Category: Shipping

Nearly all maritime kidnappings and hostage-takings in the nine months to the end of September this year took place in or near the Gulf of Guinea, said global maritime piracy watchdog the International Maritime Bureau (IMB).

New data from the IMB shows that worldwide there have been 70 actual kidnappings of seafarers and 49 hostage-takings year to date. The West African country of Guinea alone saw 23 hostage-takings, Nigeria a further 12 and the West African country of Togo an additional seven. Cameroon and Nigeria were hot spots for kidnapping, too.

The IMB says about 86% of all maritime hostage-taking and 82% of all actual kidnappings happen in or near the Gulf of Guinea. The body adds that there were at least 119 incidents of piracy and armed robbery against ships  from January through September. That’s a 31% decline compared to the 156 incidents recorded in the same period in 2018.

Incidents are down globally but Gulf of Guinea remains a concern

“Although incidents are down, the Gulf of Guinea continues to be a concern for piracy and armed robbery-related activities, with kidnappings of crew members increasing in both scale and frequency,” said Pottengal Mukundan, a director of the IMB.

That said, the IMB freely concedes that there’s a high degree of under-reporting. The assistant director of the IMB, Cyrus Moody, told FreightWaves that the IMB’s own research indicates there’s roughly a 50% under-reporting of incidents.

Possible reasons why  include the fear that insurers will hike rates if it is known that a ship was attacked. There are also fears that if an attack on a ship is reported then criminals may “go harder on the crew,” the next time the same ship is attacked. Some operators may worry that local authorities could hold or delay the ship.

Gulf of Guinea – piracy at the center of the world

The Gulf of Guinea lies between West Africa and Central Africa. It’s the sea-space at zero degrees longitude and zero degrees latitude. There are different definitions what constitutes the Gulf of Guinea. The international “Guidelines for Owners, Operators and Masters for protection against piracy and armed robbery in the Gulf of Guinea region,” a document issued by the major global maritime shipping organizations, applies to the waters off the countries of Ghana, Togo, Benin, Nigeria and Cameroon.

However, the Guidelines also say pirate attacks have occurred as far south as Angola and as far west as Sierra Leone, so the area of threat is enormous.

The Gulf of Guinea is an attractive area of operations for marine criminals for several reasons.

Many high-value, poorly-defended targets

Firstly, it has many high-value targets.

There are many ships because there are numerous ports and a great deal of cargo. And, because vessels are entering or leaving port, ships may be traveling slowly. They may be sitting low in the water, and are therefore easier for pirates to board, because they are fully laden. Or they may be at anchor waiting for commercial instructions or repairs or for any number of other reasons. As Moody pointed out, ships are constantly entering and leaving, or waiting around or in, the area of high threat.

Secondly, the targets are poorly defended because of certain provisions of international law. That is also the reason why experts talk of “piracy” and “armed robbery against ships,” and why there is a distinction between the two in statistical tracking, even though they’re physically the same crime.

What is “piracy”? What is “armed robbery against ships”?

A summary of Article 101 of the UN Convention on the International Law of the Sea (UNCLOS) indicates that maritime piracy is any illegal act of violence committed for private ends by the crew or passengers of a private ship and directed on the high seas, or in a place outside the jurisdiction of any country, against another ship.

The International Maritime Organization, a specialized body of the United Nations, uses the international definition for piracy to define “armed robbery against ships” but with the difference that the crime happens within the borders of a country.

The key parts are the concept of “high seas” and “outside the jurisdiction of any country.” Or, to put it another way, whether a maritime crime is “piracy” or an “armed robbery against a ship” depends upon where the crime happens in relation to the international/territorial border.

So a crime against a ship in the middle of the Atlantic Ocean is piracy. But a criminal attack on a ship in, say, the Port of Long Beach, California, is armed robbery against a ship in the U.S.

Where is the maritime border?

On land, a man-made barrier, or a natural barrier such as a river, often marks the location of the border. While there are no visible barriers or landmarks at sea, nonetheless, there is still a border. Under UNCLOS, a country’s sovereignty can extend from the coast out to sea up to a limit of 12 nautical miles (about 13.8 U.S. miles). This sea-space is known as the territorial sea.

Just as crimes against crew and ships in U.S. territorial waters are subject to U.S. law, crimes against crew and ships in the waters off Ghana, Togo, Benin, Nigeria and Cameroon are subject to the criminal laws of those countries. The close proximity of all those sovereign nations poses several challenges.

Hot pursuit and armed guards

Law enforcers have a right of “hot pursuit” under article 111 of UNCLOS. Marine police (or navies) can chase and capture criminals who flee out of a country’s jurisdiction and onto the high seas. But if the criminals cross the border into a neighboring country, the chasing police lose that right. And, just as happens with neighboring countries the world over, police and criminal investigators cannot wander freely back and forth across borders to tackle crime.

A few years ago there was a big problem with Somali pirates attacking ships as they sailed through the Gulf of Aden. Deployment of armed guards aboard ships was the primary means of tackling Somali piracy along the east coast of Africa. Unlike ships in the Gulf of Guinea, however, ships sailing off the coast of Somalia were attacked in international waters and therefore the law of the local coastal state did not apply. So armed guards were a legally sensible response.

But that wouldn’t work in the Gulf of Guinea. Ships have to enter and leave the territories of the coastal states to visit the local ports. Nations jealously guard their monopoly on the right to use armed force in their jurisdictions and generally do not allow large numbers of openly armed foreigners to enter and hang around in their territory. So ship-borne foreign armed guards would not be allowed.

Local law enforcement and judicial systems

National sovereignty presents a further problem to deterring or stopping pirates because not every country has a well-developed law enforcement and judicial system. There’s a good reason there’s no piracy epidemic immediately off the coast of, say, the state of Oregon. U.S. law enforcement would take decisive action against repeated acts of organized piracy or armed robbery in that area. And the U.S. has prosecutors, courts, judges and a penal system to try, convict, sentence and imprison pirates and other maritime criminals.

That’s not so in the Gulf of Guinea.

“Nigeria did not even have piracy as a crime,” Moody explained to FreightWaves. So piracy (if outside the territorial sea) or armed robbery against ships couldn’t even be prosecuted as such in Nigeria. However, Moody pointed out that Nigeria has more recently enacted laws against piracy.

“You always have maritime crime where the response from law enforcement and the judicial system is not adequate or robust,” Moody told FreightWaves.

Nigeria begins to tackle the problem

However, Moody added, there is a sense that Nigeria acknowledges there is a problem and is taking the first steps to tackle offshore violence.

Moody said there was a regional law enforcement conference recently to discuss the issue, and local authorities are thinking about partnerships to carry out security exercises and safeguard local waters.

And, in the last few days, the Nigerian Navy has announced that it will use designated maritime courts to handle cases of piracy and maritime armed robbery.

Moody also said the Nigerian Navy will respond to calls for help.

“We have good cooperation with the Nigerian Navy and the local maritime administration. We’ve relayed information to the Nigerian Navy who have gone to assist,” Moody stated.

But there are other obstacles to enforcement.

Africa is huge. The sea-space is vast

Africa is huge. And the Gulf of Guinea sea-space is vast. The straight-line distance from the western border of Ghana to the southern border of Cameroon is about 910 U.S. miles. If a mariner were able to sail the same distance in a north-northeast direction in a straight line from the southern tip of Florida, he or she would finish at roughly the same latitude as Richmond, Virginia.

Moody pointed out that if a navy does respond to a distress call in the further reaches of the Gulf of Guinea, “it’s a few hours of sailing. Pirates have been, done what they need, and have left”.

That’s a problem because pirates often kidnap and hold crew in some pretty inhospitable terrain. Nigeria alone saw 23 kidnappings and 12 hostage-takings of seafarers, and Cameroon saw another 23 kidnappings. Areas where hostages are held include marshes, rivers, swamps and jungle. So there are physical as well as jurisdictional barriers to tracking down pirates and robbers who have kidnapped crew.

Shipping industry executives do not discuss how much they pay in ransoms, and the crew are held hostage during the negotiation period for, on average, about four to 12 weeks.

Unlike their Somali counterparts, West African pirates kidnap crew, rather than hijack ships, because local law enforcement agencies would be able to track down and recapture a large ship. The Somali pirates were able to hijack and seize ships because they operated from a failed state with no local law enforcement.

The typical attack by West African pirates and robbers involves the pirates climbing aboard to loot the ship of small property and the crew’s personal effects and to kidnap the crew.

“There’s lots of violence”

“There’s lots of violence,” Moody explained. “There have been no fatalities this year, but crew do tend to get injured. The typical criminal activity is yelling, shouting and slapping to intimidate and get compliance from the crew. With the slightest resistance from the crew, they tend to get roughed up.”

West African pirates tend to be armed with knives for cutting ropes, crowbars for breaking open doors and lockers, and heavy-caliber automatic firearms.

Apart from ransacking the ships and kidnapping the crew, the pirates also want to steal cargo. Typically, they seize smaller quantities of refined products of crude oil, such as gasoline, that can be sold in the local markets around the Gulf of Guinea.

About the IMB

The IMB is a not-for-profit and non-political specialist division of the International Chamber of Commerce set up in 1981 as a “focal point” to help counter international maritime crime. The International Maritime Organization (a division of the United Nations) adopted a resolution on November 20, 1981, urging governments and all other interested parties to co-operate and share information with the IMB to help in the fight against maritime crime. 

One of the key functions of the IMB is to relay live piracy and armed robbery information. In the event of an attack, the IMB can relay information to local maritime police and navies who may be in a position to intervene. Secondly, the IMB can broadcast and emergency alert to all ships in the region so that they can take countermeasures or, if appropriate, render assistance. The warning will also let ships that are about to enter the high threat area. 

As maritime piracy and armed robbery takes place all over the globe, the IMB will accept reports from around the world, 24 hours a day, seven days a week. 

The IMB urges ship operators and other appropriate persons to file incident reports. “Your information may save lives,” the IMB has stated. 

Contact the IMB’s 24 hour anti-piracy emergency helpline: + 60 3 2031 0014

The IMB can also be contacted by fax and email:

Fax: + 60 3 2078 5769
E-mail: imbkl@icc-ccs.org / piracy@icc-ccs.org

Pictured: WiseTech founder and CEO Richard White. Photo: supplied by WiseTech.

The last couple of days took a dramatic turn with U.S. short seller J Capital making explosive allegations that global logistics software behemoth, WiseTech – a A$9 billion (US$6.2 billion) company, has been seriously misleading investors. WiseTech has robustly denied these claims.

In other news CTI Logistics pulls in A$212 million of revenues and, meanwhile, trucking industry association NatRoad says that truck rest stops are “desperately needed”. 

WiseTech hits back at allegations of financial trickery

Global logistics and productivity software provider WiseTech Global (ASX: WTC), which has offices and customers around the world and in North America, has rejected allegations of financial impropriety made by short-sellers J Capital Research. WiseTech shares dropped by about 10% to A$30 (US$20.56) on the release of the J Capital allegations. One Australian dollar equals about 69 U.S. cents.

WiseTech is a major logistics software company. The software company has a market cap of about A$9.5 billion and has over 12,000 logistics company customers in more than 150 countries. Its main product, CargoWise One, executes over 51 billion data transactions annually.

In reporting on the story, it is necessary to summarize the allegations made by J Capital and WiseTech’s response. We do not ourselves make, or support, any allegation against either company or any of the individuals involved.

J Capital’s allegations

In an aggressive note and research report, J Capital makes an estimation in which it alleges that WiseTech overstated profit by up to 178$ in the three years since the company listed. It also alleged that the company’s underlying organic growth was 10% and not 25% as stated by the company. J Capital claimed the estimated 80% of the top line growth was from purchased revenue. J Capital makes a variety of further allegations namely that European revenues were overstated, that subsidiaries are shielded from audit; that the auditors “aren’t looking at the numbers closely enough”; that the increase of profit growth post-IPO is “suspect”; that its core product “is held in low regard” by clients; that the company is manipulating its accounts and that “insiders are cashing in on the story that WiseTech is pushing out to investors”.

WiseTech fires back

Referring to the J Capital report, WiseTech responded late yesterday with a detailed denial of the allegations made against it. WiseTech stated that the J Capital report “contains many claims and allegations that are untrue. WiseTech rejects entirely the allegations of financial impropriety and irregularity contained in the [J Capital] document. The Report was published without prior inquiry to WiseTech”.

The software company noted that J Capital is a short seller and that it had disclosed it could benefit from a decline in the WiseTech share price.

“We are very concerned that the allegations in the document may mislead and manipulate the market to the detriment of WiseTech’s business and its shareholders, large and small. Our financials, our revenue, our profit, our growth rates and our product have all been verified comprehensively and form part of the external independent audits conducted annually,” the software company said in a statement.

The company added that it supports investigations by Australian regulators into attempts by overseas domiciled short sellers to target Australian Stock Exchange-listed companies. It also supports prosecuting unconscionable conduct. 

WiseTech’s detailed response

The software company said there had been no overstatement of profit, growth or revenue and that results had not been inflated. WiseTech said J Capital’s estimates for revenue growth were incorrect, adding that the software company’s disclosures between organic and acquired revenue growth had been made in full. It noted that J Capital had made allegations that capitalizing costs of software development had exaggerated profits and revenues. WiseTech then stated it has complied with Australian and international accounting standards, explaining that it had “appropriately” expensed software efforts including maintenance, bug fixes and other software investments not likely to be commercialized.

WiseTech added that European revenues had not been overstated as revenues are allocated to region, which is based on the customer’s invoicing location. WiseTech points out that some of the company’s biggest customers, such as DHL, are based in Europe and so WiseTech revenues from such customers are allocated to that region. WiseTech added that J Capital also excluded six of WiseTech’s largest European acquisitions. “This has a significant impact.”

The software company added J Cap’s allegations about WiseTech’s growth may mislead as J Capital appears to have compared operating profit in financial year 2016 with net profit after tax in financial year 2019. WiseTech also pointed out that pre-IPO accounting is “not unusual” and that it made investor materials “on a pro forma basis excluding one-off IPO costs as well as in the statutory form… WTC’s approach is consistent with other business that IPO”.

WiseTech also noted that all of its subsidiaries are required to maintain detailed accounting transaction records to support group auditing. The software company also stated that auditors include the companies Grant Thornton and KPMG. WiseTech adds that, in the 2017 financial year, one of the audit partners “necessarily changed to accommodate her maternity leave and the reviewing partner took on the role”. WiseTech added that KPMG has released an unqualified independent auditor’s report for each year since becoming the company’s auditor.

Finally, WiseTech denied the allegation that the company’s report is designed to facilitate insider “cash in”. The company noted that the two founders, Richard White and Maree Isaacs, currently own over 154.1 million shares with a value of over A$4.6 billion.

“Richard sold only 5.8m shares for a total value of $73m. Maree has sold no shares. In the period since listing, long-term directors and shareholders, Charles Gibbon and Mike Gregg have sold a combined 5.7m shares, which they have held since 2006, for a total value of $106m. The same two directors continue to hold 31.2m shares with a total value of $936m”, the company states.

CTI reports revenues of A$212 million

Road transport company CTI Logistics (ASX: CLX) reported its annual results late last night after market close. Revenues from operations were A$212 million and profits before income taxes were A$1.79 million. Profits after tax were A$788,074.

Meanwhile, revenues from other income were A$945,728. Profit before income taxes stood at A$1.79 million and the profit for the year, after all taxes and costs, was A$788,074.

Total revenues of A$212 million represented a 15.92% increase on the previous year. Most of that increase was driven by a boost in transport revenues, which were the biggest revenues generated by the company. Transport revenues stood at A$121.05 million, which accounted for about 57% of the company’s revenues. It’s a big increase from the previous year. In 2018 the company’s transport revenues stood at A$94.41 million. So the company has increased its transport revenues by A$26.64 million, a 28.21% increase.

The boost in transport revenues was driven by the acquisition of Jayde Transport and Stirling Freight Express. Both acquisitions are reported by the executive chairman, David Watson, to be “complete” and they are are operating under the CTI Logistics branding.

Logistics revenues accounted for another A$84.4 million, which was 39.83% of the total revenues generated. Security services generated another A$6.13 million of revenues.

The two biggest costs, by a wide margin, were employee benefits (at A$70.14 million) and subcontractor expenses (A$68.39 million). The third biggest cost was motor vehicle and transport cost. A further large cost was property cost at A$17.19 million.

The company also expanded its warehousing capabilities and technologies. It now offers third party warehousing to national clients.

“All of the above came with some cost, including non-recurring moving and establishment costs. In addition, as a services business in a difficult economic environment, we are still seeing significant reductions in activity and increased margin pressure across a wide range of clients,” Watson wrote in the Chairman’s Statement.

CTI Logistics is a Western Australia based company working in the business to business and business to consumer segments. Its operations include couriers,taxi trucks, fleet management, warehousing, biosecurity services, logistics (warehousing, distribution centers, cold supply chain) and freight forwarding, among other things. The company operates a fleet of over 750 vehicles, including but not limited to semi-trailers extendable trailers and truck mounted cranes.

Rest areas “desperately needed”

Australian trucking industry association, NatRoad, has declared that there is a desperate need for heavy truck rest areas in the capital of Australia, Canberra, and the associated Australian Capital Territory.

“The road transport industry is crying out for facilities essential to supporting improved road safety and professional driver fatigue management,” Nat Road has said in a statement following the release of a survey conducted in July and August 2019.

The key findings are that the “overwhelming majority” of professional drivers park on the road when taking breaks. The facilities wanted by truck drivers are parking away from traffic and light vehicle parking; fresh drinking water; rubbish bins; toilets; showers and shade. Drivers also want healthy food instead of food from a major food chain.

The Transported Asset Protection Association (TAPA) has announced that it will explore the benefits of aligning its Parking Security Requirements (PSR) industry standard with the newly established European Commission’s (EC) Safe & Secure Parking Places for Trucks programme. TAPA is an organization that unites global manufacturers, logistics providers, freight carriers, law enforcement agencies and other stakeholders to improve efficiency within supply chains. 

The idea behind the potential alignment of TAPA’s programme with the EC programme has to do with tackling the spike in truck cargo crimes at poorly guarded parking spots. Aligning the standards will help with adoption and thereby quicken the pace of security offered for trucks at parking areas across Europe. 

“At TAPA, we strongly believe that such standards should come from the industry and be for the industry because at the end of the day it is the industry that is paying for it,” said Thorsten Neumann, President and CEO of TAPA EMEA (Europe, the Middle East and Africa) region. Although a vocal supporter of the EC initiative, Neumann reserved some scepticism concerning the manner of its integration with TAPA PSR. 

“We are supporting the EC initiative, and we are part of the experts’ committee. But we still see some administrative hurdles within the entire process. We strongly believe that the process is, by far, the most complicated. It’s not really going into the direction where we foresee significant support coming in from the industry,” said Neumann. 

The issue separating TAPA PSR and the EC is mostly ideological. TAPA PSR has embedded a tiered self-certification programme into its process that can help rapidly increase the number of secure parking sites in Europe. 

The programme was designed by industry experts and provides TAPA members with an online route planning tool that identifies all the parking spots that are PSR-approved. However, the EC has refused to implement the self-certification process to date, bewildering TAPA. 

“We see self-certification as a way to start the process of securing parking spots because if you have excessive administrative hurdles, you can never get parking places certified as they will see it as too much work,” said Neumann. “We are in this triage process, where we are in constant communication with the EC, with the EC being in contact with the [European] Parliament, and the Parliament still pushing back on some areas where the EC needs to adjust.”

That said, the pace at which the standards are aligned needs to be quickened, as year-on-year recorded incidents of criminal attacks on vehicles in unsecured parking spaces have continued to go up at an alarming pace. Last year, the EMEA region accounted for 58.8% of all crimes reported to TAPA, with data from the first half of 2019 showing a 167.6% increase in unsecured parking lot crimes year-on-year. 

Though a part of the rise in recorded incidents might be attributed to a general increase in the percentage of reported crimes, the trend is worrying all the same. 

“We will continue to move forward with our own PSR security standard while our discussions with the EU continue, but we can see a lot of common ground to align our respective programmes and provide a solution to satisfy the high demand for all levels of secure truck parking,” said Neumann. “We are confident that by working together, we can meet our shared goal of making supply chains safer and more resilient.”

The Treasury Department’s Office of Foreign Assets Control (OFAC) on Oct. 17 extended a general license exception to allow U.S. companies to continue doing business with a Swedish oil refiner that is 50% owned by Venezuela’s state oil company.

Petrόleos de Venezuela S.A. (PdVSA) was placed on OFAC’s Specially Designated Nationals and Blocked Persons List on Jan. 28, 2019, for its alleged role in providing financial support to President Nicolás Maduro’s regime.

Under the sanctions, all property and interests in property of PdVSA subject to U.S. jurisdiction are blocked and U.S. persons are generally prohibited from conducting business with the oil company. However, OFAC has issued general licenses that authorize certain transactions and activities related to PdVSA and its subsidiaries within specified time frames.

One of those general licenses covered Stockholm-based Nynas AB, which is a 50% joint venture with PdVSA. Nynas refineries in Europe import Venezuelan crude and refine it into specialty oils for use in asphalt and as lubricants.

In its 2018 annual report, Nynas acknowledged the U.S. sanctions “affected PdVSA’s ability to supply Nynas with the agreed volumes of crude oil that we rely on to make our products.”

“The sanctions target new financial debt where a U.S. person or USD are involved,” the company added. “They do not target any commercial purchases of crude oil from Venezuela or sale of any product derived thereof, but indirectly the U.S. sanctions on Venezuela are causing non-recurring costs for both bitumen and naphthenics supply and higher product costs for alternative more expensive external sources.”

This is the fourth time that OFAC has extended the general license, known as General License No. 13, for Nynas AB. The new General License 13D is valid from Oct. 17, 2019, to April 14, 2020.

The Trump administration has endorsed Interim President Juan Guaidó, who has been blocked by the Maduro regime from taking office since earlier this year. The U.S. government has since turned up trade sanctions targeting financial transactions and exports to Venezuela to pressure Maduro to leave office.

However, the Trump administration said it would remove the sanctions against Venezuela once the Maduro regime exits power.

British logistics giant Wincanton has entered the race to buy iconic U.K. trucking firm Eddie Stobart.

Although no formal offer has been made by Wincanton, it said in a statement it was “undertaking a diligence exercise on Eddie Stobart and its assets.”

No value has been put on the potential deal and a spokesperson for Wincanton was unable to provide any further details when contacted by FreightWaves.

Wincanton now has until 5:00 p.m. on 15 November to make a bid.

In a separate statement, Eddie Stobart confirmed it had granted its competitor “due diligence access” ahead of a possible merger.

“No proposal has been made by Wincanton to Eddie Stobart as to the terms of any potential offer, and there can be no certainty that any offer will be made to Eddie Stobart shareholders,” said the statement.

Eddie Stobart, which operates about 2,500 trucks, is named after its Cumbrian founder and is famed for its iconic green and red truck branding.

Any deal to buy the company will need to be voted on by its embattled shareholders. As reported in FreightWaves, in August the haulage company announced its CEO Alex Laffey had quit after accounting errors were found in its earnings estimates.

Shares in AIM-listed Eddie Stobart were subsequently suspended in September and the company warned that its annual results would be “significantly below” expectations after a poor first half of the year.

DBAY Advisors, which already holds a 10% stake, is another potential buyer after making a “preliminary expression of interest” in the firm in early September. The company now has until 5:00 p.m. on October 28 to signal its intentions.

“Discussions with DBAY regarding a possible offer for the company remain ongoing,” said an Eddie Stobart statement.

However, TVFB, headed by Andrew Tinkler, former boss of Stobart Group, informed the London Stock Exchange earlier this week it had made a “No Intention to Bid Statement.”

TVFB had been given a “put up or shut up” (PUSU) deadline of 5:00 p.m., October 16 to make a move.

Until 2014 Eddie Stobart was part of Stobart Group, now its biggest shareholder with an 11.8% stake.
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At the 3PL & Supply Chain Summit in Brussels, Thomas Stroo, the head of logistics at meal-kit delivery startup HelloFresh, highlighted the company’s success in creating a lean and centralized supply chain that can be micro-controlled from the farmhouse to the consumer’s doorstep. 

A German-based company, HelloFresh is the market leader in several countries and delivers over 80 million meals per month. In the Benelux region, HelloFresh runs 600 refrigerated vans that cover roughly 450,000 kilometers every week to deliver all the boxes. 

“We want to change the way people eat because we believe that everyone deserves natural, delicious and healthy meals. We want to make people great chefs, as food brings people together and great food lets us enjoy every bit of life,” said Stroo. “We remove all barriers to eating fresh and high-quality meals at home. People don’t need to plan, don’t need to shop, but still can make great meals from scratch themselves.”

The equation of a food supply chain is quite simple – produce from the farm has to make its way to consumers’ tables. But in reality, food logistics can be a labyrinth, as it is comprised of several intermediaries who control the flow of products in the value chain. This causes needless delays, leading to food waste – especially products that have a short shelf life. 

With HelloFresh, the supply chain is cyclical as it starts and ends with the customer. HelloFresh patrons go to their online dashboard and choose the dishes they want to cook for the week, after which the company moves to source ingredients from its producers. “Once we source all the ingredients, we put them in boxes, and we deliver it. It’s a faster and fresher supply chain, and there is little to no food waste in the entire supply chain,” said Stroo. 

HelloFresh uses connected fleets for its last-mile delivery, which unlike regular e-commerce deliveries, have to be expedited and delivered across precise time windows. Connected fleets provide HelloFresh with full visibility into last-mile movement, which can be relayed to the customers via track-and-trace notifications. 

Gathering last-mile data from hundreds of thousands of deliveries has helped HelloFresh fine-tune its routing algorithms to even reflect on the time needed for a delivery stop, based on several parameters like traffic conditions, locality and availability of parking spots. “For instance, if you have a big house where parking is easy, then the driver needs less stop time. But if it’s in the center of Brussels, the driver will need to find parking spots,” said Stroo. 

A seamless supply chain also involves taking care of and making the lives of drivers more comfortable. Drivers are provided hand-held devices that they can use to click pictures if something goes wrong – like an accident on the street. The devices and their underlying software were carefully designed for drivers, with the company conducting workshops and forming focus groups to help drivers integrate better with the system. 

The in-route visibility helps HelloFresh to check on driving behavior like speeding, idling and even instances when drivers maneuver backwards every time they turn on the engine. The temperature within the refrigerated box is monitored to make sure it sustains a steady temperature of 0-4 degree Celsius (32-39 degrees Fahrenheit) as it is critical to food safety standards. 

HelloFresh does intensive research on the delivery time windows it offers, which are set in place based on inputs from its customers. For instance, a 6:00 p.m. slot was introduced recently after HelloFresh understood that a certain percentage of its customer base was hoping to cook dinner on the same day they receive their box. A 6:00 p.m. delivery slot meant that people could receive the meal kit after they get home from work and prepare their dinner on time. 

“We want to make sure our capacity and volume management is as lean as possible as it will have an effect on our drivers and our asset utilization. We are focusing on our footprint as well. HelloFresh already has 51 street scooters and electric vans driving in the Benelux, but we aim to have more than 50% of our deliveries to be e-deliveries within the next two years,” said Stroo. 

Calls for mandatory slow steaming and new marine fuel oil taxes to cut shipping’s carbon footprint are gathering steam. But so too, it seems, might be the ships – and, if so, the catalyst will be the introduction of environmentally friendly, low-sulfur IMO 2020 fuels, according to one box shipping analyst.

French President Emmanuel Macron recently called for mandated slow steaming and, earlier this week, one of his ministers called on the European Union to tax shipping bunkers. Yet new research from Alphaliner claims some container vessels could soon speed up as operators seek marginal gains on vessel speeds through fuel pricing plays.

The container shipping consultant believes the fitting of scrubbers on container ships to abate sulfur emissions and avoid using the low-sulfur IMO 2020 fuel that becomes mandatory Jan. 1 could induce some lines to offer faster services.

“Carriers that deploy scrubber-fitted ships could take advantage of cheaper bunker prices in 2020 and speed up services,” argued Alphaliner in its latest report.

The price of the heavy fuel oil currently in wide use in shipping is forecast to be heavily discounted from the end of this year because ships that are not fitted with scrubbers — the vast majority — have to switch to the more expensive 0.5% very-low-sulphur fuel oil (VLSFO) that complies with IMO 2020 regulations.

With heavy fuel oil currently available in forward markets at prices of less than $300 per ton — around $200 per ton lower than current prices for VLSFO — Alphaliner believes container lines with scrubber-fitted vessels could take advantage of the bunker price differential.

The number of containerships fitted with scrubbers reached 142 units with combined capacity of 1.14 million TEUs on Oct. 15, with a long line of ships currently being retrofitted or waiting to enter yards for retrofitting over the coming months.

“By January 2020, the headcount of scrubber-fitted containerships is expected to reach more than 260 vessels for a total capacity of over 2.30 million TEU,” said the analyst.

“This number represents some 10% of the global container ship fleet in capacity terms and it will continue to rise in 2020.”

Alphaliner expects overall capacity of the “scrubber-fitted world fleet” to hit 5 million TEUs by the end of 2020, creating more opportunities for lines to accelerate services assuming, of course, that bunker price differentials still offer an advantage to those with scrubber-fitted fleets.

“The 2M partners, Maersk and MSC, will have more than 35 scrubber-fitted ships of over 18,000 TEU by January 2020, with all 62 of their megamax vessels of capacity 18,000-23,600 TEU expected to be equipped with scrubbers by 2021,” it reported.

“This will allow the carriers to run some six Asia-Europe strings at higher speeds than currently, giving them a competitive edge over their rivals.

“Maersk and MSC are expected to operate a combined fleet of over 350 ships that will be equipped with scrubbers across all size segments by 2021,” Alphaliner said.

Of the other carriers, the OCEAN Alliance partners will have 20 scrubber-fitted units of 15,000-21,000 TEUs by January. These ships will, however, initially operate on mixed loops alongside conventional megamax units that are not equipped with scrubbers, according to Alphaliner.

Of the carriers in THE Alliance, Hapag-Lloyd has so far confirmed orders for 20 scrubber-fitted units, while Yang Ming will have 30 units. THE Alliance’s scrubber-equipped fleet will be boosted in April next year when HMM joins, adding its fleet of 53 scrubber-fitted ships, including 12 23,600-TEU newbuilds to be delivered from the second quarter of 2020, as well as a further eight new ships of 15,000 TEUs due in 2021. 

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The idea of leveraging operational visibility across the manufacturing floor for process optimization has pushed companies to invest in Industry 4.0 — a consequence of the fourth industrial revolution — ushering automation and facilitating seamless exchange of data. 

To date, manufacturing processes largely work in silos, with individual sections having no connection with the other, bringing in gaping inefficiencies that could be solved by interaction and visualization of processes at large. 

Continental, one of the world’s largest automotive parts manufacturers, is looking to transition to Industry 4.0, by partnering with software giant SAP to standardize its air spring manufacturing processes and gain real-time visibility into operations. FreightWaves spoke with Hendrik Neumann, project manager at Continental, and Antonio Porras Martinez, machine connection expert at Continental, to discuss the company’s association with SAP software.

Neumann pointed out that Continental has been using SAP’s enterprise resource planning (ERP) for two decades, but is now branching out to use SAP’s ME (manufacturing execution) — the cornerstone of the company’s Industry 4.0 initiative. 

“There are two reasons for us to go with SAP ME. One, we wanted a software company to take control of the development of the Industry 4.0 system, and two, it is easy to integrate the interfaces between SAP ERP and SAP ME,” said Neumann. “Our goal is to standardize processes and have them rolled out across all our production plants.”

The implementation process started small, with just a single machine in a production area of a plant in Germany. Upon its success, Continental eventually integrated the solutions into four other global facilities, improving operational visibility while increasing reliability and product traceability using the Internet of Things (IoT) technology. 

For a long time, Continental had been juggling the use of different software across its several business units, making it hard for integration between production centres. Neumann explained that introducing SAP ME helped as it came with prebuilt processes, enabling faster product rollouts. 

“Standardization has led to faster rollout in plants and SAP ME integration with ERP helps us with visualization and traceability. If you can visualize the production process in real time, you can react on problems in the production process in real time,” said Neumann. “For example, the old software we had would collect data from everyone and give us the data the next day. But with SAP ME, we have live data coming in, helping us react faster.”

Implementing smart factory techniques requires unlimited networking of all production machines and systems, contended Martinez. “We are about to start projects in the area of machine learning and big data, and we expect significant benefits in the field of predictive quality and process optimization. By integrating the production-related machines, we create a high level of process flow safety as well,” he said. 

Continental now leverages IoT to identify various air spring manufacturing objects using RFID devices. Using SAP ME, the company has switched its production process from batch production to serialized production, making it easier to gather data arising from every individual product. 

“In the old manufacturing execution systems world, we needed a lot of help from developers. And if we had customer demand, we had to program product labels, which took a considerable amount of time,” said Neumann. “But now, it is easy to react to the demand because the labeling software is easy and can be done in a couple of hours, which took a couple of weeks prior to this.”

Amid the chaos predicted if the U.K. departs the European Union (EU) on October 31 without a trade or customs deal, Europe’s truckers and their cargoes will be on Brexit’s frontline, facing a range of heightened dangers. There is growing evidence that not enough is being done to mitigate the risks.

A new report from Britain’s National Audit Office (NAO) published on October 16 highlighted that criminals could view any Brexit supply chain chaos as an opportunity, leaving trucks and shipments – already targets for people and drug smugglers operating on the English Channel – further exposed.

“The main thing is that drivers need to make sure they keep themselves safe,” Duncan Buchanan, policy director at Road Haulage Association, a U.K.-based trucking representative body, told FreightWaves.

“We’re in a situation now that 40, 50, 100 miles away from the main exit points of the EU there are migrants trying to get into vehicles. It’s a serious problem. It hasn’t gone away; in fact there has been an increase because the smugglers have been saying Britain is going to be ‘closed’ after October 31.

“So, our advice – the number one priority – is that drivers keep themselves safe.”

Mitigating risks

The NAO report – The UK border: preparedness for EU exit October 2019 – found that while the most significant Brexit challenge is the lack of “business readiness,” additional challenges include “monitoring and responding to any disruption that may ensue” and “mitigating risks of the border becoming vulnerable to fraud, smuggling or other criminal activity, and activating civil contingency plans” where necessary.

The NAO publication comes after the U.K. government admitted a no-deal Brexit from the EU could see truck flows on English Channel tunnel and ferry routes cut to just 50% of current levels for three months, while truck drivers could also face delays of up to 2.5 days before crossing into France. 

Such is the confusion and complexity of Brexit, many shippers have already started to reduce U.K. exposure by transferring distribution and storage capacity to new locations in continental Europe, a trend reshaping the European logistics landscape.

Buchanan said that, post-Brexit, truckers should only attempt to cross the border with complete paperwork from the import or exporter. “If you cannot get across the border, do not carry the goods,” he added.

“That’s the safest way of [avoiding] queues which make the driver, the cargo and the lorry vulnerable.”

Border security

Still, there are also concerns about the preparedness of border security. Since April, funding has been allocated for “up to 1,000” additional U.K. Border Force staff, including around 250 personnel to support the increase in transit checks, according to the NAO report.

However, it is unclear how many have been trained and are in place. Border Force, the law enforcement arm responsible for immigration and customs, refused to comment when asked by FreightWaves how it planned to guard against criminals taking advantage of supply chain chaos.

Preparations in continental Europe are also struggling to keep up with the political negotiations. A Dutch Customs officer told FreightWaves last week that a no-deal Brexit would overnight turn the U.K. from an EU country into a “normal third country,” meaning that all goods and people movements would be subject to customs checks and formalities.

Asked if any special preparations had been made for an upturn in, for example, drug smuggling, he said, “There are no special measures at this moment,” adding that Dutch Customs is unable to coordinate policies with its British counterparts until after a Brexit deal has been struck.

He said 750 extra officers were now in place out of 1,000 that will be recruited to deal with the increased workload associated with Brexit.

Mountainous workload

The scale of the challenge facing customs and police authorities guarding the new border between the U.K. and EU was laid bare by the NAO report, which found that last year 228.5 million tons crossed the border.

To prevent smuggling of contraband, the Dutch Customs officer said detailed trade profiles would be constructed over time, gradually helping the targeting of high-risk shippers and shipments based on data and experience.

At the moment, he added, because the U.K. is part of the EU, trade between the two parties lacks visibility, so “we have no idea what’s coming from the U.K. because we don’t check.”

He added, “So for customs, its experience, we have to wait. Maybe in two years I can tell you clearly what the risks are. But at this moment it’s very hard.”

He said the last time smuggling prevention policies were in place for the U.K. – “back in the 90s” – items most likely to be smuggled were “leather coats” and “antiques.”

HM Revenue & Customs (HMRC) expects it will need to process 270 million declarations each year if Britain leaves the EU without a deal, compared with current volumes of 55 million.

HMRC also expects 150,000-250,000 traders will need to make a declaration for the first time in the event of no deal in just over two weeks, of which only approximately 25,000 had registered for Transitional Simplified Procedures as of October 8

Paperwork overload

Buchanan said the scale of the paperwork changes Brexit entails means it is “absolutely impossible for everyone to be fully compliant given the volume of trade.”

He anticipates traders “making lots of mistakes” due to the lack of a transitional period.

“We are getting new information from governments all of the time – we are trying to seek clarity from authorities in Europe and we’re not getting it,” he added.

Pauline Bastidon, Head of European and Global Policy at the U.K.-based Freight Transport Association (FTA), said the NAO report highlights the scale of the challenge for industry.

“It echoes FTA’s messages to government about structural issues that are slowing down preparedness, such as the shortage of customs brokers able to support industry in complying with new customs formalities or the lack of clarity on operational details – not least in relation to how the Irish border would be managed by the Irish Government in a no-deal situation,” she added.

“The situation is particularly challenging for U.K. exports to the continent and Ireland – especially for agri-food products, where a shortage of veterinarians able to sign export certificates is to be feared.”

Bastidon also said, “In spite of the industry’s best efforts, delays and disruptions cannot be and should not be excluded, at a time when logistics and supply chain managers are less able to mitigate disruptions due to high demand for transport and warehousing capacity ahead of the Christmas period.”

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At the 3PL & Supply Chain Summit in Brussels, Sander Breugelmans, vice president at logistics real estate major Prologis, spoke on the need for businesses to nurture a fresh perspective towards retaining their warehousing workforce when faced with a market grappling with labor shortage. 

Breugelmans started by highlighting the conversations Prologis has with its customers to understand the fundamental reasons why they choose specific locations for their warehousing space and the various pain points they face in their business. “One of the topics that has come back again and again is the issue of retaining high-quality labor,” he said. 

Figuring out a way to retain a skilled workforce is critical to the functioning of a warehouse because those workers makes up a considerable portion of its operating costs. This requires businesses to be wary of their labor turnover rates, as a constant hunt for new talent will strain their already strained budgets. 

Recently, Prologis joined Eye for Transport to conduct a survey with 206 warehouse businesses, which revealed that labor scarcity and the perennial need for retaining workers to be the primary drivers for decision-making. 

“What we found is that 85% of all the people that work in distribution centers live within a 30-kilometer radius of the warehouse. That’s important as it explains why relocation in a very tight labor market like today is not an option for many companies,” said Breugelmans. “If you relocate, you run a very high risk of losing your employees, and trying to get new employees in the labor market can be very difficult.” 

As a corollary to this observation, businesses are increasingly looking to move their warehousing operations closer to densely populated areas because that will give them an edge in recruiting and retaining skilled employees. 

“Prologis is very focused on developing properties that are very well located and easily accessible, both by car and by public transportation. If public transportation is not there, we try to work with local municipalities and transit authorities to get public transport close to our buildings,” said Breugelmans. 

The space within the warehouse is also being improved. Prologis is developing spaces that can maintain good lighting and air quality within the premises, while also ensuring the environment is aesthetically pleasing to the workers. 

“Lights make a huge difference in the perception that people have of space and whether or not they feel pleasant working in that space. We also found that incorporating plants really creates a feeling that people have when they are at home,” said Breugelmans. “We also work on making our warehouses sustainable by using solar panels and by trying to minimize our carbon footprint.”

Prologis has also been experimenting with ridesharing across Central and Eastern Europe and has set up websites and apps where people can sign up and share cars together. “We found that when people share rides, it is sustainable and saves money. It also creates a sense of community, which is key when it comes to labor retention,” said Breugelmans. To foster a sense of belonging, Prologis builds restaurants, parks and even football fields in the warehousing vicinity, to help the workforce gel well after work. 

To increase the pool of skilled labor, Prologis works with municipalities and education centers to effectively train people and get them initiated into a career within the logistics space. “Once municipalities identify people in labor markets, we invest in education centers to get them the right training. This gives our customers access to a bigger workforce and also helps the communities in which these people work and live,” said Breugelmans.