Category: Transport

SAL Heavy Lift is an expert at transporting the largest cargoes across the world’s oceans, but its biggest lift in recent years has been to digitize complex administrative processes that have long weighed down the project cargo industry.

Maritime project cargoes are complex undertakings both in their uniqueness and physical handling, but they are equally complicated by the persistent documentation and different communication channels associated with each shipment.

“We move assets worth millions of dollars, but technology has not kept pace in our industry,” said Claas Matthies, chief information officer of SAL Heavy Lift, which is based in Hamburg, Germany. “We need to focus on improving our data management if we want to take this industry to the next level.”

Matthies, 47,  was promoted to CIO of SAL in January to lead the carrier’s digitalization strategy, combined with his current responsibilities for global accounting and merger and acquisition activities.

“Digitalization of business processes is becoming an ever-more competitive parameter and we see great potential in developing our digital landscape even further from today,” said SAL CEO Martin Harren in a statement at the time of Matthias’ appointment to CIO. “As a modern and dynamic shipping group, information technology plays a vital role in our further growth and development.”

Complexity on top of complexity

SAL was founded in 1980 and in 2017 became part of the Harren & Partner Group. The carrier’s fleet of ships offer up to 32,000 square feet of main deck space and have on-deck cranes capable of raising cargoes of 550 to 2,000 tons.

Until recently, SAL’s operations have been driven by disparate information systems, mounds of paperwork and numerous telephone calls and emails.

“This is an engineer-driven process in which plans, drawings and calculations are put together and must be shared with the clients,” Matthies said. “We realize that there is a real potential to digitize this process and make it smarter.”

Prior to his appointment as SAL’s CIO, Matthies worked for Harren & Partner Group since 2011, where he oversaw IT and finance. He was put in charge of the company’s implementation of an enterprise resource planning (ERP) system and ship management software for a global vessel fleet consisting of about 70 ships and a global staff of 280.

In 2017, Matthies helped to integrate SAL into Harren & Partner Group’s operation. The new ERP system, MS Dynamic Navision, automated the carrier’s purchase-to-pay process, eliminating thousands of paper invoices.

Steaming past rigid IT infrastructure

A top priority for Matthies is finding suitable cloud-based information technologies for their flexibility and not being tied down to rigid IT infrastructure.

The company recently implemented a cloud-based voyage management system (Veson’s IMOS VIP application), which largely supports the important functions of chartering, operations and administration.

“In doing so, data transparency has been increased enormously and use of real-time information stored in a place accessible for users across all SAL departments and offices worldwide allows for deeper insights and better conclusions,” Matthies said.

SAL also plans to implement a new ship management application for crewing, maintenance, purchasing and quality this year.

The company declined to say how much it has invested in new IT solutions since 2017.

Matthies said SAL’s implementation of on-line collaborative communications tools last year has allowed the company to continue its IT strategy unabated, even with most of its management and staff working from home due to the coronavirus pandemic.

However, SAL still has more IT work ahead. In ocean project cargo shipping, individual contracts are the daily reality and standardizing or even blockchaining complex tenders is a monumental task, Matthies said.

Comparing containers to projects

Matthies told American Shipper that he spends considerable time studying the IT structures of the container-shipping industry.

“If you follow the idea of containerized shipping that the parcel is as important as the information then you would assume that there would be the same trend in heavy-lift shipping,” he said.

This is not the case for most international project cargoes, which by their very nature are ad-hoc and non-repetitive. However, there are still IT best practices and tools that can be gleaned from the ocean container carriers.

“I am excited to see what will materialize even in our market space, seeing liner companies embracing new opportunities for technology usage and serving as a blueprint for our business, at least in parts,” Matthies said.

New IT breeds new talent

Matthies said the implementation of new technologies in what has been a traditionally, slow-to-change industry has become easier with SAL’s younger staff willingly embracing digitization of work processes.

Long-term, he also sees the value of having the latest IT in place at SAL to attract future talent to the project cargo shipping industry.

“Putting emphasis on digitization is necessary to keep up with the crowd, but at the end of the day it is important that these investments improve our ability to make the best business decisions and increase our financial results,” he said.

Click for more FreightWaves/American Shipper articles by Chris Gillis.

DHL Express has reached agreement with Germany’s Munich airport authority to start construction of a new cargo facility.

The facility, which is expected to cost 70 million euros ($78.8 million), will include parking for 65 delivery vehicles and a cargo-handling building of more than 86,000 square feet.

DHL currently leases space for its cargo operation at Munich airport. Once construction of the new facility is completed in 2022, DHL will have an airport building that is six times the size of its rented space, Tim Rehkopf, a DHL Express spokesman, told American Shipper.

The express carrier expects customers in southern Germany to benefit from the new facility for both European and international shipments.

“For DHL Express Germany, the new facility at the Munich airport is another step in improving the German infrastructure,” Rehkopf said. “Having our own building with airside access ensures improvement processes for our customers.”

DHL stuck with the new investment despite one of the worst downturns ever for airfreight. In an effort to contain the coronavirus pandemic, many governments imposed steep restrictions on air transport. The company expects the completion of the facility to coincide with an anticipated global economic recovery, said Markus Reckling, managing director of DHL Express in Germany.

This year, DHL, part of German logistics conglomerate Deutsche Post DHL Group (OTCMKTS: DPSGY), has announced other capital investments, including in new cargo aircraft. The company operates more than 260 planes.

In February, DHL received the first of six new Boeing 777-200 freighters scheduled for delivery this year. The company ordered 14 777Fs in 2018, with four delivered last year and another four coming in 2021.

On Monday, DHL announced a contract with Israel Aerospace Industries (IAI) to convert three Boeing 767-300 passenger planes to all-cargo configuration.

Click for more FreightWaves/American Shipper articles by Chris Gillis.

The BiTA Symposium @HOME on June 10 featured speakers presenting blockchain use cases and possibilities across various verticals within the supply chain industry. They illustrated ways to leverage blockchain to bring more transparency and visibility into logistics operations. In a series of two digests, FreightWaves attempts to outline key aspects of those talks individually. 

Founded in August 2017, the Blockchain in Transport Alliance, or BiTA, has become the largest commercial blockchain alliance in the world, with nearly 300 members. BiTA members are primarily from the freight, transportation, logistics and affiliated industries. Alliance members share a common mission to develop a standards framework, educate the market on blockchain applications/solutions and distributed ledger technology, and encourage the use of those applications.

COVID-19 testing solutions for transportation companies

Stephan Noller, CEO of German-based blockchain startup Ubrich, spoke of the hassles that companies have guarding their sensor data against being tampered with. Apart from compromising the company’s integrity in question, insights drawn off tampered data can be flawed and end up being detrimental to downstream logistics operations.

Ubrich leverages blockchain to make data trustworthy. Blockchain is used to seal the data at the source via digital signatures, which is marked over every piece of data that is generated during the logistics operations. Customers who wish to verify data can run a query against the verification API to check if the data has been compromised.

Ubirch came out with a COVID-19 certificate that is a digital representation of a test result made verifiable via blockchain. Users can show this digital certificate when they are stopped and checked. Authorities can scan QR codes embedded in the certificates to verify their authenticity, making the whole interaction seamless and more efficient.

Proof of concept on blockchain-enabled tracking and chain-of-custody ecommerce 

Rick Ryan, fellow at retail logistics firm Pitney Bowes, spoke of real-world learnings from the company’s proof of concept (PoC) project focused on tracking and chain-of-custody within ecommerce operations. Pitney Bowes’ PoC was an internal trial – kept that way to have more control over the project and its ease of access. One idea was to test non-sunny day scenarios like missed and out-of-order events and network outages.

Though the chain of custody of a package looks relatively simple from the point of shipping to last-mile delivery, there are several complexities associated with logistics. For instance, not every single event creates a change to the parcel status on the blockchain. 

Pitney Bowes used the Hyperledger Fabric platform for its full implementation. Events that were looked at and pushed on the blockchain were simple reports that included shipment arrival and departure, aggregation and disaggregation of trackable entities, and unnesting of items. 

Ryan explained that learnings from running the pilot highlighted the need to plan for missed and out-of-order events. “It was really important to include the event time, which is part of the constructs in the BiTA standards. Using the event time, you can reconstruct what happened when events come out of order,” he said. Companies also need to plan for attempts to write multiple events for the same asset simultaneously. Pitney Bowes’ also simulated the project with historical data, which was found to reflect reality. 

Chainyard and Trust Your Supplier: trust your product in the supply chain

Gary Storr, general manager at blockchain services company Chainyard, spoke about the company’s product called Trust Your Supplier (TYS). TYS is a product that helps buyers and suppliers establish a partnership to do business, with its use case centered around the pain points of buyers, including supplier qualification, validation of supplier information, and physical onboarding of a supplier.

“We see a lot of inefficiencies in that process, leading to huge delays in transaction times. Regulatory requirements are also moving very quickly, but technology is not really meeting that pace,” said Storr. “We came up with TYS, which led to a 90% improvement in the ability of a supplier to provide relevant information to a buyer. We’ve seen a substantial reduction in cycle time around onboarding and an associated reduction in cost.”

Storr likened TYS to be similar to a LinkedIn profile, where people can provide a single link to their profile, rather than sending out resumes individually to people looking for a background check. The digital identity provided by TYS is easily consumable by buyers, further augmented with expertise from organizations that Chainyard works with. 

Chainyard has partnered with IBM to create a “white label version of trust” for the suppliers delivering essential medical utilities to hospitals and healthcare organizations. When medical supplies like PPEs were in severe shortage, hospitals had to buy them from unconventional suppliers like General Motors, Ford and even Gucci. Chainyard developed a solution that used blockchain to protect the associated financial transactions and keep bad actors and fraudsters out of the system. 

Linking insights for transportation with NorthStar Digital Solutions

Linking insights for transportation (LiFT), is a program initiated by NorthStar Digital Solutions, which is an on-the-ground actuation of hyper technology in the trucking market. 

Dave Brajkovich, the CTO of NorthStar Digital Solutions, spoke about how the company uses robotic process automation (RPA), artificial intelligence (AI), and deep learning to allow its users to interact with the automation routines to make their lives easier, while also enhancing their skill sets in other areas of the business. 

Brajkovich explained that NorthStar captures and integrates data arising from trucking assets. “The measures we took were to bring LiFT into a category where there’s digitalization. Automation is a big piece, as we deal with loads of documents – from order to dispatch and dealing with customs. We ended up integrating our APIs into our ERP back-end, and with intelligent OCR and machine learning, we arrived at a scalable solution,” he said. 

This automation has helped NorthStar during the COVID-19 situation. Employees were able to work remotely from home, as the bots kept working around the clock. 

To achieve further automation, NorthStar worked with IBM’s Hyperledger Fabric to create a blockchain platform that logs incoming orders coming through the system and pushes that to its partners. These businesses accept orders through smart contracts with data being embedded inside the Hyperledger. All partners and clients in the network are privy to the process and have the ability to check progress at every stage. 

Click for more FreightWaves articles by Vishnu Rajamanickam

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

The airport landing slots used by commercial airlines for their domestic routes are quite valuable. The same can be said for landing slots used on international routes. The difference is that the international routes are regulated by both the host country and the airline’s home country. This is the result of a unique feature of international commercial air transport – the bilateral air service agreement. International commercial air transport is the only mode that starts with two governments codifying how their respective airspaces are to be utilized. From there the airlines must work within those confines. Why all the fuss? It goes back to the Convention on International Civil Aviation of 1944 (also known as the “Chicago Convention”) and the subsequent point of view that a country’s airspace is a strategic asset.

 The Chicago Convention’s mandate explains why the U.S. government got involved when UPS recently decided to give up its landing slots used for weekly flights between Hong Kong and Singapore. While these slots are valuable, an airline cannot let them remain unused. They must be used for revenue service or else relinquished. This keeps the air passenger and air cargo markets moving along. Of course, it also challenges some airlines to “loss minimize” in order to keep their landing slots active. This was why so many passenger airlines resorted to carrying cargo-only in their bellies and even on the passenger seats when COVID-19 fears combined with government-mandated travel restrictions severely impacted the passenger market in March (and ever since).

On June 9, 2020 the U.S. Department of Transportation (USDOT) approved the transfer of the UPS routes to Kalitta Air and FedEx, both U.S. domiciled all-cargo carriers. After considering the carriers’ filings, USDOT allocated three of the four available Hong Kong-Singapore routes to Kalitta and the remaining one to FedEx. A fifth weekly slot was already owned by Polar Air Cargo (a subsidiary of U.S.-based Atlas Air).

The bilateral air service agreement between the United States and Hong Kong allows for up to 64 weekly all-cargo flights. In theory, this means a U.S. domiciled air carrier could fly into Hong Kong as part of a flight originating in the U.S. or one terminating there. There is also the option to include a third country as part of the route because this bilateral agreement allows for so-called fifth freedom routing. If the route did not include a U.S. origin or destination on the part of the U.S. carrier, the resulting all-Asia route would be a seventh freedom, which is an even tougher liberalization to negotiate. All of these “freedoms of the skies” agreements grew out of the Chicago Convention. In fact, depending on how one counts, there are eight or nine freedoms in total, with the eighth and ninth constituting types of cabotage. Cabotage is defined as the right to operate sea, air or other transport services within a particular territory.

Notwithstanding the flight frequencies allowed in the bilateral agreement, their usage pre-supposes the air carriers can secure, and are willing to pay for, the required landing slots. For fifth freedom routes this requires at least three properly timed slots in order for the route to be viable. This is part of the reason why the Hong Kong-Singapore route is serviced by only five weekly visits by U.S. air cargo carriers. However, the biggest reason is that USDOT noted that the cap of 64 roundtrip frequencies per week has been reached. Starting any new route would mean cancelling another.

Another question worth considering is the effect of regulatory oversight on market efficiency. Valuable landing slots confer on the airlines a chance to earn extra profits through limited competition (something economists call economic rent). Problems arise when airlines rent-seek. This means they devote time and money to striving for this monopoly-like power. Only one or a limited number of winners emerge in the process of filing detailed applications with regulators. The other applicants lose. The amount of time and money the “losers” devoted is called rent-seeking waste. What can be done to avoid this? Regulators would have to be willing to let the market pick the winners and losers.

In a contest for the Hong Kong-Singapore all-cargo market, suppose USDOT simply auctioned off the right to a weekly frequency. Of course, USDOT would have to collaborate with the respective airports in order to plan the auction design, set minimum bids, etc. Instead of preparing detailed filings, Kalitta, FedEx and perhaps other carriers would have submitted financial bids – putting their money where their mouths are, so to speak. The “loser” is merely out the time to prepare and submit a bid rather than the time and money involved in submitting a detailed filing. Financial bids are objective while filings, by design, are evaluated subjectively.

The two biggest obstacles to successful auctions for airport landing slots are: (1) not enough bidders to create a truly competitive situation; and (2) the need for an after-market. Basically, in a route from Hong Kong to Singapore, securing a slot at the former but not at the latter renders the route non-existent. Since the two airports would be running their own independent auctions, an airport and the regulator would have to grant airlines the freedom to trade slots among themselves. For example, airline X secured a slot at airport A but could not secure one needed at airport B to create an A-B route. If airline Y wanted the slot at airport A to complete a different route it has in mind, and it was willing to give airline X a slot that would create a viable route elsewhere then there is a chance for gains-from-trade.

Basically, if the market for auctions is viable, they are superior to regulators merely taking landing slots away due to non-use and using “beauty contests” to determine which airline deserves the slot. Unless a market failure is demonstrated regulations are not the answer.   

Click here to see other commentaries by Darren Prokop on American Shipper and FreightWaves.

Updated June 22, 2020, 6:50 P.M. ET

German express carrier DHL has contracted with Israel Aerospace Industries (IAI) to convert three Boeing 767-300 passenger planes to all-cargo configuration.

The contract, which IAI stated is valued in the “tens of millions of dollars,” also includes an option for DHL to have IAI convert a fourth 767-300 to freighter service.

DHL has reserved the passenger planes under a contract with an unspecified provider and will be delivered closer to their conversion slots, DHL spokesman Tim Rekkopf said.

IAI is scheduled to induct the first plane in July, with the other two arriving in November and February. DHL expects the planes to enter service about six months after the retrofit is complete to allow for painting and other maintenance tasks.

IAI spun off its commercial aviation group in 2019, although the Tel Aviv-based company has been converting Boeing passenger planes to freighters for years.

“The constant increase in the e-commerce market and the effects of the COVID-19 pandemic have emphasized the importance of cargo aircraft,” said Yossi Melamed, IAI Aviation Group’s general manager, in a statement.

DHL, part of German logistics conglomerate Deutsche Post DHL Group (OTCMKTS: DPSGY), has continued to expand its freighter fleet in recent years. The company operates more than 260 aircraft with 17 partner airlines on more than 3,000 daily flights.

In February, DHL received the first of six new Boeing 777-200 freighters scheduled for delivery this year. The company ordered 14 777Fs in 2018, with four delivered last year and another four coming in 2021.

In early April, the U.S. Federal Aviation Administration and Civil Aviation Authority of Israel certified IAI’s design for converting the Boeing B737-800 aircraft from passenger to cargo configuration. The company recently delivered the first two of these converted aircraft.

Earlier this month, IAI signed a contract with GE Capital Aviation Services (GECAS) to perform the first-time conversion of a Boeing 777-300 from passenger to cargo service, including applying to obtain the necessary certificates of airworthiness from aviation authorities.

(Click for more American Shipper/FreightWaves articles by Chris Gillis.)

Chapman Freeborn, a charterer of aircraft flights for freight forwarders and shippers, has acquired emergency airfreight logistics services provider Arcus Air Logistics and Arcus Air OBC from the Arcus Air Group.

Neither Chapman Freeborn nor Arcus Air Group disclosed financial terms of the acquisition, which was announced on June 19.

“I believe Arcus Air Logistics will further strengthen our group’s business as we continue our strategy of growth through diversification in the niche aircraft charter industry,” said Chaprman Freeborn CEO Russi Batliwala in a statement.

Forty-year-old Arcus Air Logistics provides ad-hoc air cargo charter and on-board courier services primarily to the European automotive industry. The company also owns a fleet of two Dornier 228-212 planes that it can dispatch at a moment’s notice to Europe and North Africa, Batliwala told American Shipper in a follow-up email.

Chapman Freeborn and Arcus Air Logistics have worked together for about 30 years. “The two companies have similar DNA and almost no crossover with existing clients,” Batliwala said.

Arcus Air Logistics has offices in Germany, Spain and Slovakia. Chapman Freeborn plans to allow the company to continue operating under its existing name and management, led by Francisco Mühlens.

Despite the coronavirus pandemic’s negative impact on the air cargo industry since the start of 2020, Chapman Freeborn and its parent company Avia Solutions Group say the acquisition of Arcus Air Logistics will pay off quickly once the coronavirus abates.

In 2019, Chapman Freeborn was acquired by Avia Solutions Group, a global aviation holding company with subsidiaries engaged in aircraft maintenance, pilot training, ground handling and fueling, aviation IT solutions and business aviation.

In addition to aircraft charters and leases, Chapman Freeborn provides on-board courier services, a Boeing 747 freighter operation, and animal transport.

(Click to read more American Shipper/FreightWaves articles by Chris Gillis.)

French-based third-party logistics provider FM Logistic on Wednesday reported 21% year-over-year growth in earnings before interest and taxes (EBIT) for its fiscal year ended March 31.

Operating income of 42.5 million euros (U.S. $47.8 million) was the result of only modest revenue growth of 8.7% at 1.43 billion euros (U.S. $1.61 billion). Excluding foreign exchange rates, revenue increased 8% during the year. Management said the increase came from “entirely organic” growth.

“FM Logistic again achieved a strong performance in 2019/20. The 21% EBIT growth confirms the positive impact of our Focus programme. Revenue growth was entirely organic, supported by strong sales execution and the introduction of new services, particularly in the omnichannel and urban logistics areas,” commented FM Logistic CEO Jean-Christophe Machet.

Revenue in France increased 7.7% to 550 million euros (U.S. $618 million), accounting for 38% of the company’s total revenue. Revenue growth rates in Central and Eastern Europe were more pronounced, ranging from 8% to 16%. Transportation revenue increased to more than 500 million euros (U.S. $561.8 million), driven by growth in its less-than-truckload (LTL) segment and its urban logistics service, Citylogin.

Citylogin coordinates last-mile deliveries with small proximity hubs in urban areas, allowing pooled and outsourced logistics offerings to merchants in large metro areas. The service is now offered in 30 cities throughout Europe.

The company reported “especially strong” revenue growth in the cosmetics, beauty and e-commerce markets, with geographic strength reported in France, Spain, India and Russia. New offerings like bulk supply chain solutions and dropshipping service for manufacturers selling directly to consumers added to the increase.

FM Logistic’s EBIT margin improved 30 basis points year-over-year to 3%. The company cited improved headcount efficiency as a reason. Revenue increased 8% in the year by only adding 1.3% to headcount as the result of “the success of skills development efforts and training programs, particularly in warehousing operations.”

FM Logistic continued its expansion in India and Vietnam, opening new warehouses and distribution centers.

The company reported little impact from COVID-19 during its most recent fiscal year but cautioned April and May revenues were “affected,” presenting “little visibility” into the 2020-2021 fiscal year.

“The Covid-19 outbreak had a limited impact on the financial year ended in March 2020. However, the start to the new fiscal year has been more challenging. In April and May 2020, we saw an overall 9% revenue decrease compared with the previous year and a significant increase in operational costs related to anti Covid-19 prevention measures,” continued Machet.

FM Logistic reported almost all of its facilities are open and that “underlying fundamentals remain strong.” The company said it inked new contracts worth 150 million euros (U.S. $168.5 million) in the year, mostly in e-commerce logistics and the cosmetics and beauty sectors.

The company provided no guidance for its fiscal year ending March 31, 2021.

“Most importantly, we have some substantial strengths, namely a sound financial situation, a balanced customer portfolio of food and non-food FMCG [fast-moving consumer goods] companies and retailers, our e-logistics ability, a mostly domestic activity and a stable family shareholding structure,” said Machet. “Supply chain services help meet the essential needs of the populations and businesses. All these give us confidence in our ability to get through this unusual period.”

The company will publish a detailed annual report on July 10, the same day it holds its annual meeting.

FM Logistic was founded in 1967. The privately held, family-owned logistics company has more than 27,500 full-time-equivalent positions across 14 countries in Europe, Asia and Latin America.

Click for more FreightWaves articles by Todd Maiden.

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

In “Beat the Devil,” a film noir satire, a shady character poses a question – what is time? He answers his own question by telling his gang of thieves that time is a crook. Well, it is certainly the case that time is valuable and ought not be wasted. One of the most important constraints in logistics management is time. Limited time means that it must be rationed and allocated among only those activities that provide the highest return (i.e., net present value). Doing this properly is both an art and a science.

Just-in-time (JIT) delivery and production are attractive to companies that are able to arrange delivery of items only when needed. There are financial and physical benefits to be had when items spend less time on a company’s books and in its warehouse. Of course, there is more risk involved as well. There is an artful balance to be made in managing the trade-off between buying in bulk (i.e., in the hope of securing lower shipping costs per ton or per unit) and buying in small amounts with more frequent shipments (i.e., in the hope of lowering inventory carrying costs). Customers like it when tighter cost control translates into lower prices; but they do not like it if mistakes in scheduling lead to items being out of stock.

Uncertainty in the U.S. economy and in trade relations across the globe suggest departing from JIT in favor of building up safety stock. The feeling may be that JIT is not appropriate when there is so much flux in global supply chains at this time. It is true to say that there is never a one-size-fits-all answer in logistics management – let alone in inventory management. Therefore, some companies may still find JIT to be their best choice.

The automobile industry, though comprising less than 10% of total U.S. trade flows, is the most prominent example of JIT. U.S. exports and imports of new passenger vehicles and light trucks in 2019 totaled $59 billion and $197 billion, respectively. Volume-wise this amounted to 1.9 million vehicles exported and 8.2 million vehicles imported. For automobile parts the export and import values were $85 billion and $156 billion, respectively. About half of each of these numbers is accounted for by trade with Canada and Mexico. Certainly, the economic integration and proximity of these two countries help facilitate JIT. The United States-Mexico-Canada Agreement (USMCA) further codifies the relationship.

While the automobile industry is struggling like many other industries right now it is not likely that it will be giving up JIT any time soon. Improvements in customs documentation and customs clearance through electronic interfaces will enhance the visibility of smaller, more frequent orders. These improvements could potentially speed trade flows as long as congestion at border crossings is handled properly.

Additive manufacturing (i.e., 3D printing) applied to parts of increasing size and complexity will serve to switch the activity from JIT delivery to JIT printability. GE was an early adopter of this technology. Its Catalyst engine, used in turboprop aircraft, saw the total number of parts reduced from 855 to 12. The engine was also 100 pounds lighter. In this way, the engine requires less maintenance and is more fuel-efficient. Basically, the nature of the automobile industry is that large, expensive items such as engines can be ordered to match the scheduled daily or weekly rate of output along the assembly line.

To the extent that electric vehicles begin to displace some of the market share of those with internal combustion engines (ICEs), electric engines have fewer moving parts. This means a lower aggregate safety stock is needed. Should one of those components break or prove defective there are fewer stock keeping units (SKUs) to track. An electric vehicle essentially has the engine’s shaft as the primary moving part. Tesla’s electric engines are made up of only 17 moving parts with a single transmission, meaning no extra gears. ICEs, on the other hand, use pistons, rods, crankshafts, valves, etc. that add hundreds of moving parts per vehicle.

In the short run, the current lull in customer demand and low capacity utilization should be used by automobile manufacturers and their vendors to reconfigure their operations with an eye to social distancing and product tracking. Of course, two requirements for successful JIT programs remain the same. The first is to have excellent customer demand forecasts. The second is to have an excellent relationship with the vendor that is providing JIT fulfilment. Of course, whether it be the automobile manufacturer or the vendor that is the consignor of the JIT freight, an excellent relationship with the for-hire carrier must also be established. In this way, time constraints are dealt with collaboratively and systematically.

Click here to see other commentaries by Darren Prokop on American Shipper and FreightWaves.

CEVA Logistics on Monday, June 15, announced that it has acquired a majority stake in African freight logistics specialist AMI Worldwide to significantly expand its footprint on the continent.

AMI, which also operates under the name Manica, has about 1,000 employees among a network of offices in 12 east and southern African countries. The employees and offices will become part of CEVA, starting July 1, with full integration expected to be completed by December.

Financial terms of the deal were not disclosed by the two companies.

CEVA said, with the addition of the AMI employees and offices, its presence in Africa will increase to 1,300 employees across 79 offices in 41 countries. The company will also have 19 warehouses with nearly 1.5 million square feet of storage capacity and a fleet of 1,500 trucks on the continent.

CEVA, which is owned by French container carrier CMA CGM, said three CMA CGM Inland Services facilities – located in Mali, Burkina Faso and Ivory Coast – will come under the management of the new African logistics service. The carrier estimated that its inland and intermodal services in Africa handled about 70,000 TEUs in 2019.

The third-party logistics services provider has also established a presence in Mauritania and will expand in Ethiopia through a new joint venture with MACFAA once regulatory approvals are secured.

The World Bank recently warned that the African continent, especially the Sub-Saharan region, is heading toward an economic recession due to the COVID-19 pandemic this year.

“Economic and social impacts are immense, costing the region between $37 and $79 billion in estimated output losses in 2020, reducing agricultural productivity, weakening supply chains, increasing trade tensions, limiting job prospects and exacerbating political and regulatory uncertainty,” the World Bank said in late April.

CEVA CEO Mathieu Freidberg, however, expressed optimism in the future of Africa’s freight logistics opportunities for his company and Africa’s international shippers.

“Businesses across the African continent enjoy significant growth prospects and logistics solutions are crucial to materializing these opportunities, by ensuring supply chains work well and trade flows smoothly,” he said in a statement. “With our strategic, continental expansion plan, CEVA will plan an integral part in supporting the continent’s socio-economic emergence.”

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

Late last month, Beacon – a digital freight forwarder based in the U.K. – announced that it had raised $15 million in a Series A round of financing. It also announced that Jeff Bezos was one of the investors in that round.

Bezos’ investment instantly became an issue of discussion among people who follow early-stage technology startups in the freight markets. The fact that Beacon describes itself as a digital freight forwarder added to the intrigue since digital freight forwarders have proclaimed the imminent death of traditional freight forwarders for at least half a decade, arguably longer.

In the press release, Beacon describes itself as “a technology-driven freight forwarder applying technology to create a simpler, more efficient shipping experience for its customers.”

Like other digital freight brokers, Beacon’s goal is to disrupt the “trillion-dollar” freight forwarder market.

This made me think of a number of conversations I have had recently with various early stage startups building new products for the freight markets, while trying to discover a scalable, repeatable and profitable business model in the process.

Disruption is the outcome of solving customers’ problems

The startups that end up disrupting an industry do so by creating customer value on an ongoing basis. In the process, and as they become more successful at demonstrating and creating customer value, they develop a trusted brand and other elements of an economic moat. Over time, their success at value creation and the existence of an economic moat around their business model enables them to extract more value for themselves. 

This is particularly true if the startup successfully increases the size of the overall profit pie available for distribution across every node in the supply chain – avoiding a zero-sum contest with other participants in the supply chain network of which they are a part. 

Reacting to the announcement about Beacon’s round, Robert Keen, Director General of the British International Freight Association, defended traditional freight brokers. He argues that traditional freight forwarders are more nimble and adaptive to changing technology trends than digital freight forwarders are willing to recognize. 

Freight forwarding is not a trillion-dollar industry

Digital freight forwarders often proclaim that freight forwarding is a “trillion dollar market” that is ripe for disruption. Certainly, the customers that digital freight forwarders serve move products worth more than $1 trillion. But freight forwarders don’t capture $1 trillion of value in the form of revenues for themselves. So it is deceptive to say that freight forwarding is a trillion dollar industry. It is not.

According to Statista, freight forwarding revenues amounted to 151.9 billion Euros in 2019, worldwide. Using an exchange rate of 1 Euro = 1.13 U.S. Dollars, that amounts to $171.65 billion.

According to IBISWorld, in 2019 there were 108,675 freight brokers in the United States. These companies employed 382,955 people. Estimated revenue for the industry was $145.6 billion. It is an industry characterized by low barriers to entry and intense price competition. It is also an industry characterized by regional and industry specialization. 

Wrapping things up

I am not arguing that freight forwarding will never undergo disruption due to technology-driven innovation. Nor am I saying this means that there are no venture-scale opportunities in freight forwarding. 

But, I am saying that early-stage investors should be skeptical of claims that there is a trillion dollars of value that traditional freight forwarders have failed to create, and as such that digital freight forwarders will create that value and capture a substantial portion of it in the process.

If you are a team working on innovations that you believe have the potential to refashion supply chain logistics, we’d love to tell your story in FreightWaves. I am easy to reach on LinkedIn and Twitter. Alternatively, you can reach out to any member of the editorial team at FreightWaves at media@freightwaves.com.