In this Supply Chain Matters commentary, we feature highlights of an interview held by Executive Editor Bob Ferrari with an insightful CEO of a U.S. Midwest international logistics services firm regarding challenges that exist in international logistics and transportation, along with areas that need to be addressed to remediate current challenges.

 

Background

Our recently published Ferrari Consulting and Research Group’s 2022 Predictions for Industry and Global Chains (available for complimentary downloading in this website’s Research Center) includes a prediction specifically focused on global logistics and transportation modes. Our prediction is that service level erosion and double-digit transportation cost inflation trends that occurred in 2021 are unsustainable and will lead to remediation actions on the part of both businesses and governments.

As many in business and supply chain management media have pointed out, not all companies have the financial resources of an Amazon, Home Depot or Walmart for taking on direct control of logistics and transportation service levels, including chartering of ships, airlift and trucking capacity in order to meet customer fulfillment requirements.

Now, with today’s kickoff of Lunar New Year celebrations across Asia, there are palpable concerns that the combination of large numbers of workers traveling across countries to visit families, the threat of added Omicron infection rates, along with Asian manufacturers potentially having to suspend operations for a longer period, can lead to added global supply chain disruptions.

Particularly impacted have been small and medium manufacturers, retailers and businesses. They must rely on established carrier and third-party logistics services firms to try and overcome existing logistics and transportation cost inflation challenges to not only maintain service requirements customer material replenishing and end goods fulfillment for customers, but also to support required revenue and profitability goals.

What’s Really Occurring- An Insightful Perspective

This Editor has begun an effort to reach out supply chain management practitioner and services provider professionals with a day-to-day on the ground perspective as to what is really occurring, and more importantly, what remediation efforts are needed to assist businesses, particularly SMB firms in this period of unprecedented logistics and transportation challenges.

We were fortunate to have the opportunity to speak with Caitlin Murphy, CEO of U.S. Midwest based Global Gateway Logistics.

Caitlin Murphy grew-up in St. Louis, Missouri and graduated from the University of Missouri with a degree in International Business with an emphasis on Mandarin language. In 2017, after years of seeing the same inefficient approaches to international logistics, she came to the realization that the industry needed change and that companies should demand more strategy, transparency, and focus for a rapidly changing global economy. This was the ultimate beginning for a new direction by creating Global Gateway Logistics to partner with companies to identify and find success for their future advantage.

Global Gateway Logistics, LLC. describes itself as a global freight forwarding and logistics consulting company that provides analysis, operations support and customer service through adaptive and creative solutions. The company serves companies across the world assisting in ocean, air, and ground transportation needs.

Most Far-Reaching Challenges

In our discussion, I asked Catlin to describe from her perspective, what were the most significant and far-reaching challenges that need to be addressed in global logistics and international business?

Her response was to describe container equipment imbalances, and specifically the chronic lack of empty containers available to shippers in the heartland of United States. Noted was that in the of 2021, carriers struggled to service import/export needs for U.S. Midwest businesses, particularly inter modal railroad carriers. A broken and clogged chain of loaded import containers spilled over to the lack of available empty shipping containers for export needs. When loaded containers reached debarkation ports, some shipping lines declined to transport, stating a higher priority to reposition empty containers among major Asia based ports. Both U.S. Midwest businesses and West Coast agricultural shippers were especially impacted with economic losses. Within major ports themselves, in recent weeks empty containers are now taking up valuable space needed for the unloading of imported materials, hence a vicious circle of disruption.

A further challenge is the lack of viable options for smaller businesses to contract for ocean container transport needs. With the significant demand and available container imbalances occurring globally, and with larger global firms willing to contract with ocean carriers for larger or guaranteed threshold volumes, many businesses were beholden to spot rate pricing. That resulted in a direct negative impact to cost of goods sold. Services firms like Global Gateway Logistics have been working to circumvent these challenges with direct conversations with carriers or international freight brokers.

Government Policy and Oversight

As to the question of what added efforts can government, such as the Biden Administration, undertake to help businesses in the current global supply chain environment, Caitlin noted added representation of SMBs at the policy making level.

She further observed that international logistics requires more resiliency in the form of more carrier choices, as contrasted with added industry consolidation. Prior to the pandemic, an open market for ocean transport led to relatively stable shipping rates. That has significantly changed. She further observed that there does not seem to be a governing body for overseeing global shipping, other than regulatory agencies at the regional level such as the U.S. Maritime Commission. Business media itself has noted that there has been no significant update to global maritime laws since the 1980’s.

Added Technology Enablement

A final discussion point was that technology, specifically where can logistics and supply chain execution technology providers best apply their capabilities in assisting businesses toward better solutions in international logistics?

Catlin noted a current reality that logistics services providers frequently cannot rely on the information actually provided by ocean container lines information systems. She noted one example where a carrier-based system was booking container slots for transit from the Port of Seattle for a future sailing in two weeks when the actual vessel was shown by GPS to be still within an Asian based port, in no way being able to make such a sailing at the scheduled time. Thus, forwarders have to be extremely agile, including significant volumes of phone calls and emails to make and fulfill shipping arrangements.

Stated was that while businesses require more end-to-end visibility, the actual information being transmitted has to be validated the timeliest on the ground information. Further observed is that international logistics information flows have to include a freight and cargo owners’ perspective, in addition to that of carriers.

 

Additional Perspectives

In our prediction, we cited the Shipping Reform Act of 2021 which passed the U.S. House of Representatives in December 2021 that calls for a series of measures requested by multiple stakeholder industry shipper groups as a result of what occurred in 2021. Many were stung by what Catlin described in our interview.

Our belief is that businesses, industry trade groups and governments will seek means and methods for increasing the overall efficiency of inter-modal logistics movements with an eye toward a continuum of essential shipment and inventory information that must automatically flow across ocean, terminal, rail, and surface trucking software systems. This is an additional provision of the proposed U.S. legislation. Factoring Catlin’s observations, carrier information needs to be provided in context, namely where shipping containers and transport vehicles are actually located with actual real-time estimated arrival information. A further observation is that carrier-based information systems themselves need added attention and augmentation n order to be able to better synchronize intermodal handoffs, movements or contingency routings.

It is therefore in the best interests of international logistics stakeholders to come together in the most-timely manner and directly address the how challenges that occurred in 2021 can be overcome.  As stated, business as usual is not sustainable from multiple stakeholder and economic perspectives.

Bob Ferrari

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