With e-commerce taking an increasingly bigger chunk out of retail sales, (currently about 10%), the last mile has grown in importance as a competitive advantage. Shippers and carriers alike are eagerly looking for ways to please customers while keeping costs down. In fact, according to some estimates, 30% of the total cost of all goods delivery is in last-mile.

Customers get even more demanding

Today’s customers are on the go and not as willing to sit around waiting for a delivery. Thanks to Amazon’s Prime subscription service, the accepted 5-7 day delivery time period has been reduced a new norm of 2 days. Even that is quickly being reduced further to same-day, and in some locations, one hour delivery.

According to the UPS Pulse of the Online Shopper  survey and analysis, speed is important with 77% of survey respondents willing to pay for expedited shipping. Forty-one percent of survey respondents indicated they had ordered a product for same-day delivery. The importance of same-day delivery is evident in that 58% of those surveyed said the ability to search by items available for same-day delivery is important when selecting products online. In addition, 36% said same-day delivery is important when deciding to shop with a physical store. This was up from 31% in 2016.

Shippers and carriers alike are addressing the ever-shrinking last mile by offering options besides the traditional home including lockers, in-store pick-up and pick-up in third-party stores. In fact, UPS’ study found that 52% of online shoppers were interested in shipping to alternative locations.

“Ship-to-store” is a popular choice with 50% of online shoppers having used this option and noting that speed and convenience are important success factors.

Getting there faster

In some situations, the delivery person is being replaced by a robot or even a drone. For example, Starship Technologies is launching 1,000 delivery robots on U.S. and European university campuses for food delivery. A number of carriers, shippers, and others are testing drone deliveries. 7-Eleven has partnered with Flirtey for drone deliveries in the state of Nevada. In addition, Zipline has deployed drones in Africa to deliver medicines in remote locations. Also, Chinese e-commerce providers, Alibaba and JD.com are using drones to deliver in rural areas of China.

Not only is the delivery person being replaced by a robot or drone, but the traditional delivery companies such as DHL, FedEx and UPS, are facing increasing competition from firms such as Amazon and JD.com. These e-commerce providers are building out their own global logistics network and could potentially rival the integrators, DHL, FedEx and UPS.

The growing number of delivery options definitely indicates the importance of the customer. Indeed, the customer is in the driver’s seat and expects customization – not only in the products that are purchased but also in delivery decisions. Customers now expect to have options from the delivery time, to where the product is to be delivered to even tracking and managing the shipment while en route.

Tracking technology grows up

Gone are the days in which a customer was expected to phone a customer service representative to ask the status of an order.

With the advent of the internet, tracking technology made it easier for customers to know more about their shipment status. But still the technology lagged in timing. Today, tracking is available in real-time with little if any lag time. Some carriers such as DPD and even Amazon offer customers the ability to view actual delivery stops in real-time, online.

Apps from FedEx and UPS allow customers to not only track shipments but also offer a host of other options, including the ability to change delivery locations to leave with a neighbor or a different location while the package is out for delivery.

The customer is in the driver’s seat

The customer is in control of their shopping experience, from selection to purchase, all the way through final delivery or pick-up. Carriers and retailers will need to monitor customer behavior as well as their own costs in order to stay one step ahead of expectations and to remain competitive in a tight industry.

Starting to think the robot uprising is imminent? Relax. With all the published reports and articles on the increasing use of robots and automation, one may think there will be no place for humans in the workforce within the next few years.

On the contrary, humans will be needed more than ever before, just in a different role.

It’s true that robots and automation are changing the way business is conducted, and it certainly is disrupting the workforce. A 2013 report by Carl Benedikt Frey and Michael Osborne studied the probability of computerization for 702 occupations, and found that 47% of workers in the U.S. had jobs that were at high risk for potential automation. In particular, workers in transport and logistics and office support “are likely to be substituted by computer capital”, according to the report. Workers in sales and services also face a high risk of computerization.

A World Economic Forum report forecasts that 7.1 million jobs could be lost by 2020, the majority of which are expected to be white-collar office and administrative jobs.

Since the beginning of human existence we’ve had to evolve or die

Innovation is nothing new. It has often led to sector disruptions, as well as the introduction of new types of jobs. A classic example occurred in the 1800s, when 80% of the U.S. labor force worked on farms. Thanks to the introduction of improved farm equipment and machinery, today that number is only about 2% and food has become less expensive relative to income. As a result, people have money to spend on other things and have also transitioned to jobs in other areas.

According to Massachusetts Institute of Technology (MIT) economist David Autor:

Automating a particular function so that it can be done more efficiently increases the demand for human workers to take on other tasks that have not yet been automated.

An illustrative example of this is none other than Amazon.

Amazon now has 45,000 robots in about 20 fulfillment centers. That’s a 50% increase from 2015.  As the company expands its use of automation, it is also growing its human workforce. From the fourth quarter of 2015 through the third quarter of 2016, Amazon reported a 46% increase in employees, not counting seasonal workers. According to the company, most of the stowing and picking of items, which require fine motor skills and discernment, is done by its employees. However, the company continues to experiment with automation, including artificial intelligence and drone delivery.

Where are human skills still needed?

And this brings us to another point regarding the importance of humans in the workforce. New jobs are being created in fields such as the development of artificial intelligence (AI). For example, self-driving vehicles may need remote operators to cope with emergencies, or ride-along concierges for delivery. In addition, corporate chatbot and customer-service AIs will need to be built, maintained and updated.

It’s not a surprise that most new jobs will be technology-based.

According to the previously cited World Economic Forum study, the types of jobs that will be in demand in 2020 include:

1. Data analysts to sort through and interpret the data generated from all the technology.
2. Computer and mathematical skills for such positions as computer programmers, software developers and information security analysts.
3. Engineers focused on biochemicals, nanotechnology, robotics, and materials.
4. Specialized sales people who can explain the company’s offerings to a wide range of clients.
5. Product managers that can design and develop products such as cars, appliances, gadgets, and other manufactured goods.

Are you ready? To stay relevant in today’s business world, you need to amass a skillset that will continue to provide work opportunities such as the roles listed above. The global logistics market is changing dramatically, and for the folks that embrace these changes and continue to update their skills, the opportunities are endless. One sure step to ensure you don’t get left behind? Make learning a daily habit.

What are you doing to keep your skills current? How have you seen your job field changing due to technology?

Shock rippled through the ocean freight community in late August as lenders refused additional financial assistance to the seventh largest container shipper, Hanjin Shipping Co. As a result, Hanjin has had to seek stay orders in 43 countries to protect its vessels from being seized, in addition to going into receivership in its home country, South Korea.

This latest occurrence adds fuel to an already beleaguered ocean freight market that has struggled since the global recession hit eight years ago.  Even after the end of the recession, the global economy has only grown sporadically due to uneven growth in Europe and a slowdown in China.

Bigger ships, bigger worries

In 2011, Maersk ordered 20 ships of 18,270 Twenty Foot Equivalent Units (TEU) at Daewoo Shipbuilding & Marine Engineering in South Korea. The goals of these large vessels focused around three main principles: economy of scale, energy efficiency and environment, so the series was named Triple-E.

Beginning in 2013, Maersk began taking delivery of these vessels. However, these ships only provide increased efficiency if they are fully loaded. As global trade volumes have declined over the past year due to a number of factors, such as China’s economic downturn, the demand for shipping simply isn’t there.

As a result, it’s been a struggle to fill ships to capacity. Orient Overseas Container Line noted in 2015 that its vessels were only 72% full. However, other container lines followed suit and ordered larger and larger ships, even while demand for capacity has remained low. In fact, the global fleet is forecast to grow 4.6% this year, but demand is only forecasted to grow between 1-3%.

As a result of the overcapacity, shipping rates have fallen. In 2015, spot rates declined by more than 50% from Shanghai to Rotterdam, and more than 70% between Hong Kong and Los Angeles.

Lack of profitability fueling mergers and alliances

Unsurprisingly, many container lines are finding their profit margins shrinking and some are facing heavy losses.  Research firm Drewry predicts industry losses of at least USD $5billion in 2016.

As a result of overcapacity, companies in the ocean freight market have been trying to consolidate to protect their bottom lines through mergers.

A.P. Moeller-Maersk A/S said earlier this month that it’s conducting a review that may lead to the breakup of the 112-year conglomerate.

CMA CGM SA, the world’s third-biggest container shipping company, bought Singapore’s Neptune Orient Lines Ltd. for $2.5 billion this year in the industry’s biggest acquisition since 2005.

Hapag-Lloyd AG and United Arab Shipping Co. said in June that they have agreed to merge to become the fifth-largest container shipping company. That came after Hapag-Lloyd AG bought the container business from Chilean rival Compañía Sudamericana de Vapores (CSAV) in 2014.

In 2015, China merged China Ocean Shipping Group and China Shipping Group to form China Cosco Shipping Corp. as part of the government’s efforts to shrink industries plagued by overcapacity while creating globally competitive businesses.

Along with mergers, new alliances have also been announced this year – The Alliance and Ocean Alliance. The aim of these alliances is to improve efficiency, because lines can share box space on each other’s vessels.

But, the U.S. Federal Maritime Commission is seeking additional information. Together the 2M alliance and the Ocean Alliance would effectively control 51.2% of global ship capacity. The FMC is concerned about the effect this would have on the vendors.

Canada’s West Coast ports are feeling the pinch

For Canada’s West Coast ports, demand has slipped for the first half of this year. In Prince Rupert, total TEUs are down 1.7% for the first six months, while in Vancouver  they are down 4.8%. The declines reflect the overall sluggish global economy.

The effects of the Hanjin collapse will also be felt at the two ports. Hanjin added Prince Rupert to its Pacific Northwest Express service in 2011. As of August 30 of this year, Hanjin was refused entry into the port because of its financial situation; however, cargo began being discharged on September 8^th. Meanwhile, a Hanjin ship remained anchored at Vancouver as of September 15.

As the ocean freight market churns, ports will need to adapt in order to assure shippers their goods will be delivered in a timely manner.

The Hanjin collapse should serve as a timely reminder, not only for shippers, but ports as well, that preparing for disruption is crucial to surviving in global business.

“[NAFTA] is…a disaster.” – Donald Trump

“[NAFTA]…needs to be reassessed and adjusted.” – Hillary Clinton

These quotes illustrate how the two U.S. presidential candidates currently view NAFTA. The twenty-two year old North American Free Trade Agreement has long been controversial and blamed for lost U.S. jobs, but quantifying its impact has been difficult.

Some analysts have blamed the trade deal for 700,000 to 800,000 lost American jobs, while the U.S. Chamber of Commerce has attributed the creation of 1.7 million U.S. jobs to NAFTA.

How has NAFTA changed trade for member countries?

The passage of NAFTA established a free-trade zone in North America between Canada, Mexico, and the U.S. As part of the agreement, the three countries phased out numerous tariffs with a particular focus on those related to agriculture, textiles and automobiles.

About one-fourth of U.S. imports come from Canada and Mexico, which are the United States’ second and third largest suppliers of imported goods. In addition, about one-third of U.S. exports are destined for Canada and Mexico.

According to the U.S. Bureau of Transportation Statistics, total NAFTA trade in terms of value of goods has increased at a compounded annual growth rate of 3.75% since 2004.

By country, the Canada – U.S. relationship has the highest value of goods traded, compared to Mexican trade with either country. However, since 2004, the compounded annual growth of Canadian trade with the U.S. has increased only 2.16%.

This slow growth can be attributed to it gradually losing ground to Mexico over the years, primarily due to the growing Mexican automotive industry. As a result, Mexican trade with the U.S. has grown faster than Canada-U.S. trade, at a compounded annual growth rate of 5.91% since 2004.

Canada is America’s top customer

According to the Canadian government, Canada is the U.S.’s largest customer, purchasing US$338 billion in goods and services in 2015. Nearly nine million U.S. jobs depend on trade and investment with Canada.

In addition, Canada is the top export destination for 35 U.S. states. While Mexico grabs headlines with its auto industry, Canada also has a sizable auto industry which continues to hum along and innovate. Still, it’s a more expensive location to assemble automobiles due to union activity and higher wages, and the concern of Canadian jobs heading south is real.

Despite this, GM announced in June that it would increase its engineering and research and development team in Ontario by 700 workers over the next three to four years, focusing on electric, connected and autonomous vehicles.

Cross-border trucking industry crowding the border since NAFTA

All modes of transport have benefited in terms of volumes and finance thanks to NAFTA, but perhaps the two transport modes to see the greatest gains have been trucking and rail.

Trucking is the largest mode of transport for trade between Canada and the U.S.

For the first quarter of 2016, truck crossings were up 3.2% and in Detroit, the focal point for the automotive industry, the number of crossings increased 8%.

Despite the strong growth, it has raised concerns of growing congestion at the border between Canada and the  U.S. Detroit-Windsor is a particular area of concern as one of the busiest border crossing points between the two countries.

To alleviate the congestion, the six-lane Gordie Howe International Bridge, linking Detroit and Windsor, is expected to begin construction in 2017 with a completion date anticipated for 2020.

Meanwhile, the U.S. Federal Highway Administration has awarded $256,470 to deploy technology to provide information on wait times and give truckers advance notice of crossing conditions. The program began earlier in 2016 with a handful of trucking firms and limited border points, and the number of truck border crossings using it may continue to increase if the new pilot program is successful.

Rail continues to grow between Canada-U.S. since trade deal

U.S. and Canadian Class I railroads have also greatly benefited thanks to commodities exports, such as agriculture and petroleum. In addition, the growth of intermodal transport has spurred innovative solutions linking the two countries. For example, in 2015, Canadian National (CN) signed a memorandum of understanding with the Alabama State Port Authority and APM Terminals for the Mobile port’s intermodal gateway project.

A similar agreement was made at the New Orleans port a few months later. Described by the Journal of Commerce publication as a “third coast”, these agreements have given CN a new region in which to operate from.

The benefits for CN include the ability to take advantage of the Panama Canal widening by moving goods through the New Orleans and Mobile ports, and transporting them through Memphis, Chicago and into Canada.

Another benefit for U.S. shippers who prefer to move goods via Canadian ports is the ability to import goods via the Prince Rupert port and then transport the goods into the heartland of the U.S. without transferring to another railroad, truck or other means of transport.

Likewise, U.S.-based Class I railroad CSX opened an intermodal terminal in Montreal, which gave it access to the Eastern Canada market. Trains serving this terminal connect to its Northwest Ohio intermodal hub.

NAFTA shouldn’t be scrapped – it should be expanded

Can NAFTA really be described as a “disaster”? Hardly.

Trade between the member countries is strong and should continue to flow with little, if any disruption. Should the agreement be “reassessed” or “reexamined”?  Perhaps – in terms of opening the borders even further.

Creative logistics solutions have resulted in more efficient flows of goods, and in turn reduced time to markets for the final customer.

Do you know where your food comes from? Chances are it’s more difficult to tell than you think. You might also not know that:

• In the US, 30% of all food, valued at $162 billion annually, goes to waste
• There were 626 food recalls in the U.S. in 2015
• According to the U.S. Department of Labor, 136 goods from 74 countries are produced with child labor or forced labor

Like many other industries, the food supply chain has become more intricate as it has become more global. But the 2013 horsemeat scandal in Europe, the 2008 baby formula scare in China, and recent e. coli outbreaks in crops such as lettuce and spinach in the U.S. have more people questioning not only the safety of their foods, but where it’s all coming from.

Indeed, as consumer preference continues to shift towards fresh and minimally processed foods, concern for the safety and quality of food grows, and that’s where traceability comes into play.

Food Standards Australia New Zealand defines food traceability as:

the ability to track any food through all stages of production, processing and distribution (including importation and at retail). Traceability should mean that movements can be traced one step backwards and one step forward at any point in the supply chain.

In addition to safety and quality, traceability also facilitates improved inventory accuracy that allows firms to meet customer demand more efficiently. Better inventory management will also reduce spoilage, waste and shrinkage, and recalls will become more efficient.

Food Standards Australia New Zealand describes an effective traceability system that includes at minimum the following:

• Contact details of suppliers and a description of products or inputs supplied
• Contact details of customers and a description of the product supplied to them
• Date of transaction or delivery
• Batch or lot identification
• Volume or quantity of product supplied or received
• Any other relevant production records

For many countries, traceability is not mandatory; however, there is a movement for such requirements. Effective January 1, 2017, France will require origin labeling on all standard dairy and meat products. The U.S. had a similar requirement for its meats, but was forced to repeal the requirement earlier this year due to a World Trade Organization ruling against it.

While origin labeling provides some details, it does not tell the whole story. Because of the complex nature of the food supply chain, it’s naturally difficult to capture it all in just a label. But maybe not impossible…

Several technology companies are working towards providing a traceability solution. Some examples include:

Colibri Software has developed a mobile app for farmers

The app will make it easier for farmers to keep track of their produce and the chemicals and pesticides applied to it. The app allows farmers to input data in the off-season in preparation for their busier time of year. “They can lay out their fields, the list of chemicals they use and the crops they’re growing next season; which should take only 30 minutes,” according to the company.

Once planting begins, they can record information on the mobile app. The GPS records their progress and when they’re done, they push stop and the data goes into the cloud for them. A record is made when the harvest is done and a report is issued. Many produce distributors require these reports to ensure food safety, including the time lapse between when pesticides were applied and when the product went to market.

Australian-based Beston Global Food Company introduced what it says is the ‘world first’ food traceability app

The app, called OZIRIS, will allow retail customers to instantly trace the origin and safety of food products around the world. The app integrates the company’s Brandlok anti-counterfeiting technology into the seal on every Beston product and is linked to a systematic “track-and-trace” ingredient and quality recording system in the production process. With OZIRIS, the seal can be read by the consumer at the point of purchase to verify the product’s authenticity.

FoodLogiQ offers SaaS solutions to connect the world’s food supply chain, promoting food safety through traceability and sustainability

The solutions provide customers such as Subway, Whole Foods and Robinson Fresh with the ability to manage and collaborate with vendors in one spot. This includes maintaining documentation, ratings, audits, inspections and incident reporting, along with the ability to utilize lot-level traceability to see exactly where one’s product is at all times.

There are numerous solutions available, but whether or not they completely satisfy the “traceability” definition is a question for the user or government regulatory requirements. Still, these solutions provide a sense of security for users, particularly when facing today’s very complex food supply chain.

For a list of food traceability apps, check this list from Food Tank, which provides a list of “top 23 apps changing the food system”: https://foodtank.com/news/2015/01/twenty-three-mobile-apps-changing-the-food-system

Interested in going beyond apps and actually installing software? Capterra lists its top food traceability software products: https://www.capterra.com/food-traceability-software/

Finally, the International Center for Tropical Agriculture has produced some great interactive maps showing the origins of food crops: https://blog.ciat.cgiar.org/origin-of-crops/

Shippers, freight forwarders, transportation providers, ports and ocean vessels are all preparing for new SOLAS regulatory requirements to take effect.

In 2014, the International Maritime Organization (IMO) Maritime Safety Committee approved changes to the Safety of Life at Sea (SOLAS) convention, requiring verification of container weights before loaded containers can be placed aboard ships. The requirement goes into effect July 1, 2016.

Despite almost two years of notice, confusion is rampant. Common questions from the industry are: Who is responsible for weighing the containers? Who is responsible for the costs? And who is responsible for assuring the mandate is enforced? Slowly these questions are being addressed as July 1 approaches.

Ports weigh in on their available services

Individual ports have decided whether or not they would offer weighing services. Here in the U.S., the South Carolina port of Charleston became the first in the country to offer this service. As of April, terminal operators at the two largest American ports, Long Beach and Los Angeles, announced that their terminals do not have the necessary equipment to weigh containers before they are loaded onto ships.

However, according to a recent Journal of Commerce article, both the West Coast Marine Terminal Operators Association and Oakland Marine Terminal Operators Association have noted they would continue to weigh all truck/export container units. They currently do so to comply with federal safety requirements and will provide this information to shipping lines. It will then be up to the container lines if they will accept the weights as an official verified gross mass declaration.

Meanwhile, the Port of New York – New Jersey, the largest port on the East Coast, recently announced it would provide the service for $69.10 per unit at its Terminal One. North Carolina’s Port of Wilmington reported it would weigh containers at no additional cost for exporters.

Canadian ports leaving things up to shippers

In Canada, DP World installed scales at the Port of Prince Rupert and Port of Vancouver earlier this year and plans to offer a weighing service to shippers at a price of $245 per container.

The Halifax Port Authority posted on its website that it “does not anticipate issuing port tariff cargo regulations in relation to SOLAS VGM requirements”, and will “recommend that shippers engage in discussions with their industry associations and contact their ocean carriers to determine the final VGM certification process. Many of the ocean carriers calling Halifax have posted their VGM certification process and/or instructions to their web site(s).”

Freight forwarders offer tools to ease transition

As ports prepare, shippers and forwarders are also preparing. The use of such systems from CargoSmart, GT Nexus and INNTRA are being adopted to submit verified gross mass data. In April, CargoSmart announced it would offer the verified gross mass submission tool for free when booking or shipping instructions are filed through the company’s platform.

Software provider Kewill incorporated INNTRA’s solution into its freight forwarding software to assist its clients in complying with the new regulations. Meanwhile, CargoSmart, GT Nexus and INNTRA have all been conducting webinars and discussions with clients to keep them abreast of the changing circumstances leading up to the requirement deadline.

General lack of preparedness may lead to supply chain disruptions

The big question is: how prepared will supply chains be on July 1? Surveys hint at potential disruptions.  For example:

A CargoSmart survey of its customers found that 36% of respondents had not yet started planning, while 20% were unaware of the July 1 requirement. Another 20% were in discussions with several parties, and only 4% of respondents had a solution in place.

Indeed, it will not be surprising to see some temporary disruptions and potential short-term shifts to the alternative transport option of air freight. However, ongoing communications and collaboration among supply chain partners will be important to ensure all cargo is successfully delivered on time.

Innovation is everywhere, as we observed in my previous article about smart ships.

The efficiencies gained through recent technological advances in the transportation industry are undeniable, and now it seems the stagnant air freight market may finally have its turn.

Air freight has endured numerous issues, despite opportunities for growth and improvement in recent years.

For example, according to a recent International Air Cargo Association (IATA) survey, problems in the industry include a lack of transparency, no real-time information on tracking, inefficient processes, and the detrimentally complex nature of moving goods by air.

These issues have resulted in a reluctance in shippers to use air cargo for their freight.

Air freight’s status quo is costing it business

Currently, cold chain transport and e-commerce deliveries are the two biggest markets for air freight services. However, industry experts have dinged the air freight market for its lack of standards, procedures and service handling.

Air freight’s share of the cold chain market has steadily declined from 17% in 2000 to 11% in 2013. They lost the majority of this business to ocean freight, as those services were able to respond faster and more thoroughly to their clients’ needs.

Meanwhile, e-commerce cross-border growth is expanding. In a recent Loadstar article, FedEx executive vice-president Raj Subramaniam stated that:

E-commerce is driving significant change in the air cargo status quo, from shipment sizes to customer profiles.

Furthermore, a spokesperson for Alibaba’s logistics unit, Cainiao, issued a challenge for the air freight market. He stated that Alibaba marketplaces were experiencing bottlenecks from shipping with air freight due to restrictions on products with batteries, liquids and powders.

“So I don’t know if you have any solutions on this, because the volumes are huge. And with these restrictions, a lot of the time we have to switch to sea freight,” he said.

Despite the challenges, there are signs that things are changing for the industry.

Taking billing and booking into the 21st century

Through a collaborative effort between IATA and key stakeholders, the e-air waybill (eAWB) was introduced in 2006.

The initiative aims to build and implement an end-to-end paperless transportation process for the air cargo industry, where paper documents are replaced with the exchange of electronic data.

The change has been implemented slowly but steadily.

Unfortunately, the lag has contributed to the air cargo industry falling short of its end of year target for market penetration in the transportation industry, achieving 36.4% out of its 45% target for 2015.

For 2016, IATA has set a new target of 56% penetration.

This year, IATA is also launching a new initiative called eAWB 360, in order to work with selected airports to implement the eAWB as standard operating procedure for all parties involved in shipping air cargo.

Montréal’s Pierre Elliott Trudeau International Airport is set to become the first airport to implement the program on May 3, followed by Toronto Pearson International, Vancouver International, John F. Kennedy International, Dallas/Fort Worth International, O’Hare International, Los Angeles International, Miami International and Hartsfield-Jackson Atlanta International.

Additional service offerings are finally being introduced by various stakeholders. One such example is the Cargo Reservation, Operations, Accounting and Management Information System (CROAMIS), which was developed jointly between Wipro and Qatar Airways.

The system provides end-to-end views of cargo operations, and is compliant to IATA initiatives such as e-Freight, e-CSD, Cargo XML. CROAMIS will also facilitate adherence to Cargo 2000 quality standards.

Another solution comes from Alaska Air Cargo and simplifies billing for customers. Quite simply, Alaska Air Cargo rolled two current surcharges into its base rates.

This, in turn, will result in customers only being charged by freight weight and a single screening fee. According to Alaska Air Cargo, the changes will allow customers to easily estimate and manage shipping costs, thus allowing for more predictable pricing throughout the year.

Welcome to the web, air freight

Similar to ocean freight, start-up online platforms including Haven and Freightos, offer shippers the ability to book and track air freight shipments online, providing visibility and flexibility for the customer.

Lastly, Lufthansa Cargo is targeting new customers, cutting costs and revamping some of its products after a slump in profits and no signs of improving cargo markets.

This summer, it plans to introduce “myAirCargo”, offering customers flying with its parent group the chance to ship personal belongings or purchases bought on their travels directly, without going through a third party.

In addition, Lufthansa Cargo teamed up with business incubator firm RocketSpace to take part in its “Logistics Tech Accelerator” program. Launched in 2011, the program helps foster innovative technology startups in the air freight logistics sector.

Has the air freight market emerged from its slumber, ready to modernize and innovate? Positive signs are starting to appear.

Let’s hope the pace picks up so that together air freight and ocean freight can bring forth a renaissance in global trade for all shippers, big and small.

Would you consider switching to air freight if the industry can catch up to its competitors in ocean freight?

The spread of disruption and innovation in supply chain technology has now reached the ocean freight industry.

More than 90% of international trade commodities are transported via ocean freight, and the industry has seen its fair share of disruption over the years, including the creation of the container and more recently the mega-ship.

However, with global trade increasing over the years it has become increasingly difficult to maintain visibility and efficiency throughout ocean freight operations.

Indeed, the Port Technology periodical recently quoted Martin Stopford, Non-Executive President of Clarkson Research and Author of Maritime Economics as saying that “a fleet of ships should be run the same way BMW runs a car factory”.

As a result, like every other segment within logistics, the ocean freight market is undergoing major advances.

Introducing the “Smart Ship”

Think of a smart ship as a giant smart phone. Smart ships are being built with the ability to communicate with other vessels, ports and partners.

In 2015, Hyundai and its partner Accenture announced plans to design a ship that will include a network of sensors and analytics software to improve port logistics and maintenance, as well as reduce running costs.

Also in 2015, CMA CGM equipped one of its 18,000-TEU vessels with Traxens technology, which allows containers to communicate with the vessel by using built-in relay antennas.

The system collects data on location, temperature, humidity level and vibrations, and can report impacts, attempted burglary, and customs clearance status in real-time.

Furthermore, it can remotely control and adjust the temperature of refrigerated containers and will allow resource optimization for routine inspections.

In addition, Xvela has created a cloud-based vessel stowage and collaboration platform for ocean carriers and terminal operators.

In March 2016 it announced a pilot program in which Hamburger Hafen und Logistik AG, PSA International, DP World, Modern Terminals Limited, and Port of Tanjung Pelepas, along with ocean carriers Maersk Line, MCC Transport, Orient Overseas Container Line, Nippon Yusen Kabushiki Kaisha and Hapag-Lloyd have agreed to participate.

The purpose of the pilot tests are to provide visibility of stowage planning-related information for both terminal operators and shipping lines, and better connectivity between carriers, terminals and partner organizations.

Terminals will be able to access departure stowage plans as ships leave prior terminals, allowing them to allocate resources and resolve potential issues while carriers will have transparency of terminal operations and the ability to share in real-time with partners.

Book, compare and track ocean freight from the comfort of your living room

For users of ocean freight, the ability to book and track ocean freight has greatly improved. Startups such as Haven, Freightos, i-Containers and Kontainers all provide online platforms for users to compare rates, pick carriers, book shipments and track from origin to destination.

The bonus is that this can all now be done from the comfort of a home, office, coffee shop – literally anywhere and at any time.

By utilizing such platforms, the playing field between large shippers versus small shippers is levelled, thus increasing competition among ocean transport companies.

Virtual reality, drones and self-driving ships: the future is here!

The outlook for the ocean freight market looks to be something out of a Jules Verne novel. Imagine an autonomous ship transporting goods from Singapore to the Port of Vancouver!

The marine division of Rolls-Royce Holdings is actually working on this, and is said to be about 10-15 years from achieving this goal.

The company has already developed a virtual reality command center, a first step towards autonomous ships whereby captains can remotely control multiple ships from onshore.

Humans would still need to conduct maintenance and repairs when a ship comes into port, but even this could eventually be handed over to robots.

Finally, drones are already being embraced by the market and will likely increase in use. According to a Wall Street Journal article, Maersk is looking to use drones to cut the cost of supplying ships at sea.

According to its studies, Maersk notes it could save up to US $9,000 per ship in annual operating costs by moving items such as mail, medicine and spare parts by drone. The company is also looking at stationing drones aboard ships for other tasks, like hull inspections.

Disruption and innovation in how we conduct business, regardless of industry, is occurring at a rapid pace.

How we once viewed supply chains, the underlying basis of how commodity-based business is conducted, is changing dramatically thanks to many technological advances.

The ocean freight market is no different. Perhaps this emphasis on innovation and disruption has come at the perfect time as the ocean market struggles with overcapacity, declining rates and aging ports in need of efficiency improvements.

The result will be a very different ocean freight market, but one that is much more responsive and efficient.

Unsurprisingly, the retail industry is currently undergoing a revolution, thanks to e-commerce. In fact, market research company eMarketer expects e-commerce will account for 7.3% of global retail sales in 2015 and increasing to 12.4% by 2019.

But with this revolution comes a big headache – returns. While returns are difficult enough to manage locally and domestically, complications multiply when managing cross-border returns.

The challenges of crossing borders in reverse

Cross-border e-commerce is a maze to maneuver, but the opportunities are great.

Boston Consulting Group predicts that global cross-border e-commerce revenues will be between $250 billion and $350 billion by 2025, compared to $80 billion today.

However, the maze consists of several challenges, including:

• Lengthy transportation times
• Customs bottlenecks
• Uncertainty of final price due to VAT, customs charges, etc. In Europe, the VAT is an additional 20%, on average, on top of the value of the purchased goods. Add this to shipping, insurance and potential customs duties, and the final cost can be a hefty one.
• Complex return processes

While each challenge requires a unique solution, managing returns is even more complicated because of its multifaceted nature.

Poor handling is leaving customers unsatisfied

In general, up to 30% of online orders are returned. In some countries, it’s even higher! However, effectively managing the process can help retailers not only save money, but also ensure good customer service.

The 2015 edition of the UPS Global Pulse of the Online Shopper, a global study, found that there was room for improvements in the returns process in every country surveyed. For example, in Asia, only 36% of online consumers were satisfied with the ease of returning items.

To further complicate matters, cross-border returns are costlier to manage than those in-country. Consider a few issues that affect cross-border returns:

• Rules vary from one country to the next. In Europe, for example, customers have a 14 day period in which they can return their online purchase for any reason after delivery. Meanwhile, in China, items purchased online can only be returned for any reason up to seven days after delivery.
• The cost of international returns may be much higher than the original outbound cost. Upon re-entering the U.S., for example, the item is now considered an import, so duties and taxes will apply.

Solutions exist and are improving every day

A good article from Internet Retailer offers some suggestions to manage this process:

• Ensure a fair and balanced returns policy is set up for your customers, so no one is at a disadvantage based on their country of residence.
• Set up a web-based returns portal for your shoppers, allowing them to print their own labels and track their returns all the way through the refund process.
• Build relationships with partners who have regional and/or in-country return centers. By performing the product inspection and refund process locally, you can significantly speed up the refund process. Also, it will give you the opportunity to consolidate packages for bulk return to the home facility, saving you a lot of money. One company the author worked with managed to reduce the average cost of returning goods from Europe and Asia to the U.S. from $38 to less than $10 by adopting a local returns strategy.

Specialized cross-border e-commerce companies are being snapped up to assist with easing cross-border pains.

For example, UPS acquired iParcel and FedEx acquired Bongo. In addition, Pitney Bowes acquired Borderfree, and postal operator Singapore Post recently acquired a 71% stake in US-based Jagged Peak to “support customers globally and move products more efficiently to consumers by implementing Jagged Peak’s Flexnet technology,” according to the press release.

Besides acquisitions, specialized cross-border returns management services are growing. One such service is from the U.S. Postal Service, which is currently in its testing phase.

The International Merchandise Return Service allows foreign consumers to return unwanted products back to the U.S. after being purchased on American websites.

The service provides return labels with postage payment, allowing the consumer to print off a label and return the item through the post. Consumers are able to send back items up to 30kg in weight through the IMRS, via the postal air mail or express mail system. The service also offers package tracking.

The IMRS is also being tested for online sales into Canada and Australia, under agreements with Canada Post and Australia Post, and could be extended to other countries if additional bilateral deals are reached.

Market research company eMarketer projects a 25% growth in global ecommerce sales this year, ballooning to over $US 3.5 trillion within five years.

Returns will not let up, and will likely grow alongside this massive upward trend. There are enormous opportunities for the companies that can get it right.

The key for retailers looking to expand across borders is to be mindful of their financial ledger, decide strategically which countries to expand into, research the growing options, and pick the best solution to meet their needs.

There is no one-size solution that fits all.

How does your company handle reverse logistics? Are your customers happy with their experiences, or are there still hurdles to overcome?

Increasing demand and improving technological capabilities are helping to boost trade in goods such as pharmaceuticals, foods, and other items that require temperature-controlled transportation.

Meanwhile, the spotlight on food safety is on the rise, with international organizations such as the UN’s Food and Agriculture Organization highlighting the importance of successful movements of food to market, particularly that of perishable produce such as fruit and meat.This eye-opening statement by the FAO has logistics providers and countries alike racing to build new infrastructure and introduce solutions to support cold chain transportation.

Where cold chains are lacking worldwide, 200 million tonnes of food spoil before reaching market every year.

This is extremely unfortunate as the United Nations Food and Agriculture Organization estimates that about 805 million people worldwide are chronically undernourished. Almost all these people live in developing countries, so the need for cold chain solutions in such locations as Africa and South East Asia are of utmost importance.

Food and drugs are racking up the air miles

While there is currently a movement towards transporting with ocean vessels, air cargo is still the mode of choice for many shippers of temperature-sensitive goods. In fact, these goods have helped boost air cargo use, which has otherwise been in a slump.

According to WorldACD, perishables and pharmaceuticals were the best performing air cargo classes during the month of May 2015, due to their time-sensitive nature.

Furthermore, for the first half of 2015, the biggest gains in perishables air cargo tonnage were in the Middle East and South Asia (MESA), up 59%, while Asia Pacific air cargo rose 35%.

For pharmaceutical air cargo, Asia Pacific and MESA were also the largest regions, increasing 74% and 66% respectively.

An expanding middle class and growth in e-commerce is increasing cold chain demand

In the Asia-Pacific region, the rise in perishables and pharmaceuticals can be attributed to an expanding middle class and favorable changes in healthcare regulations.

E-commerce has further assisted in this demand. Some high impact examples include Alibaba’s Tmall marketplace, who partnered with retailers like Costco to sell fish and produce, and JD.com’s investment in FruitDay, a Shanghai-based importer of fresh produce.

These same providers are also growing their healthcare capabilities.

The Middle East has invested in infrastructure such as warehousing, ports and airports to promote its expanding middle class, as well as a transshipment hub linking Asia to Europe.

For many countries within this region, much of its food is imported. For example, the UAE imports 85% of its food, and this will likely increase as the government plans to develop farmland in other countries in order to secure food supplies amid increasing demand.

Innovation in remote sensors are decreasing waste and increasing control

So, where’s the innovation in all of this demand for temperature-controlled goods? It’s in the sensors – the ability to monitor temperature ranges and adjust as needed while goods are being transported.

While much of this innovation involves the air cargo market, it is also appearing more and more in ocean freight.

Logistics providers such as DHL, FedEx, UPS, Kuehne + Nagel and DB Schenker all provide solutions that utilize sensors, either based on GPS or RFID, for tracking and monitoring temperature and humidity levels throughout transportation. Web-based, real-time monitoring, including report generation, is also included.

Among these solutions is FedEx’s SenseAware, introduced in 2009. It is a multi-modal solution that provides location monitoring, as well as monitoring temperature, light exposure, relative humidity, shock, and barometric pressure.

With these services, it can provide near real-time visibility and insight into shipments. Since 2009, FedEx has adapted this solution, incorporating it into its other services and industry-focused solutions, including aerospace, manufacturing, oil and gas, healthcare and fashion.

Sometimes even the fashion industry needs to monitor humidity while in transit. It has expanded this service into Europe, Asia and South America as well.

DHL’s temperature-controlled solution is another example of innovation at work. In 2013, the company introduced DHL Thermonet, an RFID-based air-freight service which allows customers to track the temperatures of their goods throughout the shipping process.

In 2014, DHL followed this up with the introduction of its global ocean freight service, Ocean Secure, which allows customers to access real-time tracking and temperature data at any given point, and even take remedial action if necessary.

The benefits of cold chain innovation are about more than just profit

There are many significant benefits to this monitoring, including compliance with regulatory authorities, such as the US Food and Drug Administration, and allowing users to be proactive instead of reactive.

Furthermore, it allows for intervention when necessary, whether it’s re-icing cold chain shipments or inspection and repackaging of damaged goods.

On a broader scale, users are provided the insight needed to make better business decisions, resulting in a strong customer experience and often a higher profit margin.

Not only will these new technologies improve better customer experience and higher profitability, they will also reduce food and medicinal waste by allowing for proper monitoring and faster intervention.

This will maintain the integrity of perishables transport and distribution, particularly in regions where it is critical to health and survival.

What do you think is the most useful application or benefit of cold chain innovation, and why?