Looking back at my last air freight demand forecast, which I wrote on 8th Jan 2017 reminds me that I should be buying more lottery tickets (please read the 2017 post if you like to know why "chamindagunasekera.blogspot.be").
If I had enough cash to buy some capacity as a derivative and sell it during the peak, I could have been on my own island sipping a cocktail or playing golf every morning.
2017 was a watershed year for air freight. The growth of air freight demand surpassed the global trade growth (approx. +4%) and capacity growth (approx. 1.3%).
The FTK growth in 2017 ( 9%) was double the growth of 2016 which was 3.6 %. The capacity only grew by 1.3%(all facts as per IATA).
Let's do a postmortem. I will argue the point that airlines did not forecast well on the growth they saw in the last quarter of 2016 and thought 2017 wasn't going to be a steady growth. Airlines did not add capacity to plan for a steady demand. Why ? because the demand that we saw was so dynamic? no, I don't think so. We all saw the tsunami of e-commerce demand rising up from Asia to Europe and Europe to Asia, then Intra Asia and imports from Europe to Asia. In 2017 most airlines enjoyed healthy yields and good load factors. Intra Asia was full except a few routes, with e-commerce demand. The reasons I believe which made HKG record the highest growth in tonnage in the history and some airlines in HK recorded the highest revenues, were because E-commerce pushed up the demand and even drove the rates higher. E-commerce occupied the capacity to an extent where normal air cargo had no choice but to pay the same rates.
One good example of this artificial demand was, a popular e-commerce marketplace had over 600 tons back log in Hong Kong and had no capacity to Riyadh, Saudi Arabia. The marketplace was willing to pay any amount of money to anyone who could find them charters. Their main objective was to avoid the onslaught of social media giving them bad remarks of delayed deliveries, not the money they were burning to move the freight. This means we now live in a world that airfreight demand is no longer a barometer of job gains and consumer confidence in the USA or Europe but a reflection of social media responses too. The worst-case scenario for airlines, forwarders and the whole domain of supply chain is in front of us, that's called "dynamic demand". Perhaps it's time for 100 years old Airline industry and old-fashioned freight forwarders to think about Artificial intelligence and deploy forecasting methods that I spoke about in my 2017 article ie artificial neural network and machine learning (AI) to be strengthening the demand forecasting by taking in to consideration the data available from social media and internet to massage the demand forecasting.
2018 is going to be a different year. Let's analyze the demand, Commercial trends and geopolitical issues with a special focus on Asia being the factory of the world. I will begin to establish my point being, 2018 is going to be a strong year but not an uncontrollable peak like in 2017.
If we look at the world trade by the mode of air transport by B2B or B2C, one point is very clear, Speed of supply chain is taking over the decisions. The World has envied the logistics concept of Inditex or mostly known by the brand name ZARA. If we analyze the supply chain concept, the foundation concept is "speed to market". Zara's yearly inventory turnover reached 12 times in 2017 compared to other struggling fashion brands who had 3-4. 50% of their production is closer to the end consumer market and order replenishment is 2-5 days long from POS to Production to shop floor. The markdowns are only 15-20% compared to other traditional brands who have 30-40% markdowns. It's Fast fashion! However, we also say few brands came very close to copying ZARA's model and they got the fashion seasons right but they failed as their logistics process never changed.
As we see it, gone are the days that a delayed Ocean container converted to air freight for a fashion brand in the USA, could define the state of air freight demand. I recently witnessed an expected rate of a global bid by a very famous fashion brand in the USA. When I looked at the rates they have been pushing forwarders to agree, I wondered why freight forwarders would want to sign up for these bids with a year-round rate? It looked suicidal to me. Perhaps, these forwarders who go after these traditional air freight bids should be called "my grandfather's forwarders" as one of my mentors say.
Most say what happens in China define the Asian export demand and rates. China's demand for general cargo air freight is not going to drive the rates up so high in 2018. China has introduced a unified customs system where shippers or forwarders could export goods from any airport or port. This will ease the pressure on capacity ex PVG. No airline needs to maintain the slots in PVG as airports like CGO could uplift cargo coming from any corner of China. Charter operators will move to the interior, low-cost airports than PVG. PVG already has a landing and parking approval bottleneck.
On the other hand, HKG will be completely the opposite. HKG will be adding its 3rd runway only in 6 years from now. Until such time, not many additional freighters can be given landing permissions, leave alone the demand for passenger flights to HKG. This will drive airlines to maintain the number of frequencies no matter there is demand or not. If any airline loses one slot, its gone forever. Furthermore, e-commerce boom will add pressure on HKG capacity as the main e-commerce hub for the whole of mainland China. The production in China is going strong, however, China government has started to tighten corporate credits. This might be an issue for the manufacturing sector. HKG's restriction on the availability of landing rights for additional capacity will drive airlines to merge and consolidate capacity. Just like the one we have seen between CX and LH going metal neutral.
The Indian sub-continent had a good 2017 as production was booming in India and Bangladesh. However, Bangladesh is losing its status as a Low-cost country and their duty concessions will not be there due to improve per capita income. The garment production in Bangladesh will still be a powerhouse but a considerable amount of production will move to North Africa due to AGOA act 2, duty-free status. Only efficiency and technology will help Bangladesh to offset the lost competitiveness by losing the duty concessions. This is evident from the capacity additions in the pipeline by African carriers in the continent. In 2017 as per IATA, 7.9% AFTK growth was registered by African flag carriers.
The main driver of this year's airfreight demand yet again will be the e-commerce volumes. China's singles day in 2016 reached USD 14.3 Billion while 2017 was USD17.8Billion (staggering 24% growth). Whilst most of the movements happened inside China, availability of millions of products and suppliers influenced one of the highest demand for air cargo space for cross-border e-commerce. 650 million orders were placed by 115 Million shoppers during the singles day(Source: Alibaba and Xinhua). We could expect the same growth trajectory in 2018 with `e-commerce demand.
The international cross-border e-commerce is becoming so simple and smooth and most countries are adopting the Low-Value Bulk Clearance (LVBC) or otherwise known in the US as ECCF facility. This lowers the cost of e-commerce parcel movements but builds up the pressure on air freight rates. The characteristics of air freight demand are changing permanently. E-commerce is now moving into Food & Beverage, Pharmaceuticals, cosmetics, and other commodities which needs a defined and sometimes temperature controlled air freight products. This will speed up the whole air freight process and these commodities have the affordability to pay more to airlines to move their goods due to profitability as well and product expiry conditions.
Fuel at 60-80 a barrel will drive away the B747F freighters as it will no longer be viable to operate due to fuel cost. B777Fs are getting back to the top as most viable freighters and B747-8 will follow, All airlines will be looking at the possibility of 20-30% savings on fuel with these two types of metal.
I am now walking into dangerous grounds by trying to predict and even go further to advise the industry, but I think it's ok to be brave and share your thoughts rather than writing a synopsis of what has already happened. I will stand trial by this time next year on this article.
Airlines should adopt the skills of a master loader. Secure capacity and play strategic for 4-5 months and reap the benefits during the peak. It's time for airline managers to think different. The salespeople of airlines need to be "on the ball" as one of my senior airline friends told me last week when I saw him for a coffee in Hong Kong. I thought he was from the new age! The days have long gone that airlines can think if they sign BSAs and trap forwarders for yearlong contracts, that airlines are safe. No ! all contracts have termination clauses or airlines will be pushed to reduce the rates. But why can't airlines adopt a more dynamic capacity and demand management ?. Why can't airlines adopt intelligence from artificial neural networks and machine learning to predict the trends?
I firmly believe airlines are thinking about dynamic demand and pricing. A good example can be taken from East Africa where the freighters that used to carry the flowers on a charter basis have gone looking for greener pastures. That means, airlines are now thinking to adjust to the changing landscape than sticking to what they used to do for a decade and see the yields come down every day. All cargo operators will be happy to sit out and wait for the right opportunity to operate than getting held up for cheap long contracts.
When airlines started behaving this way with a dynamic demand and pricing, forwarders will follow, customers will follow and the whole domain of supply chain and logistics will adopt the new age. Which is dynamic demand forecasting and pricing?
Another opportunity that Airlines haven't fully figured out (to make money)is the Tsunami type growth of e-commerce. Airlines carry millions of tons of e-commerce but haven't had the pleasure of enjoying the profitability of this growth. Airlines have made considerable attempts to sneak into the value chain of e-commerce but the reluctance to break barriers and think out of the box have made all airlines still hovering in the air, instead of getting a steady yield growth from the new wave of e-commerce growth.
I am not advocating to adopt rocket science to air freight industry but it's what you see out there that can be explored. If you agree what happened in 2017 (due to retailers rushing last-minute inventory replenishment and airlines carrying e-commerce spikes due to Double11 buying frenzy), then you will understand that adapting to a shorter sight of demand will make you more relevant to the present day challenges and opportunities.
No one is considered an expert of all. Only through dialog and anyone being brave enough to reasons out, will make a subject more educational.
Thank you for your valuable time. Please share your thoughts with me on Twitter ChamindaG1 or LinkedIn.
Copyrights 2018, all rights reserved.
Wednesday 21 February 2018
Sunday 8 January 2017
Air Freight demand in 2017
It's a multi million dollar answer. Can you or anyone else forecast what would happen to the air freight industry in 2017?
No one has got it right this far.
However, the social and economic conditions surrounding global markets should be able to give us some idea about what might happen.
Anyone who has access to artificial neural network and machine learning type demand forecasting will get it right.
Following comments are my personal views and it has no bearing on my profession . I write these blogs to share knowledge and learn something from feed back that I get .
In my view, the geo political situation has a major bearing on the air freight demand and how 2017 will shape up. If we look at the tangible results of the financial markets , we could derive some idea of the market demand. The US dollar is strengthening and a large amount of funds released on the back of Quantitative Easing (QE) will flow back to USA . All money parked in bonds , properties will follow this trend. The currencies in Asia mainly in China, Malaysia, Singapore, Korea are going to feel the pressure . This trend of cash out flow from Asia to USA will depreciate the Asian currencies . The reaction expected from the Asia central banks would be to increase the lending rates, and take measure to manage the depreciation. Overall the depreciated currency will make Asian products more affordable and the demand in USA will be stronger as a stronger dollar will increase retail spending .
The Strongest geopolitical event in 2017 has been the US election and the presidency. The information out in the media suggests that US is leaning more towards protectionist policy to improve the US economy. Republicans have had more influence on the domestic policies to protect the US economy than democrats . Perhaps this is the confidence that some people have because they are influenced by the political sentiments . The cancellation of TPP agreement will bring back the demand to China and India as TPP countries will not have the price advantages .
The Indian sub continent region has been fairly peaceful with India leading the charge on "made in India" policy to increase investment and promote Indian products. Bangladesh has been winning more apparel production as the Chinese and Vietnam factories are losing the battle due to higher costs. Sri Lanka has been in the new with more aggressive moves to position herself as a regional hub for ISC region and it seems like there is a lot of progress with new Free Trade agreements falling in her lap from Singapore , Malaysia and many other countries .
China is building a 15,000 sq km free zone in the South aiming for India's demand and Africa . This could improve the air freight import demand to the country and if EU gives back the GSP++ , this will drive the high quality apparel production that Sri Lanka is famous for .
The Middle East region has been the most affected . Regional security , low price of fuel and weakening demand in EURO and also the European demand has put breaks on some of the development . Some Economies like the UAE has done well to stabilize the financials and offer confidence. Probably for the first time, in certain countries in the middle east, we saw bonds being issued to draw funds to the country. The government spending which stimulates most of the markets in the middle east has slowed down. Cost of living has gone up that drives more expenses for the companies to operate. In the past one year ,the worst effect has been on Turkey due to the proxy war that's happening in Syria . Turkey has been a strong back yard supplier to the middle east , Mediterranean and even Europe . Security concerns and depreciating currencies will displace the demand for Turkish products and biggest beneficiaries would be India and China .
In summary , We could see the some light at the end of the tunnel on a strong recovery of US demand for products and Asian products being cheaper for the Western world. Considering that politics take time to influence any change, a 'quick win' might come for air freight from Asia to US demand being stronger .This could influence other markets positively,drive the air freight rates up and improve the load factors .
If you look back the tactical part of forecasting , the last two to three months of air freight demand in China / Hong Kong was a surprise to me .
This confirms something that I have always believed in. That is the world is changing to a more dynamic demand and supply variations and that could give spikes of high and low demand . The Airlines have to adjust to these trends otherwise they could join the Hanjin Club.
The last quarter air freight rates to USA reached HKD100 . The HKG carriers have seen more and more medium sized forwarders and postal services demand for BSA than the big boys . In this season of BSA discussions , I have seen the demand for BSA discussions improve and the market is expecting HKD2-3 rate hike to US and Europe and about 1-2 HKD higher for the Middle East, ISC and Australia . The demand for E-commerce is growing in double digits and most postal services have seen a huge growth on demand for mail and smaller parcels .
The Airlines should expect more growth in e-commerce demand. In one of my mentor's words ,"even my grandmother could have predicted it" .
The Fuel prices are going to stay around USD50 in my personal opinion. If the OPEC and Non-OPEC countries have reached an agreement , then 1.2 million barrels per day cut in production should drive the oil demand. This will also influence the air freight rates as it will add pressure. A good example would be, the Civil Aviation Dept in HKG, who withdrew the FSC, could think about bringing it back.
The other sentiment on Ocean freight rates will also be an influence to the air freight demand . The Hanjin issue has finally been a wake up call to all the Ocean freight sales executives and pricing desk managers that if they don't do something about the yield , they could lose their jobs overnight . New Alliances getting formed in the Ocean world will displace the old deals they had for bigger customers and NVOs .
I may be wrong by a million dollars, but these market scenarios are telling me that we could expect a better air freight demand in 2017 than 2016. I think that will help all stake holders in the industry to sustain the services , products and even jobs , so that we do not end up with the Hanjin after party.
I hope you all could share with me what do you think about the air freight demand .
Sunday 15 November 2015
Merger and Acquisition practical notes
I think the next few years are going to be the time when small companies will fall prey to bigger and richer hunters in the supply chain world. The current economic conditions are testing each and every logistics or freight forwarder in the business. The companies who have a stronger P&L and adoptability to the market condition will survive , while others will fall prey to the bigger and stronger.
There is no text book written or there is no single concept which is proven as the best practise for Merger and Acquisition (M&A) in our logistics and supply chain industry . But it's a much debated topic among many experienced companies who have done many M&As . Through out my career , I have seen many M&As , big and small. Some of them have been a great buy and others were left to a name board only . I cannot find any reason to disagree with the methods that were applied to do these M&As ,but the results have been negative and positive .
If we really think about a M&A , we need to ask ourselves , why a company wants to sell and why another company wants to buy . In most cases , I have seen that these two questions are not understood by both parties in a M&A . if we try to spend time to understand the seller's intentions and buyer's intentions , it will open a path for a smooth merger . The positive M&As that I have seen have always had this question answered and I also saw both parties working towards the same goal .
In my personal opinion , buying a company is not a very difficult situation . if you have the right people who understand the business , doing the due diligence and if you have the sharpest financial team analysing the results , then it is not too difficult to agree on an enterprise value and discuss the prices . But I think the difficult part is merging the two organisations and achieving the objectives .
When we talk about M&A , on the one hand we have seen some companies who were bought ,being left alone to do their business . On the other hand , some companies which were bought , and were merged immediately .
I personally think , the 'whether to merge or leave alone' strategy comes with the understanding of the first question . The intentions of the buyer and seller . In most cases the upper hand is with the company who buys another . There are two principles that every buyer should think about . Are you buying a company to expand your footprint ? if the answer is yes , then merge the company immediately, even if you have to go through a restructuring process ,and even if that's painful to the company and its employees . Delaying this will lose good people and business .
Are you buying a company to benefit from the business of the seller's company ? if the answer is yes , then give them the needed financial support and network support but leave them to do their business . Do not try to merge them as that was not your intention .
In summary , it's all about how much do you understand the buyer's intentions and seller's intentions .
We have seen billions of dollars lost during so many mergers and acquisitions in the past 10 years which we can name them . I have personally experienced M&A on the buyer's side and seller's side where I have seen both scenarios of final result .
There is no text book written or there is no single concept which is proven as the best practise for Merger and Acquisition (M&A) in our logistics and supply chain industry . But it's a much debated topic among many experienced companies who have done many M&As . Through out my career , I have seen many M&As , big and small. Some of them have been a great buy and others were left to a name board only . I cannot find any reason to disagree with the methods that were applied to do these M&As ,but the results have been negative and positive .
If we really think about a M&A , we need to ask ourselves , why a company wants to sell and why another company wants to buy . In most cases , I have seen that these two questions are not understood by both parties in a M&A . if we try to spend time to understand the seller's intentions and buyer's intentions , it will open a path for a smooth merger . The positive M&As that I have seen have always had this question answered and I also saw both parties working towards the same goal .
In my personal opinion , buying a company is not a very difficult situation . if you have the right people who understand the business , doing the due diligence and if you have the sharpest financial team analysing the results , then it is not too difficult to agree on an enterprise value and discuss the prices . But I think the difficult part is merging the two organisations and achieving the objectives .
When we talk about M&A , on the one hand we have seen some companies who were bought ,being left alone to do their business . On the other hand , some companies which were bought , and were merged immediately .
I personally think , the 'whether to merge or leave alone' strategy comes with the understanding of the first question . The intentions of the buyer and seller . In most cases the upper hand is with the company who buys another . There are two principles that every buyer should think about . Are you buying a company to expand your footprint ? if the answer is yes , then merge the company immediately, even if you have to go through a restructuring process ,and even if that's painful to the company and its employees . Delaying this will lose good people and business .
Are you buying a company to benefit from the business of the seller's company ? if the answer is yes , then give them the needed financial support and network support but leave them to do their business . Do not try to merge them as that was not your intention .
In summary , it's all about how much do you understand the buyer's intentions and seller's intentions .
We have seen billions of dollars lost during so many mergers and acquisitions in the past 10 years which we can name them . I have personally experienced M&A on the buyer's side and seller's side where I have seen both scenarios of final result .
Sunday 17 May 2015
Has rail from China to Europe , taken away the sea-air traffic via Dubai?
I have started to rebuild the sea-air product with new concepts . Its is true that Dubai as a hub has lost almost 40% of the sea-air volumes . Its could be even more . The main reason for this is, the consumer products available in the market and changing buying habits of the end customers . Everything boils down to cost and lead time .
I could see several reasons for the slow down of sea-air via Dubai . One is for sure the slow steaming adopted by the shipping lines which extends the transit time . From Hong Kong to Jebel Ali , it used ot be 11 days . Now its 12-13 days , sometimes even more days are consumed. The only ocean line (which I dont want to mention the name ) who used to offer a good sea-air service on the ocean leg, has also lost its motivation to keep the commitment on transit times . On the other hand , the retailers have changed the way they hold inventory . Less inventory in shops drive more air if the market picks up. But where have we seen the market picking up in recent days .
The latest buzz is everyone is rushing to do rail freight from China to Europe via Siberian route . China has its ambitions to control the freight from China to Europe , therefore pouring billions to develop this mode of transport . However in my opinion , a very dependable , capacity full filled product is at least 5 years away. I have often argued with people who says , rail is better than sea-air . I agree to a point that it stops at a theoretical point , but not go in to practicality . The reasons are simple . Today there are 3 train hubs in China , Suzhou , west China and North China . The trains line up the cargo at the western China to be carried on to Europe . A 40feet container could cost from a shanghai factory to a distribution centre in France aprox USD 8000 . Its far below the sea-air rates that are available in the market. The maximum length of this train until it reached the European rail standards if only 800 meters . Just calculate and see how many 40 feet containers can you carry every 2 days to Europe . aprox 45-48 containers a train ? I agree that its viable right now as the market is so low and there is no demand . But no one hopes this export market from China to Europe will stay like this for ever . When the market picks up , can everyone get space on a train that carries 45 containers ? think about the demand and supply ? I conclude this point of argument by admitting that rail from China to Europe is a good progress and a great achievement . However its not yet ready to take away the sea-air product via Dubai and other hubs . Once the rail products reach multiple journeys a day to europe and perhaps double stacking the containers , then yet , it could be a good alternative . Not until then .
One the other hand , people who believe in multimodal products like me , will always educate the customers about the benefits of sea-air , air-air and air-sea products . There is no limit to the way you can move freight on multimodal methods as long as you can be creative and knows how to ensure the product works .
I sincerely hope that Dubai government will take measures to speed up the sea-air transshipment process and reduce costs , allowing the freight forwarders to bring in more transshipment cargo to Dubai. Simplifying the process on how Dubai cooperates with Sharjah in terms of transshipment customs , open many possibilities . can UAE government influence the shipping lines to improve the transit time and ensure there is a dependable Ocean capacity and lead time guarantee to jebel Ali ? this could improve the transit times .
Times have come to be innovative in how you do sea-air products .
join my twitter for more news on sea-air : @chamindag1
other article to read
I could see several reasons for the slow down of sea-air via Dubai . One is for sure the slow steaming adopted by the shipping lines which extends the transit time . From Hong Kong to Jebel Ali , it used ot be 11 days . Now its 12-13 days , sometimes even more days are consumed. The only ocean line (which I dont want to mention the name ) who used to offer a good sea-air service on the ocean leg, has also lost its motivation to keep the commitment on transit times . On the other hand , the retailers have changed the way they hold inventory . Less inventory in shops drive more air if the market picks up. But where have we seen the market picking up in recent days .
The latest buzz is everyone is rushing to do rail freight from China to Europe via Siberian route . China has its ambitions to control the freight from China to Europe , therefore pouring billions to develop this mode of transport . However in my opinion , a very dependable , capacity full filled product is at least 5 years away. I have often argued with people who says , rail is better than sea-air . I agree to a point that it stops at a theoretical point , but not go in to practicality . The reasons are simple . Today there are 3 train hubs in China , Suzhou , west China and North China . The trains line up the cargo at the western China to be carried on to Europe . A 40feet container could cost from a shanghai factory to a distribution centre in France aprox USD 8000 . Its far below the sea-air rates that are available in the market. The maximum length of this train until it reached the European rail standards if only 800 meters . Just calculate and see how many 40 feet containers can you carry every 2 days to Europe . aprox 45-48 containers a train ? I agree that its viable right now as the market is so low and there is no demand . But no one hopes this export market from China to Europe will stay like this for ever . When the market picks up , can everyone get space on a train that carries 45 containers ? think about the demand and supply ? I conclude this point of argument by admitting that rail from China to Europe is a good progress and a great achievement . However its not yet ready to take away the sea-air product via Dubai and other hubs . Once the rail products reach multiple journeys a day to europe and perhaps double stacking the containers , then yet , it could be a good alternative . Not until then .
One the other hand , people who believe in multimodal products like me , will always educate the customers about the benefits of sea-air , air-air and air-sea products . There is no limit to the way you can move freight on multimodal methods as long as you can be creative and knows how to ensure the product works .
I sincerely hope that Dubai government will take measures to speed up the sea-air transshipment process and reduce costs , allowing the freight forwarders to bring in more transshipment cargo to Dubai. Simplifying the process on how Dubai cooperates with Sharjah in terms of transshipment customs , open many possibilities . can UAE government influence the shipping lines to improve the transit time and ensure there is a dependable Ocean capacity and lead time guarantee to jebel Ali ? this could improve the transit times .
Times have come to be innovative in how you do sea-air products .
join my twitter for more news on sea-air : @chamindag1
other article to read
Friday 3 October 2014
Dubai as a hub for Sea-Air product
Its been 7 months since I started to live in the place where I once involved in creating the sea-air products for many companies and customers. I thought it would be wonderful to live in Dubai and still promote the sea-air product. Its still the case , however when you are close to the operation, you tend to see things more microscopic than macro level. I am a firm believer in the multi modal product. I think people who use this product are real out-of-the-box thinking supply chain managers.
The sea-air product has not evolved so much from the history of 2-3 decades . The good old companies who are doing sea-air have done the same. I felt like after creating BAX Global and Schenker sea-air product when I was in Shanghai , followed by Kerry Logistics and Agility, few new kids in the industry have taken things aggressively to see the benefits of sea-air.I like that as it has spread the word around. However is there anyone doing anything to explore better options , innovative ways of producing the next generation sea-air product ? no I guess .
The consumer world has drifted far away from the good old supply chain habits . When we had 2-3 seasons of peak demand , now it has become 3-5 with sharp spikes of demand. carriers and providers alike , cannot plan anything as the market is so dynamic . Rates have fallen resulting in low volumes of sea-air. How do you revive the sea-air market and demand ? thats the difference between people who lead the product innovations and people who follow other's effort and success .
I have been a bit taken back by the developments in Dubai , specially with the changes of transshipment process. I am not too sure if Dubai government is consciously making things difficult for sea-air transhipments or someone is not thinking far enough on the after effects of their decisions . The recent decisions to increase the Terminal Handling Charges (THC) at DXB airport and restrictions of customs clearance process for mix loaded containers for sea-air , are like Dubai saying "we dont want sea-air anymore".But if you look at the GDP contribution of transshipments and supply chain activities for Dubai , it represents a double digit number . Isn't that good enough to protect this product ? Dubai policy makers need to seriously think what to do and how to improve Dubai as a capacity and cost leadership in the multi modal transport industry. Since the rates from Asia to Europe and US have fallen , Dubai government should take measures to reduce cost and offer seamless transshipment processes for sea-air in order to protect and sustain the volumes. Otherwise the lack of options will deter sea-air customers to look for options like rail from Asia to Europe which is happening now.
Sea-air is becoming commoditised due to lack of innovation. For some companies who have started to do sea-air by copying other's success is considering reducing rates, is the only innovation. thats pathetic and destroying the market for a good sea-air option.
I have always predicted the next best sea-air hub is Colombo, Sri Lanka. Thats not because I am Sri Lankan but it makes a lot of sense when you look at lead time compression . But unfortunately , the country does not have a strategy and not interested in one either .
let me give you an idea in my next blog about the specific changes in Dubai in terms or cost increases and processes becoming complicated . I need to find time to write too. thanks /Chaminda Gunasekera , follow me on Twitter #ChamindaG1 or LinkedIn.
The sea-air product has not evolved so much from the history of 2-3 decades . The good old companies who are doing sea-air have done the same. I felt like after creating BAX Global and Schenker sea-air product when I was in Shanghai , followed by Kerry Logistics and Agility, few new kids in the industry have taken things aggressively to see the benefits of sea-air.I like that as it has spread the word around. However is there anyone doing anything to explore better options , innovative ways of producing the next generation sea-air product ? no I guess .
The consumer world has drifted far away from the good old supply chain habits . When we had 2-3 seasons of peak demand , now it has become 3-5 with sharp spikes of demand. carriers and providers alike , cannot plan anything as the market is so dynamic . Rates have fallen resulting in low volumes of sea-air. How do you revive the sea-air market and demand ? thats the difference between people who lead the product innovations and people who follow other's effort and success .
I have been a bit taken back by the developments in Dubai , specially with the changes of transshipment process. I am not too sure if Dubai government is consciously making things difficult for sea-air transhipments or someone is not thinking far enough on the after effects of their decisions . The recent decisions to increase the Terminal Handling Charges (THC) at DXB airport and restrictions of customs clearance process for mix loaded containers for sea-air , are like Dubai saying "we dont want sea-air anymore".But if you look at the GDP contribution of transshipments and supply chain activities for Dubai , it represents a double digit number . Isn't that good enough to protect this product ? Dubai policy makers need to seriously think what to do and how to improve Dubai as a capacity and cost leadership in the multi modal transport industry. Since the rates from Asia to Europe and US have fallen , Dubai government should take measures to reduce cost and offer seamless transshipment processes for sea-air in order to protect and sustain the volumes. Otherwise the lack of options will deter sea-air customers to look for options like rail from Asia to Europe which is happening now.
Sea-air is becoming commoditised due to lack of innovation. For some companies who have started to do sea-air by copying other's success is considering reducing rates, is the only innovation. thats pathetic and destroying the market for a good sea-air option.
I have always predicted the next best sea-air hub is Colombo, Sri Lanka. Thats not because I am Sri Lankan but it makes a lot of sense when you look at lead time compression . But unfortunately , the country does not have a strategy and not interested in one either .
let me give you an idea in my next blog about the specific changes in Dubai in terms or cost increases and processes becoming complicated . I need to find time to write too. thanks /Chaminda Gunasekera , follow me on Twitter #ChamindaG1 or LinkedIn.
Wednesday 29 January 2014
How to be creative in supply chain solutions
Being creative is a very unstructured discussion. Each person can be creative in his/her own way. In the supply chain industry , being creative is priceless . Creativity in solutions comes from knowing all products and options like a carpenter's tool kit . Also its essential that one has the ability to understand the problem , break it down to small parts and then find alternatives .
supply chain solution design needs a broader mind and ability to understand and relate to customer issues. The task becomes easier when you have been exposed to different products and different markets. For a person venturing in to supply chain solution design , thinking out of the box and believing in creation of new products ,is very important .
Analytical skills will be the last skill to develop .
supply chain solution design needs a broader mind and ability to understand and relate to customer issues. The task becomes easier when you have been exposed to different products and different markets. For a person venturing in to supply chain solution design , thinking out of the box and believing in creation of new products ,is very important .
Analytical skills will be the last skill to develop .
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