Category / Logistics

by Mike Poverello

Adoption of container tracking will accelerate in the coming years

According to a new research report from Berg Insight, the number of active remote container tracking units deployed on inter-modal shipping containers was 77,000 in Q4-2011. Growing at a compound annual growth rate (CAGR) of 66.9 percent, this number is expected to reach 1.0 million by 2016. The penetration rate of remote tracking systems in the total population of containers is estimated to increase from 0.4 percent in 2011 to 3.6 percent in 2016. Berg Insight’s definition of a real-time container tracking solution is a system that incorporates data logging, satellite positioning and data communication to a back-office application.

The market for container tracking solutions is still in its early stage. Aftermarket solutions mounted on high value cargo and refrigerated containers will be the first use cases to adopt container tracking. Orbcomm has after recent acquisitions of Startrak and PAR LMS emerged as the largest vendor of wireless container tracking devices with solutions targeting refrigerated containers. Qualcomm, ID Systems and Telular are prominent vendors focusing on inland transportation in North America, which is so far the most mature market for container tracking solutions. PearTrack Systems, Honeywell Global Tracking, EPSa and Kirsen Global Security are examples of companies offering dedicated solutions targeting the global end-to-end container transport chain.

Ever since the events of 9/11, there have been a lot of activities to bring container tracking solutions to the market according to the report. Only now technology advancement, declining hardware prices and market awareness are starting to come together to make remote container tracking solutions attractive. Container telematics can help supply chain operators to comply with regulations and meet the high demands on security, information visibility and transportation efficiency that comes with global supply chains. Source: Berg Insight

by Mike Poverello

China leads shake-up in distribution methods

Out of respect for copyright, I would encourage all logistics followers to visit this link to learn more about a significant shift occurring in the distribution of containerized goods. Some food for thought considering local conditions in South Africa which currently appear to marginalize (if not discourage) inland localisation and multi-modal distribution of goods between the hinterland and major air and sea ports in Southern Africa. Source: FT.com

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by Mike Poverello

Aircargoshop – a revelation for shippers

The following piece suggests that the realisation of AEO obligations on shippers is real and will be augmented by support systems that may marginalise the highly competitive freight forwarding industry.  While there is a suggestion of cost savings due to non-reliance of shippers on traditional forwarding agents, I believe this is a short-sited view as the ‘real challenge’ lies in whether or not shippers are up to the task in meeting these obligations given their unfamiliarity with customs and transport requirements. I see many shippers having to recruit experienced customs and forwarding experts to maximise their compliance given the burgeoning obligations materializing in international shipping!

In October 2011, Aircargoshop an online booking portal provided shippers the possibility to book their own airfreight without involvement of the traditional shipping agent via the online portal Aircargoshop. This is a development that might have important consequences for the closed airfreight industry. As a consequence the online booking portal offers a lower-priced, more efficient and more transparent process for aircargo booking.

Founder Paul Parramore of Rhenus Logistics suggests that this system will bring down the cost of airfreight by as much as 50%. The Dutch Shipping Council EVO, gave the system the thumbs up and said that it will revolutionise the manner in which the freight business is currently being conducted.

Joost van Doesburg, a consultant with EVO said that in the long run restructuring of the industry is necessary in order to meet the challenges of the 21st century. Many of the forwarders will lose out, but the system is geared towards cost effectiveness and being competitive. He also added that if the forwarder is to add value to the supply chain, then he has to comply to adapting to the system rather than working against it.

On the home front, a recent article featured on the website Freight into Africa reports that the South African Cross Border Transporters Association (SACBTA) will be introducing a similar system which is currently under development for the cross border road freight industry. It will be called “ROAFEonline” or shortened form of Road Freight online which will allow the customer to book directly his freight with accredited SACBTA members hence cutting out the middleman and brokers.

All payments can and will be done online and this system will integrate with SARS EDI (Would like to hear more on this!). The consignor will only have to ensure that his goods are loaded onto the truck, the rest will be done by the system. The cost per transaction to the customer will be a paltry R100.00 in relation to a few thousand Rands normally swallowed up by the middlemen.

Based on our estimations a regular consignor can save up to R3-5 million Rands per annum which hopefully will be passed onto the consumer. With the looming integration of the SADC countries towards one stop clearing, it makes sense to further integrate the system. So whether you are in Dar es Salaam or Lubumbashi, you can now book your freight from Cape Town without having to go through a string of brokers. You also have the assurance that your cargo will be loaded by an accredited SACBTA transporter who complies to the standards set out by SACBTA. It will facilitate consolidations as any accredited transporter will at any given time be able to see what cargo is available. If Transporter A has only 20 tons, he can check which other transporter on the system has another 8 tons to Dar es Salaam for example. The transporters can then consolidate a load on the system which will happen in a shorter period of time than say for instance waiting a month to fill a tri axle.

This system will have many other functionalities that have been incorporated like online tracking, bar coding, which will give the consignor and consignee piece of mind knowing at any given time where their cargo is. It will also be accessible to border agents and customs officials who will be in a position to extract vital information on any consignment long before it actually gets to a border.

The system will go into testing around March of this year and if all goes well should be ready for implementation by the latter part of 2012 or early 2013. We hope that this will go a long way towards restructuring the industry for the better. It has long been the desire of SACBTA to allow industry players to come on board to create a better industry. However, there has been very little interest shown in transforming the industry and we feel this system will by virtue of its nature, transform the industry whether industry players are willing participants or not. Source: Freight into Africa and various own sources.

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by Mike Poverello

IDZs to be replaced with SEZs

Department of Trade and Industry (South Africa)Heard this before? In line with the Industrial Policy Action Plan and the New Growth Path, the Department of Trade and Industry (the dti) aims to continue fostering its efforts to create employment and economic growth by establishing a strong industrial base in South Africa. The new initiative aims to improve on the concept of industrial development zones (IDZs) which have enjoyed mixed success since being introduced in December 2000 through the Manufacturing Development Act. 

An IDZ is a purpose-built industrial estate linked to an international airport or seaport which is tailored for the manufacturing and storage of goods. It offers investors certain rights within the zone, in addition to incentives such as customs duty and VAT relief. One important priority of the IDZs is to boost job creation and skills in underdeveloped regions. The IDZ programme led to the establishment of five zones – Mafikeng, OR Tambo International Airport, Richards Bay, East London and Coega. The Richard’s Bay IDZ only commenced its first phase of development in September last year while OR Tambo International Airport is not yet fully operational.  The Industrial Policy Action Plan, issued by the Department of Trade and Industry in February 2011, has also identified, as a key milestone, the establishment of an additional IDZ at Saldanha Bay. 

The Special Economic Zones (SEZs) programme is one of the most critical instruments that can be used to advance government’s strategic objectives of industrialisation, regional development and job creation. Moreover, the programme can assist in improving the attractiveness of South Africa as a destination for foreign direct investment.

In order to ensure that the SEZ programme is an effective instrument for industrial development, the dti has developed the SEZ Policy and Bill. Through the Bill there will be a dedicated legislative framework for special economic zones.

The main objectives of the SEZ Bill are to provide for the designation, development, promotion, operation and management of Special Economic Zones; to provide for the establishment of the Special Economic Zones Board; to regulate the application and issuing of Special Economic Zones operator permits; to provide for the establishment of the Special Economic Zones Fund; and to provide for matters incidental thereto.

Furthermore, the SEZ Bill will enable government to move towards a broader Special Economic Zones Programme, through which a variety of special economic zones can be designated in order to address the economic development challenges of each region and address spatial development inequalities.

Although national laws may be suspended inside industrial zones, government is currently not offering regulatory incentives to derogate from labour rules, a concession which is seen by some as crucial to stimulate investment in special zones. It is however unlikely that a relaxation of labour laws will be considered under the SEZ initiative. Benefits are rather expected to come in the form of enhanced incentives for labour intensive projects and additional tax relief for investors. A further question arises – just how flexible an inventive will the customs and VAT requirements be allowed to be?

The key provisions include the establishment of a Special Economic Zones Board to advise the Minister of Trade and Industry on the policy, strategy and other related matters; establishment of the Special Economic Zones Fund to provide for a more coherent and predictable funding framework that enables long-term planning; strengthening of governance arrangements including clarification of roles and responsibilities of key stakeholders. Source: Department of Trade and Industry.

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by Mike Poverello

Ports back campaign to weigh all export containers

The International Association of Ports and Harbours (IAPH) has joined the World Shipping Council (WSC) and International Chamber of Shipping (ICS) in urging the International Maritime Organization (IMO) to establish an international legal requirement that all loaded containers be weighed at the marine port facility before they are stowed aboard a vessel for export. In what has been a much publicized issue since 2008 in the maritime industry, much the same view is taken by customs administrations. Like many other changes in the supply chain, it is a lot easier said than done. Modern ports are designed and developed taking into account requirements for weight bridges, radiation portal monitors, networks to monitor vehicle and container movements in and around port precincts, and inland transportation routes. While the expense and budget for these are usually borne by the relevant port authority, would it not indeed be good if those responsible for the packing/stuffing of containers took it upon themselves to ensure the correct weight, quantity and content are properly declared?

Refer to the joint WSC/ICS paper on “Solving the Problem of Overweight Containers” as well as the ICS’s “Safe Transport of Containers by Sea”. Both are self explanatory and short enough so as not to be considered laborious. In the South African context the question of who packed the box is often unanswered given that a variety of entities could be involved in this activity. In some instances it could be a container depot operator or a freight forwarding and consolidation agent; depending on how ‘safety and compliant conscious’ the shipper wants to be. While it will still take some time before the entire supply chain becomes properly regulated and monitored, now’s the time for ‘operators’ to take stock of what might in future be a new standard. New standards mean more capital outlay with pass-on costs for which the shipper ultimately carries the can.

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by Mike Poverello

Freight forwarders’ liability is being boosted by expanding supply chains

TT Club, the international transport liability insurer, is warning that freight forwarders and other transport intermediaries face increasingly significant liability risk, particularly in emerging markets, as they take on additional supply chain services for their customers. TT Club specialises in the insurance of liabilities and equipment for multi-modal operators.

Traditional freight forwarders, who have seen the opportunity to offer extended warehousing, packaging, delivery fulfilment and even purchasing functions for shippers are not always fully aware of the liabilities for cargo loss and third-party damages that these additional tasks are opening them up to, according to Andrew Kemp, European regional director of the TT Club.

He told the Cargo and Freight Insurance Annual Conference in Moscow that as supply chains continue to develop to supply emerging markets, where the cargo owners are not always willing to invest in distribution infrastructure, the out-sourcing of such tasks will proliferate.

This could bring significant new business opportunities to companies, which had previously limited their service offerings to freight forwarding and the organisation of international transport, but these additional procedures could be complex.

“A typical new type of activity would be the packaging, for the local retail market of an item with a sales promotion attached (price discount or two for one offer). This task is straightforward in itself but brings with it risks of errors and possible damage to the items. This would be something not experienced by transport operators in the past,” he said. Source: Logisticsmanager.com

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by Mike Poverello

Three tax risks to consider when managing your supply chain

Supply Chain Management (SCM) aims at fulfilling customer demands through the most efficient use of resources, which includes distribution capacity, inventory and labour. Merely locating the assets and risks of one’s supply chain in a favourable tax jurisdiction is not sufficient. The functions, together with the people, must be located in the chosen jurisdiction to manage these particular assets and risks. It is essential that the systems and processes, implemented and applied, support these functions in order to create a sustainable tax benefit.

Local tax authorities will attempt to defend their tax base at all costs. This may result in the local tax authorities seeking substantial taxable capital gains and/or transfer pricing adjustments when restructuring actions (which reduce the ultimate tax they would have received) are implemented.

Therefore, careful planning and documentation substantiating the reasons why certain steps were taken, are essential to ensure most tax risks are mitigated. Transfer pricing documentation also forms an important part of the documentation required. In the absence thereof, a substantial amount of time and resources may need to be set aside in the event that adverse assessments have to be defended. Read the rest of the advice of local tax consultants at the following link: Deloitte Tax identifies three tax risks to consider when managing your supply chain.

by Mike Poverello

Upgrades and Downgrades

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The global shortage of intermodal shipping containers is making the companies that lease them rich. In a year that will probably go down as the worst in shipping history, a small group of companies is making a fortune. These are the companies that buy and then lease to major shipping lines the humble “box,” or intermodal shipping container. You know, those ugly rust- or gray-colored containers that sit atop 18-wheelers and block your view of the road and cause massive congestion and beaucoup emissions? And I bet you can’t name a single one of these companies. I couldn’t, until I started researching this article. They’re not exactly household names, but they should be for any investor worth his or her salt. Read the full article here! Source: The Maritime Executive

by Mike Poverello

Reminder: People Run the Supply Chain

doesn’t this just sound so familiar? What a fine article by Chris Kane, Chief Strategy Officer of a family owned third-party logistics provider (3PL).

As the U.S. economy continues to struggle and unemployment remains high, our industry has focused on cost cutting through automation. Technology has undoubtedly helped us move more products more quickly and less expensively than ever before, but have we focused so much on automation and technology that we’ve neglected to identify how they affect the people in our supply chain?

I’m a distribution guy, so I’m the first to admit that technology provides visibility into our operations that makes my life much easier. A single report can tell me exactly where a specific load for any one of our customers is located in real-time. What it doesn’t tell me is how our people in the distribution center hustled to get the trailer loaded, even after a forklift problem, so that the driver didn’t miss his delivery window. Or how the driver’s skills helped her avoid an accident that would have destroyed the customer’s product. If I just look at that report, I miss the most important aspect of our business: the dedication of our people. When things go wrong (as they inevitably do), technology will only get us so far.

Is our industry fast paced? Absolutely. Do we need to utilize the technology available to be more efficient, more cost-effective and more competitive? Of course. But if we pursue those options exclusively, with little regard for the people running our operations, we’ve failed. Because at the end of the day, it’s the efforts of the people in the supply chain that get the product to its destination.

by Mike Poverello

Exports – Dispelling a fallacy

Following my previous post on ’empty container depots’, its time to dispel a long time myth basically perpetuated to safeguard the cargo handler’s imagined responsibility that goods delivered to be packed for export must be first cleared through Customs. There is no current law, rule or policy which supports this notion, and neither is there any liability on stuffers, consolidators, container depot, transit shed operators, empty container depot operators to ensure that goods they receive under instruction to pack for export have been pre-cleared with Customs.

Let’s first consider what a Customs export declaration implies. Generally, a declaration for export is lodged with Customs subsequent to the conclusion of a sales agreement between a local supplier and a foreign buyer via the commercial bank. The forwarding agent will arrange foreign shipment with a carrier, obtain commercial documents (pro forma invoice, required regulatory permits/certificates, etc.) and prepare a declaration for submission to Customs on behalf of the exporter.

The acceptance, by Customs, of an export declaration is no more than a formal notification of an exporter’s intention to export – nothing more. It is therefore untrue that an ‘approval to export’ or ‘release for export’ notification is the last word from Customs. Moreover, it is also incorrect to reason that Customs has no right to intervene in a ‘transaction’ subsequent to clearance. In essence the notion of an export ‘consignment’ only materialises once the goods are packed, sealed and ready for delivery to the point of international cartage ; or, more accurately, when the ‘secured goods’ are reported for delivery to the place/port of export. Only at this point can risk be evaluated in all its dimensions and a final decision by Customs (load/no-load) be pronounced.

The advent of advance information, post 9/11 and subsequent proliferation of ‘secure export’ initiatives means that ‘risk’ in relation to international cargo movements encompasses three key areas – information, conveyance and cargo. To merely accept whats declared on the export is insufficient for Customs. Other potential risks involving a multitude of people with a lesser liability, little appreciation for accuracy, and little or no sensitivity towards the safety and security of goods in their custody may compromise the ‘compliant’ intent of the exporter and clearance broker at time of initial customs clearance.

It is therefore plain to see why SARS Customs is modernising not only its procedures and systems, but also its enabling legislation.  A new export clearance and cargo reporting dispensation is envisaged, to be accompanied by the licensing of cargo handlers and their premises and the implementation of a seal integrity programme.

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by Mike Poverello

Empty container depots adding to industry’s costs?

FTW published an article recently in regard to ‘empty container depots’ and their apparent negative impact on cost and response to industry needs. It was duly noted that while so much focus was accorded to Port delays, little is said about the additional costs caused by empty container depots. Many of these in fact hold, clean and distribute empty containers on behalf of shipping lines some of whom are not equipped to service the industry due to ill-equipped facilities.

Shipping lines complain about the turnaround of their vessels at the port, but take little interest in ensuring a quick turnaround of vehicles at their appointed container depots. The report continues: “Transporters are delayed for hours at major depots while waiting for containers to be turned in, cleaned and then released for export cargo. Most of these depots do not work 24 hours in line with the port and transporters, which further limits the ability of transporters and industry to perform”. I think this deserves some further thought and consideration, and for this I’ll provide a customs-slanted view.

Firstly, in other parts of the world, the same mentality prevails whenever a port or customs system is replaced or upgraded – an avalanche of vitriolic sentiment, followed by line operators threatening to institute port delay surcharges and the like. To place matters into true perspective – yes, the port and customs services are there for the benefit and support of the supply chain, and should run and be maintained to offer efficient operation even in the event of catastrophe or a burgeoning logistics market demanding increased capacity and responsiveness. 9/11 provided a catalyst for Customs Inc. to initiate an unheard of demand on trade to increase its internal security mechanisms and even provide information in advance of the lading of a vessel at a foreign port. The US lines were the first to climb on the band wagon in support of heightened security and quickly acted to ensure that their regional offices were able to assist foreign shippers in supplying the required ‘advanced information’ at a nominal charge – varying between $25 and $60 per bill of lading. Sure, this was the cost necessary to ensure lines met their new stringent reporting requirements to the US Homeland Security to obviate possible penalties of $5,000 and up. Nonetheless, the same lines, when asked to provide the local authorities the same courtesy, recoil and look for all sorts of excuses to avoid the subject. Sure, it is understood that only the US has the right to make such demands, not any anyone else. I have followed most other advance cargo reporting requirements with similar amusement.

You see, lines were prepared to make suitable arrangements for US-bound containers such as pre-booking empty containers. Now when the requirement is extended to other parts of the world there is an immediate issue. Simply, and as the article correctly deduces, supply chain security implies that everyone changes – even the empty container depots.

As the local port authorities and your customs service are spending millions in upgrades to meet the demands of the future, so too is the same required of trade. Unlike commercial entities, your customs service remains one of the few who in the world that has not instituted a customs service fee. Certain traders and intermediaries in the industry might complain that recent developments at SARS have seen their costs increase due to new transactional requirements, for example the electronic supporting document issue. This I will discuss on its own in a separate post. The bottom line is that the FTW article is an important cue for those container depots concerned to get their act together. The heat will undoubtedly be turned up on them once SARS introduces its new export clearance and cargo reporting requirements. South Africa needs smaller to medium enterprises offering dedicated services. Perhaps it’s time for the lines (those who operate such facilities) to consider outsourcing these activities to more dedicated enterprises. Read the FTW article here!

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by Mike Poverello

Cargo Dwell Time in Durban

An acquaintance in the forwarding industry brought this working paper to my attention. Titled “Cargo Dwell Time in Durban“, it is very useful reading for logistics operators, Customs and government agencies, and policy makers. The object of the working paper attempts to identify the main reasons why cargo dwell time in Durban port has dramatically reduced in the past decade to a current average of between 3 and 4 days. A major customs reform; changes in port storage tariffs coupled with strict enforcement; massive investments in infrastructure and equipment; and changing customer behavior through contractualization between the port operator and shipping lines or between customs, importers, and brokers have all played a major role. The main lesson for Sub-Saharan Africa that can be drawn from Durban is that cargo dwell time is mainly a function of the characteristics of the private sector, but it is the onus of public sector players, such as customs and the port authority, to put pressure on the private sector to make more efficient use of the port and reduce cargo dwell time. The Working Paper is the product of the World Bank’s Africa Region, Transport Unit, being part of a larger effort  to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. 

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by Mike Poverello

Durban Dugout – more about Transnet’s thought process

Durban DugoutWhile the ‘bean counters’ at ACSA and Transnet continue to finalise the sale of the old Durban airport, its good to  understand  Transnet’s alternative options in so far as port expansion on the eastern seaboard is concerned. I came across the following document which not only details the current ‘dugout site’, but also includes designs for an equally  impressive container terminal at Richards bay.  Click here!

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by Mike Poverello

Logistics Performance Index (LPI)

Customs and logistics users will in particular find the featured survey of interest, if not important. International Logistics encompasses an array of essential activities — from transport, warehousing, cargo consolidation, and border clearance to in country distribution and payment systems, involving a variety of public and private agents. The Logistics Logistics Performance IndexPerformance Index (LPI) and its indicators are a joint venture of the World Bank, logistics providers, and academic partners.The  LPI is a comprehensive index created to help countries identify the challenges and opportunities they face in trade logistics performance. 

The 2010 LPI points to modest but positive trends in key areas such as customs, use of information technologies for trade, and investment in private services. The LPI is a multidimensional assessment of logistics performance, rated on a scale from one (worst) to five (best). It uses more than 5,000 individual country assessments made by nearly 1,000 international freight forwarders to compare the trade logistics profiles of 155 countries. Germany and Singapore receive the highest ratings in the 2010 LPI with scores over 4.08. South Africa ranks 28th on the list with a score of 3.46, one position behind China (3.49), but 11 and 18 places better than Brazil (3.20) and India (3.12), respectively.

The LPI covers the performance of countries in six areas that capture the most important aspects of the current logistics environment:

  • Efficiency of the customs clearance process.
  • Quality of trade and transport-related infrastructure.
  • Ease of arranging competitively priced shipments.
  • Competence and quality of logistics services.
  • Frequency with which shipments reach the consignee within the scheduled or expected time.

One of the features of the LPI includes indicators of border procedures is the time taken to complete trade transactions.  Although this  is a relatively small fraction of total import time, such time increases significantly when goods are physically inspected. Core customs procedures converge strongly across all performance groups, but physical inspection—and even multiple inspections of the same shipment by different agencies—are much more common in low performance countries. The report moreover suggests that border agencies other than Customs tend to constrain the clearance process and ultimately the costs imposed on the private sector. 

by Mike Poverello

Lloyd’s List now available on iPad and iPhone

The Lloyd’s List App enables subscribers to access current news and market data anytime and anywhere. Once the news is uploaded, it is “cached” within the app, giving users the ability to read the latest headlines on the go without an internet connection. Stories are arranged in recency and categorised into channels Containers, Dry Cargo, Tankers, Ports & Logistics, Finance & Markets, Insurance, Ship Operations, and Regulation. Lloyd’s List subscribers can simply use their existing login details to access the new App. The App is free to download and has been formatted in keeping with mobile devices while retaining the familiar feel of Lloyd’s List.
Lloyds List iPhone-iPad App2