Annual Review and Outlook

In today's supply chain, it’s clear that physical scale and buffer stock are no longer the winning formula, and enterprises must utilize data intelligence and AI to transform their supply chains.

They say that an elephant never forgets, and neither do motor carriers who now have the upper hand in a market where there is very tight capacity in the truckload and less-than-truckload sectors.

2018 will be a very challenging year for manufacturers and retailers as the service-level demands of their customers increase, while transportation capacity tightens, and transportation costs rise. There will be no relief from their own C-suite in terms of profit expectations in an environment where it is very difficult to pass on price increases to customers.

Competition is good for everything that it brings: efficiency, innovation, customer choice. But there’s sometimes an unwelcome byproduct of competition: indigestion. Ports and terminals have a touch of it right now. That’s because there’s tense competition underway for cargo. There are too many gateways chasing containerized trade volume that’s growing … but not growing fast enough to absorb capacity. It could make a person queasy. The antidote for this heartburn? A healthy dose of upgrading. We’ve got to step up our game if we’re going to compete for cargo. That means improving efficiency and developing new capabilities. Fail to do that, and we risk losing market share. So what is it that ocean carriers and cargo owners want from port authorities and terminal operators? Here’s what we’ve learned working in close proximity with our Port Efficiency Task force over the past two years: Speed and reliability: Customers want extended hours, appointment systems, and turn-time metrics to hasten cargo flow. Big ship readiness: More than just deep water, customers demand fluid landside operations and infrastructure — starting with taller cranes — to handle mega-ships. Holistic supply chain support: Customer requirements don’t stop at water’s edge; we’ve got to provide the range of logistics services from onsite transloading to cold chain capabilities. Because we’re competitive, we’ve spent the past two years working on these improvements. Cranes are going higher. Terminal gates are open at night. This year, we’ll open a 283,000-square-foot refrigerated distribution center. In 2019, our 440,000-square-foot transload center opens. The Northern California market is reasonably well-insulated. It can’t be easily served by other US ports. That helps us protect market share. But it’s no reason to relax. We’ve got to keep improving … got to compete if we intend to grow our business. That’s the message for all port operators in these stomach-churning times.

The major trade gateways and consumption centers that matter most to our customers tend to change slowly, if at all. What has changed quickly, however, is our customers’ approach to moving goods through their supply chains, as consumers expect faster service.

The most successful digital transformation projects in 2018 will prioritize inbound and outbound data flows and needs, research the industry leaders’ trends, work with their largest partners, and use flexible, neutral technology to connect them.

In 2018, look for core transformative technologies that you can explore with your current relationships. Many companies are seeking to create the next standard or the singular marketplace or platform to corner the industry. Find partners focused on being the best at something and creating real value. Invest time and some staff resources in separating the hype from the practical, as there will be plenty of both.

It would be great if rapid changes were benefiting the inland waterways transportation system, but this is not the case when it relates to lock and dam infrastructure. US locks and dams were constructed during the 1930s New Deal, and more than half have outlived their 50-year design life. Emergency outages and inefficiency from antiquated systems are increasing.

Mark Green, administrator of the US Agency for International Development, announced in November that the Global Alliance for Trade Facilitation, an initiative that aims to help countries reduce administrative barriers to trade, would scale up its operations from four to 20 countries. This is an important move, one that will not only provide a lift for developing countries but also boost US exports and jobs.

Like a chameleon, a successful broker/forwarder has a highly developed ability to adapt to change. We are constantly adapting to continual changes — in trade, transportation, and regulation.

FIATA encourages authorities in the World Trade Organization Trade Facilitation Agreement signatory countries (e.g. Customs, Department of Trade, Department of Foreign Affairs, Ministry of Finance, etc.) to engage with FIATA association members in their own countries to assist the swift and efficient implementation of the agreement as widely as possible in the world.

The Jones Act carriers operating in the trades to Puerto Rico, Hawaii, Alaska, and other territories should subject themselves to a rate review board that includes representatives from the relevant state or territory, in lieu of continuing to enjoy the benefits of protectionism.

Do you hear that alarm? It’s loud, it’s piercing, it’s our industry’s wake-up call. It’s telling us that it’s time to change our viewpoint on a critical asset — the driver. These individuals play an important role in keeping freight moving and deserve more respect, for instance being treated like a “customer” at intermodal terminals and customer locations. Our industry needs to work to maximize their utilization as they become an even more valuable supply chain component after ELD regulations kick in and driver compliance is fully enforced. Delays at ramps, ports, and customer destinations will need to be reduced and ultimately eliminated. Many customers’ supply chains will be impacted once ELDs are enforced. They’ll have to look at their network and possibly realign lanes that are over 250 miles one way if drivers are delayed at terminals or in traffic. The industry will need to become accustomed to one-hour free-time provisions with higher detention rates and drayage costs as offsets to the inefficiency and opportunity cost of drivers not making it to the ultimate destination. We as an industry need to embrace the hard work and importance of these devoted individuals who are trying to earn an honest living for themselves and their families. Many are first-generation Americans trying to live the American dream. We must collaborate with industry partners and customers to develop a positive environment with more rewards — competitive pay and benefits, safety, and good work conditions. This needs to be an ongoing commitment and campaign by industry participants. For today and the future, we need to reinvent our industry’s approach to make sure we retain and attract drivers. It must be seen as a rewarding and respectable occupation in our industry.

“Trade has long been a powerful engine for Canada’s economy, and as both the developed and emerging worlds expand, the impact on Canadian imports and exports will be significant. Increasingly, rapid changes in trade, transportation, regulation, and other industry dynamics require more agile, flexible, and transparent supply chains. Digitization is both a disruptor and an opportunity to drive positive change, where transparency equates to bottom-line savings and optimization of operations. But in Canada, the path to more agile and flexible supply chains meets with tremendous obstacles. Much of our work on the advocacy front involves dealing with antiquated infrastructure, capacity constraints, regulatory red tape and snafus, miscommunication, or lack of communication among stakeholders, labor tensions, and (carrier) service levels that are not held to measurable levels of accountability. Our role involves communication, mediation, advocating for change and for common sense. This involves a delicate fine-tuning of the very fragile industry dynamics so severely impacted and affected by even the slightest operational delay. Working in concert with other members of the chain, we need to build in resilience and agility while aiming for transparency and service levels that rise above being ‘just adequate.’”

Economic maturity for countries participating in globalization will create opportunities that will impact containerized transportation. Countries such as China and India that are making the transition from a manufacturing economy to a consumer economy will cause carriers to review vessel rotations and service capacities across their entire networks. Regulations to favor cleaner manufacturing choices will have a significant impact on trades where carriers provide service. There will also be opportunities for carriers to expand their scope of coverage. Countries supplying newly developing consumer countries will drive additional capacity and/or increased call frequency. Marine fuel sulfur limit regulations will add a variable to the equation for more rapid capacity replacement. This will concentrate the available capacity in the market with larger vessels and fewer services. The most rapid visible changes to international buyers, sellers and intermediaries using containerized ocean transportation will come through automation and technological advancement. This includes Internet of Things, terminal robotics, autonomous battery-powered semi-truck convoys, and blockchain technology. The information gathered from automation will help carriers become nimble, both proactively and reactively, to changing market conditions more quickly. It will help to drive out costs of equipment management among other operational inefficiencies. All these changes will improve the customer experience by removing uncertainty and increasing reliability. Carriers prepared to lead, respond, and adapt will differentiate themselves and be rewarded for it.

We continue to experience remarkable changes that directly impact our industry. Nothing has generated a bigger impact than the continued evolving of the container alliances. It has been a good step forward for international trade. The three major alliances currently represent the majority of the world’s total container capacity. Larger container shipping companies can now allocate their resources better than ever. The question remains, can they do it while maintaining compensatory rates? 2018 will be the final year of the current International Longshoremen’s Association master contract. As much as technology and innovation continue to rewrite the ways that we do business, our industry is still very much a people business. The men and women who work our piers every day are the backbone of our successes. For the good of the maritime industry and international shipping, it is imperative that we reach an agreement quickly and without any interruptions to our supply chains. There has been a lot of discussion in the past year about investing in our country’s infrastructure. Many of our nation’s tunnels, bridges, and other superstructures are past their prime years, and some are crumbling. Our industry depends heavily on properly maintained waterways, highways, and rail networks. We must make sure our elected officials continue to push for infrastructure funding. It is a lifeline for all of us.

As today’s digital revolution unfolds, US freight railroads must keep pace to support technological innovation, economic growth, and the demands of a global transportation system — just as they did during the industrial revolution. Then, the steam engine revolutionized transportation. Now, data analytics is the game-changing engine that can drive advances in the global logistics industry. The explosion of online retailing is up-ending business models for how products are purchased, shipped, warehoused, and delivered. Consumer expectations of next day – even same day – delivery are the new norm. This exerts intense pressure on overnight delivery companies and freight carriers across modes to either adapt or risk irrelevance. To remain not just relevant, but vital, freight railroads must be part of the solution. From equipment health, to product tracking, to extending the planning horizon, railroads are identifying, inspecting, and modeling big data to boost operational efficiencies and customer service. Remote monitoring systems, for example, let us track locomotive engine performance and conduct preventive maintenance to avoid breakdowns and delays. Predictive analytics allow us to precisely gauge the movement of rail shipments, shrinking the time between origination and destination, and optimizing scheduling across a network. Online portals allow shippers to track their products and materials in near real-time, get service alerts, and gain seamless assistance across all railroad departments with which they interact. Overall, we need to continue to move toward integrated and robust data streams, where railroads gain more granular views of our respective systems. Next, we need to more holistically integrate data exchanges with other carriers, giving shared customers access to real-time tracking data as their products move over rails, roads, sea, and air. It’s an exciting time to be in railroading. Data-driven advances will create a better tomorrow for us, our customers, and their customers, bringing the global community even closer.

The transformation of container shipping along the east coast of North America is underway.

Rapid changes in trade and transportation are transforming our industry and creating new opportunities for ports to evolve.

Is modern life a blur? For some maybe; for the agile, never.

Hurricane Irma tested the emergency response preparedness at every seaport in Florida.

Surviving the “perfect storm” we are having in transportation will be based largely on how open you are with the information you have that will help all of your transportation partners help you deliver your freight. The more transparently you share will allow your partners to make faster decisions to enable your shipments to move that much faster.

The freight rail industry, which continues to invest large sums of private capital, welcomes the Trump administration’s pro-business shift, and knows our customers do as well. We are confident it will continue, without compromising safety in the years to come. But we also view many challenges.

Shippers should re-examine their budgets organization-wide, and be flexible. To handle the excess demand, shippers should think differently. They must incorporate their most reliable brokers as “shoulder to shoulder” peers to core carriers.

We just experienced the biggest bump in the economy in a decade, and there are more goods being moved than ever before. All of this leads to one thing, and that is a much higher demand than supply. We have seen what this looks like for the past two quarters, but a confluence of demands will only send prices even higher.

We have always found ways to push the boundaries on supply chain efficiencies beyond what was deemed reasonable, and 2018 will be no different. ELDs will accelerate improvements in shipping inefficiencies. Aging infrastructure needs to be addressed, and significant capital needs to be reinvested in the roads we travel every day to move America’s goods. The trucking industry is ready to pay its share for an infrastructure package that is fair and future focused.

We see firsthand the importance of trade between the US and Mexico, as export grain is our largest southbound cross-border commodity. Certainly, if the US would like to make progress toward closing the $63 billion trade deficit with Mexico, look no further than the opportunity to export refined products, LPGs, and plastics into Mexico.

As today’s digital revolution unfolds, US freight railroads must keep pace to support technological innovation, economic growth, and the demands of a global transportation system — just as they did during the industrial revolution. Then, the steam engine revolutionized transportation. Now, data analytics is the game-changing engine that can drive advances in the global logistics industry.

While the North American rail industry remains focused on maintaining a strong supply chain, we know the pace of change is accelerating. This has had a direct impact on our business mix.

As the transactional API economy continues to expand in the supply chain arena in 2018, customers need to carefully examine all the options. The ability to swiftly determine transportation pricing is key to a healthy, effective supply chain. Finding a solution that can quickly return shipment pricing, provide enough horsepower for detailed analytics, and fuel shipment-mode optimization processes will never be out of style.

More is expected from every provider in the supply chain. From the transportation side, it means a need for greater reliability of service, more visibility, and partners easy to do business with.

We need to do a better job communicating the facts — that the US-flag maritime sector provides nearly 500,000 middle-class American jobs and generates nearly $100 billion in economic output; that it enhances national security by ensuring the availability of qualified seafarers, ships, and intermodal assets for times of war or national emergency; and that it provides the industrial base vital to defense shipbuilding, maintenance, and repair. We also need to dispel the myths — the Jones Act does not drive the cost of shipping goods to remote places like Puerto Rico or require that all goods arrive on US ships.

I see industry consolidation continuing the trend of non-vessel operators gaining market share. BCOs will continue to search out NVOs to navigate the world of acquiring vessel space, react quickly to higher supply chain velocity, solve problems, and create value in the process of handling and managing their cargo. NVOs have used these tools to gain share in the past, and I see this continuing.

It is no longer enough to know and understand concepts from a textbook, a chart or SOLAS regulations. In addition to the knowledge and skills they learn in college, students need to learn to be flexible enough to serve the demands of their rapidly changing workplaces. Beyond a given skill set, the future maritime workforce needs more than ever to learn the flexibility, adaptability, and creative and innovative problem-solving skills that will prepare them for changes to the industries in which they work and for the many different jobs and careers they are likely to hold.

2018 will be the final year of the current International Longshoremen’s Association master contract. As much as technology and innovation continue to rewrite the ways that we do business, our industry is still very much a people business. The men and women who work our piers every day are the backbone of our successes. For the good of the maritime industry and international shipping, it is imperative that we reach an agreement quickly and without any interruptions to our supply chains.

The US industrial real estate market shows no signs of slowing in 2018; you haven’t heard the last of all-time highs for now.

Going forward, technology will be leveraged to empower shippers and carriers to more seamlessly communicate and transact business. Shippers’ evolving needs for improved supply chain visibility and resiliency will be the catalyst for innovative technology-enabled service offerings.

Just as technology is rapidly transforming the supply chain, transportation professionals must embrace new ideas and find ways to incorporate technology into their networks by increasing visibility, improving key performance metrics, and evaluating various transportation options. Only by embracing technology while retaining the human relationships that sustain our industry, will shippers become a shipper of choice.

As we enter 2018, the retail industry is coming off another strong holiday season bolstered by strong consumer confidence. Despite some media reports, the retail industry is not dying; it continues to evolve to meet the needs of its consumers, just like every other industry. Successful retailers will be those who adapt to meet the challenges of today and tomorrow.

As America’s retailers look ahead to the new year, RILA believes strengthening and innovating the retail supply chain will be one of the top priorities for the industry. We see this done through three distinct ways: focusing on trade policies that keep America competitive on the global stage, working with the US Congress, the administration, and external stakeholders to update and strengthen infrastructure, and continuing to help the retail community foster cultures of innovation throughout the ecosystem.