Annual Review and Outlook

The act of shopping is experiencing revolutionary change. As retailers look to 2016, they are focused on how to attract and serve a rapidly changing consumer and how to adapt systems to ensure they do so efficiently and effectively.

E-commerce is a strong structural driver that will continue to shape logistics demand trends in 2016. Japan, Europe and the U.S. boast among the most sophisticated e-commerce supply chains. Players in these regions have built out national and even regional distribution networks.

Out of necessity, ports are taking strategic steps to enhance their leverage, reduce risk and protect their market share. They’re doing this by entering into more collaborative relationships with partners that are often their strongest competitors.

The most important trend for the industry in 2016 is strengthening consumer demand, and the biggest headwind it will face is bloated inventories.

2016 is going to be an “old school” year in our global transportation and logistics universe. My organization’s purpose is to flow our Windows-enabled devices to the right customer, at the right time, and at the right price … every time. Consistently. To achieve this, we also need the fulfillment industry, our partners, and deployed technologies to facilitate and promulgate an “empathic supply chain” that evolves to our needs, and our client’s needs, across all modes of international transportation.

While the retail sector has made massive progress in adapting and adjusting to the new world order of e-commerce and online shopping, even the industry leaders recognize that they have a long way to go. A recent survey concluded that only 24 percent of companies believe they have an agile supply chain adequate to serve the online world, and a huge 81 percent admitted their supply chain is not fit for serving the omni-channel. Significantly, the largest market and growth potential is in the emerging and developing countries across Asia, much more so than in the developed economies of the Western world. The Asia-Pacific already accounts for more than one-third of the global e-commerce market and is forecast to US$1 trillion by 2017, with the Chinese online market on its own forecast to hit US$1 trillion by year 2020. These shifts in the retail landscape combined with digital consumers’ shopping preferences will continue to have profound supply chain implications, particularly for traditional distribution operations and established logistics networks. The online revolution tests almost every aspect of the long-established pattern of retail supply chain processes, including warehouse operations; pick, pack and despatch; order fulfilment and delivery; as well as introducing new dilemmas such as free shipping, last-mile delivery, product returns and cross-border transactions. These challenges present a window of opportunity for new entrants who can design and build business models and logistics operations from scratch, leveraging leading-edge Cloud-based technologies to rapidly implement made-to-measure e-commerce solutions, while the traditional service providers struggle to adapt and keep up with the pace of change. The boundaries are becoming increasingly blurred; the previously clearly segregated roles undertaken by retailers, Internet companies and logistics service providers are converging, with many exciting opportunities ahead in serving omni-channel supply chains. Mark Millar, Managing Partner, M Power Associates

The number of manufacturing facilities increased in 2015 with many European, Asian and U.S. manufacturing companies locating operations in North America and consistently within the United States. Supply chain costs, service challenges from overseas to North America, and the rising labor cost were large factors in location decisions.

How much the presidential election will influence the actions of the next Congress with respect to pending trade legislation is currently the best parlor game in Washington.

By the end of 2016, the Automated Commercial Environment will become the primary system by which the trade community will report imports and exports — and how the government will determine goods admissibility.

No doubt the upcoming presidential election has the potential to be the biggest game-changer for the year, but with regard to the international trade community, the Trans-Pacific Partnership may likely be the "change agent" for 2016 and, assuming passage, for many years to come.

The most important change affecting the brokerage and forwarding community will be the commencement on Feb. 28 of Customs and Border Protection's Automated Commercial Environment and the International Trade Data System as the electronic system of record when transmitting date to various governmental agencies.

As we look at issues facing retailers in 2016, one thing is certain — we cannot afford a repeat of the situation that brought West Coast ports to a crawl last winter. With rapidly growing port congestion threatening the economy, labor negotiations can no longer be allowed to add to the slowdowns.

The year ahead promises some respite from the Washington regulatory regime.

The second half of the decade dawns with significant potential challenges to all elements of the Department of Defense’s Joint Deployment and Distribution Enterprise.

The long-awaited and much-anticipated full integration of the Automated Commercial Environment into the international trade processes is upon us. By the end of 2016, ACE will be the single window through which manual processes will be streamlined and automated, paper will be eliminated, and the international trade community will be able to more easily and efficiently comply with U.S. laws and regulations.

Failure to understand shipping law and insurance puts sellers and buyers at risk of unintended and even unforeseeable consequences.

A new spirit of collaboration and cooperation between intermodal stakeholders is critical as we head into 2016.

All indicators point to U.S. industrial real estate demand continuing to outpace supply this year.

In 2016, the ocean shipping industry faces its most significant regulatory change in several years. While it poses significant risks to the smooth flow of commerce at our distribution centers and ports, I see it as a great opportunity for our industry not only to meet the challenge, but also take a big step forward toward greater efficiency through automation.

The regulation of international ocean common carriage in the United States will reach its 100th anniversary in 2016 and the current market bears little resemblance to when that regulation first began.

The role of the global trade compliance professional has evolved dramatically in recent years. A role that a decade ago seemed more as a back-office function with little visibility in the organization is now gaining more and more significance in leading corporations.

In a rapidly changing economic environment, businesses are realizing that to survive they must reinvent themselves, and to stay competitive in an increasingly global economy, the infrastructure that supports our industry must remain a top priority.

Cargo theft, smuggling, the import of harmful consumer products, and duty evasion all pose risks to public health and safety or cost a country customs revenue. But unlike threats perpetrated from the outside, violations committed by customs personnel themselves require a different set of safeguards.

The question of mega-ships is how to mitigate the supply chain risk of port congestion and distribution while enhancing supply chain performance.

We experienced the rerouting of ships in 2015, made supply chain diversion strategies after 2002, and adjusted supply chains for “slow-steaming.” Today, with shippers fixated on price, all-water rates to Gulf and East Coast ports are $200 to $300 cheaper than going through Southern California ports and transloading/interior point intermodal shipping to Chicago, New Jersey or Atlanta on rail. Will this finally be the shift that East Coast ports have dreamed of? Well, it better not be.

The key for the trade community in 2016 is to tell policymakers, not only in the U.S. but around the world, that we need clear signals on both the regulatory and financial policy fronts to make long-term plans.

As we move into 2016, we will continue to see the international trade industry evolve alongside global commerce and technology.

One of the changes I expect during 2016 is the increase in volume transiting through the Panama Canal. The canal is scheduled to be ready to handle larger vessels during the second quarter. This development should encourage more cargo to move via the all-water service from Asia to U.S. East Coast ports.

Big change in the transport and logistics industry doesn’t happen overnight. Although there is a lot of talk about disruptive ideas and technology such as Uber, drones, driverless trucks, 3D printing, The Internet of Things, etc., there are no signs of revolution anytime soon. So my prediction is that not much will change in 2016, but there will be certain changes in the landscape and in our system setup because of current industry trends.

In 2016 the two most important changes I see impacting our part of the shipping industry are the change away from the independent owner-operator model of doing business with respect to drayage to and from the port areas. and the continued strength of the dollar.

A topic on every shipper’s mind is how the completion of the Panama Canal expansion will impact international maritime trade as new lanes open this year to accommodate more and larger cargo vessels that will be able to carry up to 13,000 TEUs.

The two major issues/opportunities I foresee in the coming year in the supply chain arena are the desire on the part of manufacturers to collaborate with one another — and with their “ship-to” customers — and consolidate inventories to take advantage of a wide array of transportation opportunities available to them; and talent acquisition and retention (both general labor and managerial). More and more senior-level logistics and supply chain executives are expressing a willingness to partner with competitors because they understand the issues surrounding transportation, such as eliminating trucks with empty miles and reducing congestion on the roadways. Couple this with the continued growth of omni-channel, e-commerce business to consumers as a percentage of total retail, and you have major implications on the broader supply chain. Amazon is becoming a competitor to just about anyone who ships product. This will promote innovative thinking on how to get products through the many classes of trade to the consumer and still make a profit. On the labor side, we need to begin thinking about and taking action on where we’re going to get the talent that is critical to perform the tasks inside distribution centers. Companies today are seeking professionally trained supply chain managers. It’s important for us, as a discipline, to bring “supply chain as a career awareness” into the lower levels of education so that students have an understanding of the profession and the many benefits it offers professionals. Rick Blasgen, President and CEO, Council of Supply Chain Management Professionals

Having been intimately involved with the South Pacific market for 45 years, I see a trend taking place in Australia and New Zealand that reminds me of the halcyon days of the 1960s and 1970s where swashbuckling entrepreneurs saw great opportunities in international forwarding. In those two countries, I see a change taking place that is nearing an about turn for the large multinationals.

Industrial real estate expansion continued in 2015, expanding now for 23 consecutive quarters. In the United States, the growth has been bolstered by personal consumption and broad, yet softening, overall confidence.

Supply chain participants recognize that they need technology to service customers, increase efficiency, improve data accuracy, and boost time and cost savings. The good news is technology adoption has accelerated in recent years and we’re seeing an uptick in systematization of freight data to improve data management, as well as use of that data for reporting and more strategic decision-making.

Combining a technology startup mindset with long-standing and proven operating practices, freight railroads constantly innovate to safely deliver the goods U.S. businesses and families need and use.

A significant focus for the Surface Transportation Board in 2016 will be making sure rail service continues to be reliable and timely. For the Board, an important part of that is getting the data we need to properly monitor rail service.

2016 offers our industry a unique opportunity to define how the “sharing economy” will be applied within the logistics world. Enabled by mobile phones, the utilization of unutilized assets is becoming a powerful tool in the toolbox of many logisticians.

The rise of global commerce and increasingly integrated worldwide supply chains create exciting growth opportunities for railroads.

The railway regulatory environment in the United States and Canada will continue to be an important subject of discussion in 2016.