply chain managers “What Keeps You Awake at Night?”

APICS is the premier professional association for supply chain and operations management and the leading provider of research, education, and certification programs to elevate supply chain excellence, innovation, and resilience. The association posed the question to supply chain executives to better evaluate opportunities and challenges faced by the supply chain industry.

“At APICS our focus on improving supply chain performance includes ensuring the APICS community has access to research and content that helps them identify, prevent, and solve problems,” APICS CEO Abe Eshkenazi, CSCP, CPA, CAE revealed. “This new report will help professionals and organizations obtain meaningful insights around the most common supply chain challenges.”

The concerns that made the top of the list included:

• Capacity and resource availability: Across the board,executives were highly concerned with various activities targeted at maximizing the firm’s facility capacity. This could be replacing old equipment with state-of-the-art, higher-capacity machinery, dealing with innovative products, or the possibility of strain on the supply chain from escalating sales.
• Talent: Survey respondents also mentioned the intensity of talent competition for supply chain jobs. Retaining new hires and best use of talent were residual burdens after even the most successful hiring cycle.

• Complexity: Stock keeping units (SKUs) can’t keep up with complex new products, especially when supply chain companies build different types of products while simultaneously growing their existing products.

• Threats and challenges: Natural disasters, continuity planning, and troubled suppliers were just a few of the broad concerns voiced by supply chain executives. Considering business continuity when developing new products, when to opt into investments in resiliency, and lean operations’ limitations on continuity planning were all key matters. 
• Compliance:  Top issues were product regulation, trade controls, and continually changing regulations. Trade compliance, anti-dumping, and customs, and the supplemental mandates from agencies like the Environmental Protection Agency, the Food and Drug Administration, and the Department of Agriculture add complexity to the supply chain industry.

• Cost and Purchasing Issues: Healthcare and pharmaceutical firms are the top industries impacted by price pressures. The Affordable Care Act, Medicare, and Medicaid all have and will only continue to vastly change the industries’ landscape. The underlying solution is easier said than done: focus on efficiency.

Maersk is taking to the sky for drones delivery to cargo ships…
Maersk Tankers has been testing drones—ATEX, or ATmospheres EXplosibles–approved drones certified for explosive environments—for an initial delivery: cookies.

In an attempt to explore the use of Xamen Technologies’ delivery drones, Maersk’s first test took place on a foggy day, offshore in Denmark’s Great Belt, between barge and tanker, dropping the cookies from about 15 feet above a target.

“We are very early in the process and we need to be sure the technology works safely. It’s often quite challenging to get things on board. So I was a happy man when the test worked out fine,” noted supply chain manager Markus Kuhn.

• Drone safety is key, as Tankers are certified as intrinsically safe, so no sparks could be generated in the event of a crash.
• This could be a cost-effective strategy to move away from expensive deliveries to vessels which are not alongside the quay.
• With barge costs averaging $1,000 or higher, potential savings through the use of drones are estimated to be between $3,000-$9,000 per vessel per year.

“Drones can make savings in both costs and time. There are high costs for on-board delivery of small parcels, filled with urgent spare parts or mail, because of the need for a barge,” says Supply Chain Manager Markus Kuhn.

Next, Maersk Tankers and the Maersk Group must evaluate results. Group Technical Innovation Board has designated this as one of five projects to jump start in 2016 in efforts to adopt a culture of early-stage technical innovation.

“It’s a totally new step in delivery to vessels. Today it’s cookies. Another time it might be medicine which we need to treat someone on board,” Captain Christensen clarified.

Imports at the Port of Los Angeles surged…
The Port of Los Angeles saw a record 372,744 loaded 20-foot containers of imports, a jump of 46.6 percent from February of 2015 and an import volume spike of 30 percent from 2014—indicative of stable consumer demand and the strong dollar bringing in more goods from overseas.

• The Port of Los Angeles recently explained that March volumes would most likely be “softer” due to slowing Chinese production in February’s Lunar New Year.
• Loaded export containers at the Port of Los Angeles in February, however, were flat compared with February in 2014. And nearby, the second-largest container port in the U.S., Port of Long Beach, noted similar trends last month.
• Cass Information Systems Inc.’s freight index report illustrated improved domestic freight activity— 8.3 percent up from January—along with 6.3 percent more spent on shipping.

• Freight shipments were down 2.6 percent from last February and expenditures fell 5.1 percent, coinciding with Cass’ predictions for a “sluggish” first half of 2016.
• Cass’ report author wrote, “The robust turnaround this month signals improvement, but current economic conditions do not support a robust rebound.”

The trick to profit growth? Keep trucks off the road during US truck driver shortage…
This trend isn’t showing any signs of relenting with fuel prices down 25 percent.

• Industry analysts point out that low diesel fuel prices and increased availability of trucks in the spot market will keep transportation costs down for retailers and manufacturers, but this will definitely hurt the freight and logistics industry.
• Providers of truckload and less-than-truckload services have had to cut prices. The rail market is behaving similarly, where low coal and oil volumes have freed up cars and driven down rates.
• Even intermodal carriers that carry freight over long distances with a mix of trains and trucks observe dropping prices for 2016. One third-party logistics executive told Cowen analysts, “economic signs for 2016 overall are not promising.”
  
• Many freight companies report that demand to ship goods is accelerating, a trend many expect continue this spring under normal seasonal shipping patterns.

Virginia Henkels, CFO of Swift Transportation Co., the largest truckload carrier in the U.S., said that after a “slow start” to the year, the company’s measure of shipping volume increased 3 percent year-over-year in February.

“Our customers are not near as bearish on the overall economy or freight demands as many of the research reports or surveys that are out there,” Ms. Henkels said. “With the exception of a couple of our customers, they are all anticipating increased volumes in 2016 vs. 2015.”

The decision to halt expansion of its fleet back in October resulted in Swift’s reported $196.5 million in adjusted earnings—up from $195.7 million in 2014. Executives also credited these results to lower costs from fewer accidents and insurance claims, improved freight rates, and company drivers’ fewer empty loads.