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2024: Year of Shipping Challenges

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2024 Could Present Greater Challenges And Significant Disruptions

Our friends at OEC Group have provided an interesting perspective on what international shippers might expect in 2024.  It is with these challenges in mind, that we urge our clients and prospective clients to reach out to ICC to schedule a free, no obligation, consultation with one of our Supply Chain experts.  Our goal would be to review your shipping plans for 2024 and discuss how ICC, with our vast network of global logistics solution providers, can assist you in ensuring your 2024 will be pain free and cost efficient.

“2023 will be remembered as a unique year in supply chain history because of the precipitous fall of rates from historic highs back to pre-pandemic levels. As 2023 ends, experts believe that 2024 may have its own set of surprises and challenges that could disrupt and alter the industry’s landscape.”

One challenge, the practice of blank sailings, was a defining problem for many shippers in 2023. It is expected to press on throughout 2024. The continuation of aggressive blank sailing program is a result of the carriers direct need to control capacity as the ratio of supply and demand slips through over supply as a result of new ship orders being delivered to market throughout 2023 and 2024. This will force both importers and exporters to continue being agile with their supply chain strategies while carriers continue to struggle with balancing wildly fluctuating vessel capacity with shipper demand.

This continued practice, and the volatile rate swings that come with it, will make for a very interesting contract season. To have success, shippers should partner with a third party logistics provider that can tackle their long-and-short-term fluctuating capacity and price requirements, and advanced planning options.

The call for sustainability is another subject that will remain at the forefront, especially as climate issues continue to plague the industry and the movement of vessels. Issues such as draft restrictions and vessel limitations through the Panama Canal will be increasingly impactful as we move into the new year, and experts will consistently monitor other critical waterways around the globe, such as the Mississippi and Rhine Rivers, that have already had problems due to lack of rainfall.

“These highly delicate problems could have volatile consequences that will potentially reverberate throughout the industry for years to come. Simply turning a page on a calendar will not erase these and other serious concerns that are affecting the industry,” said Anthony Fullbrook, President of OEC Group’s Northeast Region. “Shippers need to align themselves with professionals that can give them as many options as possible to ensure the short and long-term viability of their supply chain. Those who fail to do this will suffer severe consequences.”

The last few months of 2024 could be especially volatile due to potential labor action at U-S East and Gulf Coast ports as the International Longshoremen’s Association’s (ILA) contract expires at the end of September. The ILA, led by its president Harold J. Daggett, has been outspoken about its determination to negotiate hard before the current contract ends. Union representation is digging in on port automation, worker pay and benefits, and compensation for working through the pandemic.

If negotiations go awry, then shippers, carriers, and providers could see a situation far worse than what was experienced earlier this year with ILWU-PMA contract disagreements. Slowdowns and other negotiating tactics could occur at any time during 2024, which could significantly disrupt supply chains and drive rates dramatically upward.

“Importers and exporters need to plan ahead and be open to all options as 2024 could be a very rough ride. Having as many options as possible will be the key to succeeding in this environment,” said Peter Hsieh, Vice President of Sales and Marketing for OEC Group’s Northeast region. “The more port pairings, intermodal options, and final trucking and distribution solutions shippers have access to, the better chance they’ll have at minimizing delays, building a reliable supply chain, and beating what promises to be a very challenging market.”

Full article from OEC Group can be found here: https://www.oecgroup-communications.com/post/shippers-beware-2024-could-present-greater-challenges-and-significant-disruptions

The True Role of AI in Logistics

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The True Role of AI in Logistics: Navigating a World of Constant Disruption

In an era marked by relentless disruptions, the logistics sector finds itself at a crossroads of transformation. Artificial Intelligence (AI) stands as a beacon of innovation, promising to steer this industry through the tumultuous waters of change.

But as we look to the horizon, questions arise about the effectiveness of AI in logistics, the functions it will enhance or overshadow, and the role of consultants in guiding companies through these decisions.

AI’s Effectiveness Amidst Disruption

The logistics industry, characterized by its complexity and the need for real-time decision-making, is particularly susceptible to global disruptions. AI’s prowess lies in its predictive capabilities, which allow for the anticipation of such disruptions and the formulation of proactive strategies.

By analyzing vast datasets, AI can forecast demand patterns, inventory needs, and potential bottlenecks, enabling companies to pivot before a crisis hits. The effectiveness of AI, therefore, is not just in managing the present but in preempting the future, transforming logistics into a forward-looking domain that’s always one step ahead.

Impact on Logistics Functions

AI’s impact on logistics is multifaceted, with some areas ripe for transformation and others that will remain human-centric. Warehouse operations, for instance, are undergoing a revolution with AI-driven automation. Robotics, powered by AI, are streamlining sorting, packing, and inventory management, leading to unprecedented efficiency gains.

On the other hand, transportation remains a domain where the human touch is irreplaceable. AI here augments human capabilities, enhancing efficiency and decision-making but not replacing the nuanced judgments and adaptability that human operators provide. The distinction lies in the nature of tasks: repetitive, data-intensive functions are AI’s forte, while roles requiring emotional intelligence, complex decision-making, and adaptability remain human-led.

Logistics Consultants as a Decision-Making Catalyst

In navigating the AI landscape, companies often grapple with the “how” and “when” of integration. This is where logistics consultants like ICC can be instrumental. By providing frameworks for digital transformation, consultants can help businesses assess their readiness for AI adoption. Through its advocacy for cross-border data flows and digital collaborations, we can facilitate the sharing of best practices and success stories, offering a roadmap for companies looking to harness AI.

Steering into the Future: Embracing AI for a Resilient Logistics Landscape

AI’s role in logistics is not just as a tool for efficiency but as a compass for navigating disruption. Its effectiveness will be contingent on the industry’s willingness to embrace predictive over reactive models. While AI will revolutionize certain functions, it will enhance others, ensuring that the human element remains integral to logistics.

Logistics consultants provide the necessary guidance, ensuring that companies do not just adopt AI but adapt to it, fostering a logistics sector that is resilient, forward-thinking, and perpetually ready for the next wave of change. As we stand on the brink of this new era, the question is not whether AI will be effective, but how we will harness its full potential to redefine the landscape of logistics.

Learn more by setting up a free consultation with our logistics experts today.

Time to Take a Peek at Peak Surcharges

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Now that Thanksgiving has come and gone, we are into the prime shipping season, or Peak Season as everyone in the shipping world calls it. If you are not sure of that, take a quick look at the rates that you are being charged by your carriers. Even if you are not a large volume shipper, it is very likely that you will see some type of Peak Surcharges on your carrier bills now. Believe it or not, some of these have been in place since last year! 

It is important to note that you do not need to be a large volume/ E-Commerce shipper to get hit with these unplanned/ unexpected charges. There are plenty of Peak Surcharges to go around for everybody!

For example, UPS has been charging “Demand Surcharges” on shipments coming to the US from Asia since August of 2022.  They have been billing a Demand Surcharge for these shipments, that varies from $.65 to $1.54 per lb., depending on origin and service.  There are also Demand Surcharges on other International shipments that have been in place since January of 2022! 

FedEx has also had Demand Surcharges in place for International Shipments well in advance of Peak Season. Like UPS, these surcharges vary based on Origin, Destination, and Service. Some of the International Demand Surcharges that FedEx lists are as much as $1.90 per lb. 

So, if you are thinking that your safe since you don’t do much International Shipping, think again. There are Peak/ Demand Surcharges that are in place for some accessorials including: Additional Handling, Oversize/ Large Package Surcharges, and Over Limit/ Unauthorized Packages. Shippers should pay very close attention to these package size based charges for a couple of reasons. 

First, some of these charges are extreme. For example, the Demand Surcharge for Large Packages will increase the cost of this accessorial charge by over $70 for both carriers (an increase of over 50% in some cases).

Next, Carriers weigh and measure in motions systems are not perfect. We have seen many examples of shippers being charged for Additional Handling, or Large Package surcharges on packages that don’t have the dimensions to qualify for these surcharges. The bottom line is that this is not a fine science. It’s bad enough to be improperly billed for these charges. But, having a Peak Demand Surcharge on top of this is like rubbing salt in the wound! 

If you are a larger volume shipper (defined as a shipper that has sent out more than 20K packages in a week), you may have been paying Peak Surcharges on Residential shipments throughout the year. UPS literature indicates that certain larger shippers could be billed $.40 to $.60 more per package throughout the year.  With both UPS and FedEx, these charges ramp up as you get into October and November. 

At this point, you might be thinking “Why is this all so relevant?”. Well here’s why- Don’t you find it interesting that carriers are still charging Peak/ Demand surcharges when volume has been lower, and there seems to be more capacity in the market place? 

We have all heard about the softness in the economy for the past 6 months, and the impact that this has had on Carrier volume. UPS has acknowledged a loss of volume due to their negotiations with the Teamsters during the summer. From what we can tell, Both UPS and FedEx are fighting for volume.  So why are they both still charging Peak/ Demand Surcharges? The answer is simple- BECAUSE THEY CAN AND WILL IF YOU LET THEM!

Hopefully by now you are thinking- Well what can I, and should I be doing about this? You might be thinking that you could have some leverage with carriers to try to improve your rates and discounts. You may be right here. You also may be thinking about picking up the phone to call your carrier rep to kick off negotiations or request an improved agreement. But before you do that, you need to think about the complexity and reality of negotiating Small Parcel agreements. 

We often see carrier offers that on the surface, provide the appearance that they will save the shipper money. We have even had carrier reps tell shippers that their new offers will save them X amount of dollars per year. However, when we performed our proprietary analysis, we have seen some interesting results. We have seen many scenarios where there are no savings at all, or even dis-savings! The bottom line is that the carrier pricing folks are experts at the “smoke and mirrors” game. 

Even if you do have the ability to analyze a carrier proposal, and were able to confirm savings opportunities, how would you know that this is the best that you could expect from carriers? Do you really want to Bench Mark offers against your own rates? This does not seem to make a lot of sense. 

What makes sense is to partner with a company that has had long term experience and success with helping shippers analyze carrier proposals, and that can drive optimum cost savings. After all, the savings that we drive can have a big impact on your profit margins and bottom lines. 

Additionally, we do not limit our cost saving initiatives to improved Carrier contracts. Our solutions are often multi-faceted to ensure maximum value for our clients. We always look at the big picture, and seek to provide solutions that create customers for life. How else do you think we have remained in business for close to 50 Years! 

Please reach out to us today to find out if your company qualifies for our free Comprehensive Logistics Assessment. We are anxious to help you put an end to the perpetual Peak Season that has been going on for the last couple of years! 

 

Beyond the Price Tag

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Cultivating a Value-Centric Parcel Carrier Relationship

Navigating the intricate dance of a shipper/parcel carrier relationship requires more than a keen eye on the bottom line; it demands a shift in dialogue from the immediate allure of price to the enduring promise of value. 

This philosophy is not just about deflecting attention but about guiding clients to a vantage point where long-term benefits outshine short-term savings. Its here that the client-focused consultants can truly excel, helping decision-makers to see beyond the price tag and embrace the holistic value of their investments.  

Understanding the Price-Value Dichotomy

The fixation on price is a natural inclination for clients seeking to maximize their immediate gains from parcel carriers. However, this narrow focus can eclipse the broader picture of total cost and long-term value. The art of consulting is not just about presenting a product or service; it’s about leading a client through a paradigm shift—from price-conscious to value-aware.

How to Shift from Price-Conscious to Value Aware

1. From Price to Total Cost: 

A good logistics consultant helps a client to see beyond the tip of the iceberg. The dialogue should illuminate how your carrier’s offering reduces not just the monetary cost but also the cost of time, potential waste, and inefficiency. By articulating the broader cost implications, a good consultant can reframe the conversation to focus on the comprehensive value your provider’s solution provides.

2. From Savings to Differentiation: 

The allure of savings is potent, but it’s the differentiation that sustains a business relationship. When price is the only factor, it’s crucial to help clients pivot the conversation to what sets a carrier’s offering apart. This shift is about showcasing the unique benefits and superior outcomes that justify the price difference. It’s not just about what the service is, but what the service does differently—and better.

3. From Narrow to Broad Needs: 

Simplistic needs invite simplistic solutions. By broadening the conversation to encompass the full spectrum of the client’s complex needs, you create more value for your client.  A parcel carrier should be a partner, not just a provider.

Empathy as the Gateway to Value

Each conversational shift begins with two powerful words: “I understand.” This empathetic bridge reassures the client that their concerns are heard and validated. A good logistics consultant will work with you to find a parcel carrier that understands this important dynamic.  It’s the starting point for a dialogue that transitions from a transactional interaction to a consultative relationship.

The Focal Point 

In the end, what remains focal is what becomes important. By maintaining a steadfast focus on value, our clients can elevate the conversation, transcend the commoditization trap, and make better decisions that are not just good for today but great for tomorrow.  Learn how ICC Logistics is different by setting up a free consultation today.  Let’s help you get the value you deserve out of your parcel carrier relationships.

UPS and DOWNS in the Parcel World

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UPS and DOWNS in the Parcel World

The rise and fall of FedEx and UPS stock prices, and what it means for you

If you have been following UPS and FedEx Stock prices for the past 6 months, you have probably noticed some major differences in performance. During this period, UPS Stock has seen a decline of over 18%, while the FedEx stock price has increased by almost 20%. While you may think that these swings are only important for the stockholders of these respective companies, we feel that this is equally important for shippers.

To explain this, the first important question to ask is, what is driving these major changes? If you have been following the blogs that we have been putting out for the past few months, you probably have a good idea already. 

We had been monitoring and reporting on the UPS/Teamster negotiations that started back in April. The negotiations were quite contentious, and ended with UPS providing an offer that the Teamsters touted as “Historic”, and that will cost UPS $30 Billion over the life of the new five-year agreement. 

UPS leadership has publicly debated how much this new agreement will actually cost the company. However, regardless of how much, it is pretty obvious that it is going to increase their costs in a meaningful way. 

The chart below illustrates the performance of UPS Stock price over the past 6 months. As you can see there was a big drop in value following the kick-off of negotiations, most likely driven by the negative sentiment and risks associated with a potential strike by the Teamsters. 

The stock has continued to fall following the completion of negotiations, and has seen a steady decline since UPS reported Q2 earnings at the beginning of August. This UPS earnings report acknowledged the loss of volume due to customer concerns of the outcome of their negotiations with the Teamsters. UPS also lowered its revenue outlook for the year following the outcome of the new agreement.

For FedEx, there has been a steady uptick in their stock price. As you can see in the chart below, their stock has risen substantially during the same period. 

FedEx earnings reports have suggested that they have been successful in reducing costs and have solid plans to continue doing so. However, they have also acknowledged the fact that UPS/Teamsters negotiations have helped them gain market share. 

FedEx’s chief customer officer, Brie Carere, said “We onboarded new customers who valued our service, and were committed to a long-term partnership with FedEx,” she said on the company’s earnings call Wednesday. “As a result, we added approximately 400,000 in average daily volume by the end of the first quarter.” She then went on to say “My job is to make it very difficult for our primary competitor to win back that share.”

In case you didn’t catch it, the statement made by Ms. Carere should be the aha moment that explains why these fluctuations in stock prices are important to shippers! The bottom line is that both carriers have a need for volume right now. The economy is soft, which is having a negative impact on volume. UPS needs to recoup volumes lost due to Teamster contract negotiations, and FedEx has won volume from UPS that they don’t want to lose. Seems like the perfect storm for shippers. This suggests that carriers might be willing to get aggressive with pricing to protect and or grow their volumes.

So, now you are probably thinking that you need to call your respective UPS or FedEx rep to try to take advantage of this situation. Maybe you have been successful in the past with obtaining better rates and discounts directly from your carriers. Maybe you have built and used successful strategies in the past that resulted in cost reductions for your company. But before you pick up your phone to call your reps, there are some very important questions that you need to ask yourself.

  1. How well do you understand your own Parcel Data? Do you have the visibility that you need to understand your shipment characteristics and trends of your parcel spend? Are you relying on data/reporting that comes directly from the carrier to understand your volumes? (bad idea #1) 
  2. How do you know that you will be able to obtain the best rates possible from your carriers? What do you have to compare this to? Are you going to bench mark new offers against your own existing rates and discounts? (bad idea #2)
  3. Do you have the ability to completely analyze and determine the true impact of offers that you receive? Will your analysis pick up on discount details that you feel will not be impactful, but actually are? Are you going to take your carrier rep’s word for it when they tell you that their new offer is going to save you money?  (you guessed it- bad idea #3!)

Our long term experience tells us that instead of picking up the phone to call your carrier rep, you should first pick-up the phone to call us. Here’s why; 

  1. The proprietary analytical program/process that we have built along with our associated Auditing & Reporting portal allows for unmatched visibility and reporting. THIS WILL TRULY ALLOW YOU TO UNDERSTAND YOUR PARCEL VOLUMES AND SHIPPING CHARACTERISTICS!  
  2. Shippers have no way of knowing that they are receiving the best rates and discounts possible on their own. Do not take your carrier rep’s word for it.  ICC Logistics utilizes a vast database of over $9B/yr. in carrier data that allows for highly accurate benchmarking of rates and discounts. WE KNOW WHAT THE BEST RATES AND DISCOUNTS LOOK LIKE!
  3. Our analysis will provide a true and accurate picture of the impact of all carrier offers. We have protected many customers from accepting offers that carriers claim would reduce costs, and that would actually have had little impact or even increase costs. DON’T BE FOOLED BY SMOKE AND MIRRORS!

So if you are looking to enter into negotiations with your carriers from a position of power, it is imperative to partner with a company that understands the process. Market conditions suggest that now is the time to dust off your parcel carrier contracts, and take advantage of potential cost reductions. The Parcel market is ever changing, and the pendulum can quickly swing back the other way as capacity tightens. We are certain that our approach to negotiations will help shorten the timeline and result in the highest level of savings possible. So, be sure to reach out to us today to get things moving right away! 

 

8 Steps to Better Collaboration: Procurement and Logistics

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Unlock the True Potential of Synergy and Collaboration 

I have always been intrigued by the relationship between corporate procurement departments and corporate logistics departments.  The question that always comes to mind is, which department is best suited to negotiate the “best” deal for the company?  There is a reason why this intrigues me.

Several years ago, we were asked by the corporate logistics department of a major apparel retailer to analyze their parcel carrier contracts to advise them what potential savings they could achieve as a result of our comprehensive benchmark analysis services.   Unbeknownst to us at the time, the corporate procurement department of the retailer had been given the ultimate authority to finalize the negotiations with the parcel carriers.  

Negotiations had been going on between the retailer and the parcel carriers for months, which is certainly typical with large parcel spend contract negotiations. In the end, the procurement department made the decision to end the back and forth negotiations and sign the “latest and greatest” offer from the Parcel carriers. This decision was apparently made because of the considerable amount of time the negotiations had been ongoing.  However, one key element the procurement department failed to consider, was the fact that the data and analytics we had provided to the logistics department projected that if they did sign the “latest and greatest final” parcel carrier contracts the carriers had presented, they would be leaving over $12 Million in potential savings on the table.   

So of course after hearing this decision by the corporate procurement department, my immediate response was, “how will you explain to your CEO and CFO that you left $12 Million on the table?”  Secondly, “how many garments would you have to sell to generate $12 Million in net profits for the company?” 

We assume those discussions with top management did not go well.  

It is clear that the relationship between corporate procurement departments and corporate logistics departments is critical for the overall successful functioning of any organization. While they are separate and distinct functions within a company, their activities are closely intertwined and complementary.

Collaboration is King

Procurement and logistics departments should collaborate closely to ensure the smooth flow of goods and services within the organization. While procurement is responsible for sourcing and acquiring the necessary materials, products, services, and comprehensive contract provisions, logistics provides insight into the company’s actual needs for transportation services, storage, and distribution of these items. Effective collaboration and data sharing, between these two departments is essential to meet the company’s overall operational needs and even more importantly, customer requirements.

Procurement departments must rely on logistics teams to provide insights and data related to demand forecasting and inventory management. Logistics departments offer valuable information about transportation capacity, lead times, storage capabilities, freight rate structures, contract pricing requirements and anomalies, as well as overall supply chain constraints. This information helps procurement departments make informed decisions about when and how much to procure.

Both procurement and logistics departments should interact with suppliers and service providers. Procurement typically negotiates contracts, establishes relationships, and manages supplier performance. They should always work collaboratively to optimize the supply chain, ensure efficient operations, and maximize cost reductions and customer satisfaction.

Working together

Procurement and logistics departments that collaborate effectively tend to understand each other’s needs and objectives, thereby creating the best solution for all parties involved.

Shared Goals and Objectives: Procurement and logistics should align their goals and objectives to ensure a unified approach. This includes understanding the company’s overall logistics requirements, cost targets, service level expectations, and strategic priorities. By jointly defining the desired outcomes, they can work together to achieve the best value for logistics services.

Early Involvement: Procurement should involve logistics early in the procurement process. By engaging logistics experts from the beginning, procurement can gain insights into specific logistics requirements, challenges, and opportunities. This enables them to consider logistics-related factors when evaluating potential suppliers, negotiating contracts, and making sourcing decisions.

Collaborative Supplier Selection: Procurement and logistics should collaborate in selecting logistics service providers. Logistics should provide input on supplier capabilities, service levels, geographic coverage, and any specific requirements related to transportation modes, warehousing, or distribution. Procurement can then leverage this information to evaluate potential suppliers, negotiate contracts, and select the most suitable logistics partners.

Performance Metrics and KPIs: Procurement and logistics should define key performance indicators (KPIs) and service level agreements (SLAs) together. Logistics should contribute their expertise in identifying relevant metrics, such as on-time delivery, transit times, order accuracy, and responsiveness. Procurement can then incorporate these metrics into contracts, ensuring that they reflect the company’s expectations for value and service quality.

Continuous Performance Evaluation: By regularly reviewing supplier performance against established KPIs, they can identify areas for improvement, address any concerns, and drive accountability. This evaluation process should be collaborative, with logistics providing input on operational aspects, and procurement focusing on contractual compliance and cost effectiveness.

Data Sharing and Visibility: Procurement and logistics should establish effective data sharing and visibility mechanisms. They should leverage technology solutions that enable real-time information exchange, such as transportation management systems (TMS) or supply chain visibility platforms. This shared visibility allows both departments to monitor logistics operations, track shipments, identify bottlenecks, and proactively address any issues that may impact value or performance.

Continuous Improvement Initiatives: Procurement and logistics should jointly drive continuous improvement initiatives. By sharing insights, best practices, and lessons learned, they can identify opportunities for process optimization, cost reduction, and service enhancement. Regular communication and collaboration foster a culture of continuous improvement throughout the procurement and logistics functions.

Supplier Relationship Management: Procurement and logistics should work together to manage relationships with logistics service providers. They should collaborate in supplier performance reviews, contract renewals, and contract negotiations. By maintaining strong relationships with logistics partners, they can leverage these partnerships to drive value, innovation, and continuous improvement.

parcel and freight contract audit service

So while we’re sure most companies would think twice about leaving $12 Million in potential savings on the table, (especially when the savings projections were clearly documented as they were in this case), when dealing with logistics and supply chain operations the three most important elements are Communication, More Communication and Even More Communication!