Indications are growth will slow but remain hefty. Ti’s market sizing and forecast data and analysis shows a projected annual growth rate of 11.8% in the global e-commerce logistics market for 2021 through 2026. North America, in particular, will enjoy rapid growth, surpassing Asia Pacific by 2026 as the largest e-commerce logistics market in the world, Ti says. The United States, Canada, and Mexico are all expected to see growth above the global average, while the more mature Chinese and South Korean markets are expected to see slowing growth.

“In 2021, e-commerce has been a key growth sector for logistics and we’ve seen some spectacular revenue growth from individual service providers,” says Michael Clover, head of commercial development for Ti. “Overall growth has slowed since 2020, leveling off as the extraordinary conditions for e-commerce growth brought about by the pandemic unwind, but is still above pre-pandemic levels.

“The forecast out to 2026 portrays a maturing market where online retail penetration levels are sustained in the most mature markets between 25 and 30% and other markets move up to this level,” he adds.

Of note, the cross-border e-commerce logistics market has a projected compound annual growth rate of 10.7% from 2021 to 2026. Driving the growth are consumers who increasingly use e-commerce to search outside their country for particular luxury goods unavailable at home. Still, compliance with tax and customs regimes could hinder cross-border e-commerce market growth from fully reaching its potential.

The focus on Asia will bring about more supply chain complexity and challenges, highlighting the need for business intelligence. It will be a period of change and transition, and an optimized supply chain will be a huge competitive advantage.

Business Intelligence: A Smart Move

In the past, developing regions had to play catch up with developed countries in terms of building technological infrastructure for IT solutions. With cloud computing and other tools, however, Asia Pacific companies are in a unique position to implement sophisticated solutions quickly and effectively.

Many businesses have already adopted IT solutions to manage various aspects of their supply chain. These efforts are often intended to solve a problem or streamline a process and create visibility. In spite of having these solutions for years, visibility and business intelligence remain a problem as there is a general lack of know-how on how to use it properly. There are three main areas of the supply chain where business intelligence can drive change in Asia Pacific.

1. Supply chain transformation. First and foremost, business intelligence should be viewed as a tool to improve your business rather than a data bank. Often, executives mistake business intelligence as a reporting software to provide data on their dashboards, especially in Asia Pacific. Some IT solution vendors are taking the extra step to work with and educate companies on how to get the best out of their solutions, turning the supply chain into a competitive advantage to support the company’s business strategy. When operating in a new and unfamiliar region, the ability to really drill down into the data and make sense of the information can be the difference between success and failure.
2. Visibility drives collaboration.Professionals in the industry will have heard the mantra “collaboration is key” being chanted over and over again. However, we have reached a stage where various supply chain partners (vendors, customers, distributors, manufacturers, etc.) are finally realizing that working together towards a common goal and sharing intelligence and information leads to a win-win situation and a well operating supply chain in the long run. With continued innovation in technology, the increased access to information will also force tighter collaboration and interdependence between stakeholders. For example, retail outlets and manufacturers can work together to monitor demand trends, identify the best performing items and have shipments arrive just as the existing shelf stock is depleted. Also, manufacturers can work with distributors and suppliers to monitor performance and implement a continued improvement process (CIP) motivating them to improve execution.
3. Connected everywhere, all the time.With the proliferation of mobile devices and cloud computing, especially in Asia Pacific where businesses are able to leapfrog technologies, we have access to information on the go. We are entering a period of time where many processes will become automated, and the role of a supply chain manager would move from overseeing day to day execution to planning and transformation based on advanced analytics. Even monitoring the supply chain would become automated with orders for new stock automatically being sent out to the relevant suppliers.

Conclusion

Supply chains are increasingly becoming recognised as a key differentiator between companies, to the extent that when a company reports supply chain problems, it impacts their stock price negatively. Organizations in Asia Pacific need to understand how technology can impact your supply chain and how you can use information and intelligence to make adjustments and improvements. We are faced with an information overload day in and day out, yet we are able to decipher what is most important for us. It is time businesses operating in Asia Pacific to do the same, process data gained from visibility and develop true business intelligence to get the best out of your supply chains.

Finding Partners With Local Knowledge, On-the-ground Resources

India’s stable government, solid infrastructure, and ambitious policy efforts—the government is focused on growing GDP by 8 percent year over year—indicate that the country has “a very bright supply chain future,” says Arun Sharma, manager of global forwarding for third-party logistics provider C.H. Robinson. “Today, India’s economy has visible momentum, energy, and optimism.”

India has achieved rapid growth in the services sector, including projections that logistics in the country will exceed $2 billion by 2019. “This growth underlines India as a land of opportunity for logistics-oriented companies,” says Ravikant Parvataneni, CEO of Crimson & Co. India, a firm that helps companies establish warehousing infrastructure and supply chains.

Southeast Asia’s Promise

In Southeast Asia collectively, the economic outlook also appears promising, with estimated economic growth of 4.7 percent in 2017 and 4.8 percent in 2018 for the region, according to the United Nations and Social Commission for Asia and the Pacific.

“The next decade should be exciting for Southeast Asia, as many industries have been focusing on this emerging market,” says Tony Tan, director of global forwarding for C.H. Robinson SE Asia. “As one of the fastest growing regions, and with a large customer base and growing middle class income, Southeast Asia has the potential to become a major supplier region, as well as a market for global economies.”

The region’s diversity offers both unique opportunities and complex challenges. “The varying maturity levels of development mean companies must calibrate different supply chain strategies to optimally navigate the standards and quality prevalent within the individual markets,” notes Norman Mummery, senior vice president, Asia-Pacific logistics/supply chain management for DB Schenker, a Germany-based logistics provider. “Trade in the region requires a delicate balancing act, not only to respond quickly to market but also to maintain operational dexterity to suit the regulatory needs of every supply chain stakeholder.”

Infrastructure investment in India and the countries of Southeast India has been robust in the past few years. But continuing to build on recent growth will be a critical component of these countries realizing their potential.

Sharma points to major infrastructure developments in India as an encouraging sign. In the past five years, the country has developed road infrastructure and built world-class international airports and seaports. In addition, India has shown a continuing commitment to expand in this area, including a target of nearly $377 billion earmarked for infrastructure developments in the next three years.

“The government is going all out to provide the necessary infrastructure for companies that want to do business in the country,” Sharma says.

Parvataneni applauds the commitment to improvements, but notes the changes are still “not at the pace we all would have wanted.” In fact, the biggest challenge to growth in India remains “the poor quality of overall supply chain infrastructure,” he says.

Consequently, shippers wading into trade with India must have a strong understanding of regional transportation networks. Main routes are reliable, “but reaching Tier 2 and Tier 3 cities, and towns beyond the span of the metros, is an onerous task,” Parvataneni says. “Having good regional connectivity is vital to reaching the end customer.”

Bridging the Divide

In fact, across Southeast Asia, the discrepancy between urban and rural can be dramatic, and bridging that divide is essential. “Technology and automation in the large, developed, and dense cities must be able to integrate extensively with the increasingly complex hinterland,” Mummery says.

The infrastructure in Southeast Asia can vary widely among the countries, but the region’s general emphasis is on “developing roads, ports, and airports as a top priority, which is improving capacity and access to support growth,” Tan says.

For instance, Indonesia has increased its national budget for infrastructure spending by nearly 100 percent over 2016. “And its infrastructure investments are expected to continue increasing in the future,” Tan adds.

For all Southeast Asia countries, “it’s important to understand that transportation plans that work on paper don’t always work in real life,” Tan notes. “Frequent challenges related to natural events can occur. For instance, low tide can affect access to countries that rely on river ports.”

Overall, in the region, “while the usual modes of air and ocean infrastructure are developing well and steadily, there remains further room for development in the road and rail sectors, primarily across the land-bordered countries,” Mummery says.

In India, a highly skilled workforce provides a boost to the logistics sector and offers critical capacity to help support growth. “The country has huge human resources capital—people with great knowledge and skills,” Sharma says.

At the other end of the spectrum, an obstacle to Indonesia’s efforts to improve its supply chain environment and enable growth is a lack of skilled workers in the logistics field, according to a study conducted by RMIT University in Australia with partners from Indonesia.

“A huge gap” in the supply of skilled logistics workers serves as “a major impediment to the nation’s attempt at lifting its national logistics performance,” the report says.

While Southeast Asia has “divergent levels of worker skills and productivity, aligning corporate expectations and global business practices with local workers’ expectations is an issue,” Tan says.

Ease of Doing Business

A potentially momentous event in the Indian logistics community arrived July 1, 2017 with the implementation of the Goods and Services Tax (GST), a single, common tax for all services across India. The tax replaces what Parvataneni describes as a “plethora of different indirect taxes determined at a local level.” The GST is “a game-changer that will essentially unite India under one common market,” he says.

The new tax will make it easier for shippers to locate their warehouses anywhere in India without worrying about navigating a gauntlet of different taxes that vary among the localities. Establishing the GST will also make it simpler to move goods between states.

“The GST represents a huge opportunity for companies that want to expand their businesses to new markets,” Sharma says.

The GST is coupled with the Make in India initiative, which launched in 2014 to boost manufacturing in the country by facilitating investments, fostering innovation, and enhancing skill development. The initiative has helped spark growth of more than 46 percent in foreign direct investment in the country since its inception.

While India has taken major steps to improve the ease of doing business, Southeast Asia faces challenges in that area. Singapore, and to a lesser extent Malaysia, are exceptions—but in other countries, companies must confront “different policies and procedures for investment licenses, customs formalities, taxation, and free trade zones,” Tan says.

In that environment, paying attention to the details of legal paperwork is necessary. “Shippers should have their import/export code and all required documents and licenses, as well as electronic declarations where possible, in place before they start shipping,” Tan says.

India’s 1.2 billion consumers and countrywide shift toward more online shopping makes it an increasingly popular location for e-commerce. The increase in e-commerce volumes and the addition of new airports have made freight rates more competitive, too.

India remains at “a nascent stage,” Parvataneni says, particularly alongside China, but its relatively young demographic “represents a huge opportunity with lots of potential for growth.”

E-commerce’s rise in Southeast Asia continues to be a massive trend, with multichannel trade at shops and markets gaining popularity. Airport construction has improved direct flight frequency, and motorcycle delivery riders have contributed to capacity for last-mile deliveries in major metro areas.

The aerospace, defense, and railway industries are finding particular success in India. Retail tops the list in Southeast Asia, followed by real estate, finance, technology, and labor-intensive industries.

“Brands with innovative ideas and dynamic characteristics are always a good fit in countries that have a large majority of young people with disposable income,” Tan says. “That is the case in both India and in Southeast Asia.”

Success Stories

For companies with an eye on building their presence in India and Southeast Asia, a number of case studies can serve as guides.

Walmart, for example, employed a partnership with Bharti, an Indian conglomerate, to move adroitly into the Indian retail sector. And efforts by Abercrombie & Fitch, Gucci, Tommy Hilfiger, and Dolce & Gabbana to link up with DLF, a commercial real estate developer, to arrange retail chain stores throughout India is “a huge success story,” Sharma says.

In Southeast Asia, Tan highlights companies such as AEON, the Japan-based retailer that has developed a large presence in Malaysia; Uber, the U.S.-based transportation networking company that has been expanding into Southeast Asia; and Grab, the Singapore-based ride-sharing and logistics services company that has grown throughout the region, for their success navigating the market.

Finding Partners With Local Knowledge, On-the-ground Resources

For shippers eyeing trade with India and Southeast Asia, understanding the cultural nuances of each country is essential to successfully making inroads.

“Relationships and native language are key to working with local vendors and carriers,” says Tony Tan, director of global forwarding for third-party logistics provider C.H. Robinson SE Asia. “To operate a successful supply chain, shippers must understand cultural background and practice. This is especially true in countries where legal certainty is not as high as it is in developed nations.

“Rather than rely completely on signed contracts, shippers should understand and verify the capabilities of their local partners,” he adds.

Fortunately, a number of global logistics providers and supply chain consultants have established a major presence in the region, offering critical local knowledge. For instance, C.H. Robinson has 420 supply chain experts in India and seven offices in other countries in Southeast Asia, while steadily expanding its footprint. DB Schenker maintains extensive operations in the region, with both deep roots and a growing presence, such as its recent announcement of plans for a logistics center in the Port of Tanjung Pelepas in Malaysia.

In some cases, partnerships with already established companies in the region have been key. For instance, DHL Supply Chain’s expansion into India has been an effective one because of its purchase of Bluedart, a top performer in India’s logistics market, which has showed “how a global company can tie up with a local company to expand its reach,” says Ravikant Parvataneni, CEO of Crimson & Co. India.

“Bluedart still runs Indian operations efficiently, in a way that is well-integrated into DHL’s global operations,” Parvataneni adds.

The region’s openness to trade and “agnostic landscape” for e-commerce can lull companies into thinking “that the market’s culture will eventually embody universal traits of doing business,” says Norman Mummery, senior vice president, Asia-Pacific logistics/supply chain management for DB Schenker.

“While that may hold true with the tactical systems and processes in the transactions, understanding the distinct ways of doing business in the Asia-Pacific markets can determine the success of how the supply chain fits with the end consumer habits for fulfilment,” Mummery adds. “These are innately acquired traits that come with service providers that have rich and longstanding experiences in the markets they serve.”

Ultimately, says Arun Sharma, manager of global forwarding for C.H. Robinson, it is crucial to be calculating, selective, and adaptable about making an entry into the region. Impatience, imperiousness, or inflexibility can lead to trouble. “It is important to understand local capabilities if a company is to have a successful supply chain.”

Over several years of favorable growth conditions, the life sciences and healthcare (LSH) industry gradually matured across the region, becoming a hosting platform for the majority of LSH key players today.

So what makes Asia Pacific an economic growth vehicle for this industry? Here are the key reasons motivating the world’s LSH companies to establish and expand their supply chains in this geographical region.

1. The value of a holistic research platform

Asia Pacific is home to countries that propel growth and ignite success. A key example is Singapore. Singapore’s government attributes life sciences prosperity to the city-state’s integrated research ecosystem which enables companies to access multidisciplinary capabilities from one single location. This is particularly critical given the witnessed decrease in R&D productivity, the increased complexity in decision-making, and the urgent need to accelerate drug discovery and development.

2. The attractiveness of “pharmerging” markets

Numerous pharmaceutical and biotechnology businesses seek proximity to key markets and wish to expand into new “pharmerging” territories. While companies continue to rely on distributors to gain access into Asia Pacific, an increasing number of customers are adopting a multi-channel approach by considering complementary platforms such as e-commerce, direct-to-patient, and direct-to-hospital solutions to reach their patients.

3. Improved responsiveness

LSH entities are establishing their regional presence in order to shorten their lead times and get closer to customers. Numerous medical device and pharma companies have started setting up their own regional distribution centers, especially in Singapore, many of which showcase value-added and postponement activities.

4. Cost leadership

Lower-cost sourcing and manufacturing are undoubtedly key competitive advantages offered by Asia Pacific, which become even more relevant in the face of rising cost pressure and patent cliffs. LSH companies increasingly capitalize on established generics suppliers in India or China to enter the market, some of them going as far as setting up their own manufacturing facilities in these countries, as well as in Australia and Singapore.

It would be too easy to match these struggles to the impacts of political events such as the U.S. presidential election and the Brexit vote. In 2016, Barack Obama was still the U.S. president and the European Union had 28 members. Instead, weak real wage, productivity, and consumption growth dampened global economic growth. Tepid retail sales and manufacturing production growth, in particular, greatly affected the contract logistics market, says the TI report.

On its own, this information suggests contract logistics will continue to struggle. After all, it is a market associated with formalized retail structures, developed for large corporations hoping to achieve operational efficiency. Emerging markets, however, are taking an ever-larger slice of the pie. In fact, in 2016, Asia Pacific became the largest regional market for third-party logistics, overtaking Europe, notes the TI report.

Asia Pacific’s strength is a result of many factors. Sustained robust economic growth coupled with continued retail formalization (thanks to rising disposable income) powers retail contract logistics. Meanwhile, multinational manufacturers increasingly consider production locations outside China, especially nearby ASEAN, thanks to cheaper labor costs.

But even with rising wages, manufacturing in China is still undeniably strong. By moving up the chain to more value-added production, China was able to offset the departure of low-cost manufacturing.

While Europe and North America suffer from stagnating retail sales and manufacturing growth, Asia is driving growth for the global contract logistics market as a whole. This trend is likely to continue.

While economic growth rates in developed nations are forecast to pick up slightly, emerging markets will continue to far surpass them.

These squiggly lines connecting trade agreements result in a variety of tariff rules and administrative processes. This makes it more difficult for companies to manage the compliance requirements so they can take full advantage of FTAs within the Asian region.

In 1992, The Association of Southeast Asian Nations (ASEAN) established a trading agreement known as the ASEAN Free Trade Area (AFTA). The original members were comprised of Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam, Laos, Myanmar and Cambodia all joined throughout the remainder of the 1990s.

AFTA delivers a competitive edge for importers and manufacturers within these countries through tariff reductions and relaxed trade requirements. Benefits include reduced importer costs, improved customs clearance times, less complicated trade procedures, and increased access to a wide range of products eligible for preferential treatment. However, AFTA doesn’t make trade less complex. Complexities exist as each ASEAN member still administers AFTA through their own national trade authorities and agencies. This places a burden on companies as they seek to meet each respective country’s declaration and qualification requirements.

Asian FTA procedures differ from others. Taking NAFTA as an example, which allows self-certification where the exporter issues the preferential certificate valid up to one year, and importers claim preference using the ‘blanket certificate’ for multiple shipments until such certificates are valid. In contrast, Asian FTAs have more pre-shipment compliance requiring companies to obtain a Certificate of Origin from the exporting country agency to achieve duty savings. As a side note: counterfeit government-issued certificates of origin have become a significant global trade issue. Actions have been taken to inhibit this practice including the addition of linear bar codes and online platforms to validate authenticity.

Software technology solutions are transforming the ability of companies to manage and track the multiple factors and various data required to take advantage of Asian FTAs. To comprehensively address the challenges, companies should equip their supply chain and global trade professionals with software solutions that address the following elements:

• Automate the BOM analysis and qualification
• Fully manage certificates of origin by linking them with products
• Accurately calculate, submit and store manufacturers’ cost statements to better meet qualification requirements
• Efficiently collect and summarize supplier information to support preferential claims
• Analyze product, supplier and import/export activity to identify potential FTAs available

The benefits can be significant. With the right software solution, importers and exporters can address the complexities of managing Asian FTAs resulting in the following benefits:

• Boost duty and tax savings
• Increase process efficiency
• Ensure all country-specific compliance requirements are met
• Maximize duty savings
• Reduce manually intensive processes

More and more companies are realizing the benefits of fully managing eligible FTAs within the Asian region. Executives are becoming more familiar with the significant cost savings that can result and are directing supply chain and trade staff to realize the benefits preferential trade can have on the company’s bottom line and global supply chain performance.

Global Trade Management (GTM) solutions play a key role in providing the deep expertise and software solutions required to meet the regulations mandated by Asian bilateral and multilateral agreements. By efficiently addressing pre-shipment and other requirements unique to Asian FTAs, your global supply chain can reduce the administrative burden, obtain preferential duty rates and improve the flow of goods across Asian borders.

The Trans-Pacific Partnership, more commonly known as TPP, is a trade agreement that aims to deepen economic ties among 12 countries along the Pacific Rim by reducing tariffs and stimulating trade to create growth. In a nutshell: If passed, the agreement will create the foundation for a single world market.

TPP supporters believe the agreement will boost the economy and open doors for improved goods, while those opposed argue that jobs will be lost and the economy will suffer. As with previous trade agreements, the crux of the debate is around jobs and border control. The retail industry is at the center of TPP and has the most to gain—or lose—with the fate of the bill.

Retail’s race to the bottom must end

Over the past several years, the retail industry has experienced a race to the bottom in terms of price and quality. Retailers have sacrificed quality in order to pay a lower price for raw materials and associated manufacturing costs, which has led to decreased sales. This trend was starkly illustrated in a post-2015-holiday season Bloomberg report, which revealed that retail sales only posted annual gains of 2.1 percent over 2014, the worst performance since 2009. Given this trend line, it is clear retailers have won—or more appropriately, lost—the race to the bottom, allowing big box stores to gain a competitive edge over more traditional retail stores.

The first step in rectifying this quality problem is identifying what led to it in the first place, and taking the proper measures to adopt different actions. In terms of TPP, there are a few reasons why retailers need to stand behind the passage of the agreement including:

• Increasing product quality. The passage of TPP allows for greater opportunity to lower pricing while also ensuring that a quality product is delivered to the end consumer. TPP also enables retailers and manufacturers to focus on using quality materials to create a product, without having to worry about paying hundreds of different tariffs instituted by international governments. Decreased tariffs means retailers can revert back to selling goods at a competitive price; the key will be differentiating them on the market.
• Expanding markets. With the absence of harsh tariffs, open free trade allows retailers to expand into different markets and openly source materials. Retailers and manufacturers will be able to grow their businesses and seek international suppliers, not just nearshore options. Suppliers will also benefit from TPP and gain more exposure and materials penetration in various international markets. International supply chains will follow suit and become truly diverse, answering the needs of manufacturers.
• Creating jobs. To support international expansion, retailers and suppliers need to create more jobs and put a focus on infrastructure. We currently do not have the infrastructure in the United States to handle some of the manufacturing that happens in Asia, which is putting us at a disadvantage. In order to compete on an international stage, retailers must have the equipment and people in place to support rapid growth.

Retail is evolving on a daily basis with many companies seeking to leverage new technology and expand into new markets. While there are those that oppose the passage of TPP, retailers need to come together in support of the trade agreement that will ultimately improve the industry for all.

The Panama Canal can now accommodate ships that are one-third larger than before. These megaships carry 45 percent of the world’s cargo and will be able to take shorter routes and save an average of $3,600 per cargo shipment, affording both businesses and consumers better prices, reduced carbon emissions, and faster delivery.

According to the Bank of America Merrill Lynch 2016 CFO Outlook, 61 percent of companies report they will have some foreign market involvement this year, with 48 percent buying from foreign markets, 41 percent selling to foreign markets, and 21 percent having operations outside the United States.

Many of these companies—particularly those located in the southeast United States—are re-thinking trade routes and investing in new infrastructure to take advantage of the expansion of the Panama Canal.

far-reaching Supply Chain Implications

The impact of the Panama Canal expansion on supply chains goes beyond shipping considerations. It’s important to think in terms of intermodal infrastructure (moving containers from ship to rail to truck).

Many U.S. businesses have been shipping goods from Asia to the West Coast and then trucking them through the interior of the United States to the East Coast. Now companies can, for example, move goods directly from Asia and the western regions of South America to states like Florida.

Flagler Global Logistics, for example, fumigates blueberries and traditionally transported them through Philadelphia. The blueberries come from South America and were previously transported via steamships to Philadelphia and then trucked down to Florida. By building out their supply chain and warehousing infrastructure and working with border protection and the U.S. Food & Drug Administration, the company can now import blueberries and fumigate them in Florida. The blueberries wind up in grocery stores a week earlier and stay fresh longer.

The new Panama Canal can help bring twice as many cargo containers through Philadelphia (estimated 8,000 to 9,400 20-foot containers). Philadelphia isn’t the only city that’s benefiting; this monumental expansion has huge impacts in port cities throughout the United States.

Best ways to Leverage the expansion

The expansion of the Panama Canal promises significant changes in trade patterns and increased global trade, but what are the best ways for organizations to take advantage of this new opportunity? There are three main matters to consider, including establishing operations in port cities, upgrading supply chain infrastructure, and investing in business infrastructure.

First, businesses should consider whether it makes sense to establish operations in port cities in the southeast United States, particularly in Florida in ports such as Jacksonville and Tampa, which have made significant investments in upgrading their infrastructure to accommodate larger ships. In addition, Virginia ports have been undergoing infrastructure projects to handle larger ships and to facilitate the movement of goods to their final destination. In Georgia, federal and commercial entities have been working to develop a consolidated network of transit modes to move products. And in South Carolina, the Port of Charleston underwent a $1.6-billion expansion of its harbor to upgrade strategic gateways, already with the deepest harbor in the Southeast United States, to benefit the already busy port city.

Companies also need to look at their own infrastructure upgrades and investments. For example, one furniture retailer has recently invested in sophisticated supply chain and logistics to take advantage of the goods that will come into the East Coast via the Panama Canal, allowing them to deliver goods to customers more swiftly.

Finally, executives should examine their technology needs, including financial solutions, to handle what may become increased global business facilitated by the expansion of the Panama Canal. As companies look to grow and scale, they will need financial and analytics solutions in place to manage risk and have greater visibility into capital needs. Working with banks or financial consultants is a good first step, not only to examine these needs but also to discuss how best to work with foreign markets.

What’s Next?

Going forward, U.S. companies have a unique opportunity to grow and gain market share due to the Panama Canal expansion. Now is the time to ensure that business strategies and infrastructure needs are considered to accommodate the new wave of opportunities.

Stronger communications go beyond monitoring a system developed to check daily tracking status. It entails understanding the underlying needs of our counterparts in Asia and acknowledging many of our suppliers must consider the demands and concerns of multiple customers. Some of those other customers may be your competitors. Therefore, shippers that present less unnecessary difficulties to their supplier base are more likely to reap the benefits of predictability, quality, and cost. In the famous words of Stephen R. Covey: “Seek first to understand, then be understood.”

As an importer, you must not only continue to communicate your business requirements, but you also need to ask suppliers to reach out and talk openly about their requirements. This may sound strange to some of you, but it needs to happen more often. When we discuss early communication, we want to expand beyond the basic transaction information exchange. We need to develop a thorough understanding during the transactions. There must be a continuous loop of real-time information exchange.

THE Benefits of Continuous Communication

The first benefit is predictability of timing and scheduling within the supply chain. When the schedule is predictable, it enables your material managers, cost accountants, procurement managers, logistics managers, and inbound facility managers to focus on strategic improvements because they do not have to concern themselves with the issues that come from ineffective scheduling.

The second benefit is the improvement of quality within the supply chain. When an importer takes the time and energy to communicate with suppliers, they find themselves able to understand how their suppliers can perform at their optimal levels. A company is able to provide that elusive “value add” because it can provide your goods at the highest possible level, while still having resources to invest in improving processes that are already efficient.

The third benefit is the containment (or reduction) of supply chain costs. When the supplier understands your requirements, it can develop a plan and then execute it. When an importer determines and takes into account the constraints, the costs, and the conflicts that are facing the supplier, both sides benefit from the shared knowledge. This mutual insight leads to reduced set-up costs for manufacturers, increased utilization of fixed cost transportation structures, and a more efficient human resources management plan to complete the objectives.

The communication skills mentioned here are not technically complex, and none of these skills mandate excessive effort from their existing management teams. Many importers can implement these simple tactics immediately and reap the benefits in a relatively short amount of time.

Improvements in schedule, quality, and cost lead to value creation throughout the entire supply chain.

Overcapacity Problems Sink Hanjin Shipping

Right in the middle of the peak ocean shipping season leading up to the U.S. holiday rush, South Korean ocean liner Hanjin Shipping filed for bankruptcy protection in one dozen countries in late August and early September 2016. Hanjin is the world’s seventh-largest ocean carrier, and handles nearly 8 percent of the trans-Pacific trade volume for the U.S. market.

A number of factors led to Hanjin’s current predicament, including the 2009 global financial crisis, China’s slowing economy, and five straight years operating at a loss that left the company with more than $5 billion in debt.

Eighty ships carrying more than $14 billion in various cargoes were left stranded at sea, potentially ruining Christmas for a large number of global retailers. In addition, the carrier stranded more than 1,200 workers on ships at sea or in foreign ports.

Around the globe, Hanjin ships were refused entry to ports, and owners or governments forcibly seized a number of leased ships. At U.S. ports, undelivered containers occupy so many trailers that a chassis shortage threatens the industry.

Hanjin recognizes the damage it has caused, but claims it is not the only one guilty of wrongdoing. "Hanjin is not the only bad guy here," said an attorney for the shipping company at a U.S. Bankruptcy Court hearing in Newark, N.J. The company claims that cargo owners withheld as much as $80 million in payments for shipments that were completed, while many of those owners claim that what they’ve been forced to spend to recover their cargo exceeds what they owe to Hanjin, thus cancelling the debt.

A number of cargo owners who couldn’t afford to wait for the situation to straighten itself out have been forced to cover the cost of rail and truck transport for their cargo, even if they had already paid Hanjin in advance for those same services.

Meanwhile, logistics providers such as Averitt Express sprung up with rescue services to save stranded cargo. "This has been a difficult situation for all who are impacted," says Charlie McGee, Averitt’s vice president of international solutions. "We are working to help shippers retrieve their stranded cargo so that they can get their businesses back on the right track. This is a particularly volatile time of the year for businesses and the situation with Hanjin has been devastating for so many. It’s our industry’s responsibility to help alleviate the pressure that has been created."

For those who can’t afford additional costs to retrieve their shipments, an end may still be in sight. Korean Air Lines, Hanjin’s largest shareholder, lent the carrier $54 million to get cargo off ships and docks, and into the hands of owners. The state-owned Korea Development Bank lent the carrier an additional $45 million.

"We’ve calculated the costs that will be needed to offload the cargo, and this can be covered roughly with the funds that have been pledged," said Choi Sang-mok, vice finance minister for the South Korean government, in a press statement.

Hanjin expects all cargo to be offloaded by the end of October 2016. Even if it meets that deadline, the impact of so many late shipments on holiday season sales remains to be seen.

Sorry About That, Chief

Ocean carrier struggles, the U.S. West Coast port strike, the Tianjin explosions in China, and a series of earthquakes in Japan are just a few events to disrupt the supply chain in recent years.

Still, fewer than 24 percent of respondents to the State of the Global Supply Chain survey by technology provider GT Nexus say they have a chief supply chain officer on hand who would be equipped to deal with such an interruption. Thirty-two percent say they have a similar position, but not in the C-suite.

Yet, nearly half of manufacturers report a disruption that impacted business within the past 12 months, suggesting that adding expertise in the boardroom should be a priority for all companies. Bringing someone on board who knows how to build and oversee an end-to-end partner network might help companies face the following challenges in the years to come:

• Geopolitical risk. Twenty-nine percent of respondents predict that currency fluctuations and geopolitical risk will be a prevalent supply chain risk in the near future. This includes issues such as the spread of ISIS, the effect of Brexit on the European Union, the economic slowdown in China, and relations between the United States and Russia.
• Labor strikes. Fourteen percent of manufacturers fear additional labor strikes in the supply chain. If the West Coast port strikes in the United States taught us anything, it’s that unhappy laborers can have a substantial impact on global trade. In addition, a surge in labor strikes in the Guangdong region of China could have a great effect on production in coming years.
• Trans-Pacific Partnership (TPP). Eight percent of those surveyed cite the TPP as an issue they expect to impact their business in the future. Besides reducing obstacles to the trade of goods, TPP also reduces barriers to less tangible services such as information technology and logistics. If the 12 proposed member nations ratify TPP, manufacturers will undoubtedly need to make investments to adjust the way they operate internationally.

Commonality of the Chief Supply Chain Officer Role

Supply chain management is critical to a company’s success, but less than 24% of survey respondents have a Chief Supply Chain Officer in place.

Source: State of the Global Supply Chain, GT Nexus

Maersk Makes A Split Decision

While the world’s seventh-largest ocean carrier sinks underwater, its largest shipping line is splitting in half. As low oil prices continue to negatively impact the company’s oil-dependent businesses, and low freight volumes similarly affect the transport side, Maersk has decided to reorganize its transportation and logistics operations away from its energy-related operations so that each can focus on its own differing and specific needs.

"Separating our transport and logistics businesses and our oil and oil-related businesses into two independent divisions will enable both to focus on their respective markets," said Michael Pram Rasmussen, chairman of the company’s board, in a public statement. "This will increase the strategic flexibility by enhancing synergies between businesses in Transport & Logistics, while ensuring the agility to pursue individual strategic solutions for the oil and oil-related businesses."

The new Transport & Logistics division will consist of Maersk Line, APM Terminals, Damco, Svitzer, and Maersk Container Industry. While each of these sections will maintain their separate branding, management and operations will now take a more integrated approach.