Category Archives: Marketing

Forwarders report zero freight on wretched Asia-Europe trade

Forwarders are reporting a growing number of enquiries for zero freight rates on container shipments from Asia to North Europe, even as spot rates on the trade and on Asia-Mediterranean this week matched the lowest levels ever recorded.

Asia-Europe rates hit $205 per TEU, a level it fell to on June 19, and spot rates to the Med dropped to $195 per 20-foot container, the level it hit on Oct. 16 last year, according to the the Shanghai Containerized Freight Index.

Even though March is the slack season, the year-over-year comparisons are ugly. Asia-North Europe is almost 70 percent down on the same week last year, and Asia-Med is down 76 percent. The comparisons can be found on JOC.com‘s Market Data Hub, along with rates and volumes from all major east-west trades.

JOC.com contacted several forwarders, carriers and shippers about the zero freight reports and no one was prepared to go on the record because of the sensitivities around talking freight prices. However, there was widespread concern about falling rates.

A forwarder with offices in Hong Kong and China said two customers shipping about 100 containers a year to Europe out of three cities in the mainland said they had received a quote for zero freight and wanted him to match it.

“It is absolutely ridiculous. I still don’t know if a carrier actually offered this rate, but if zero freight gets into the market, that would be a disaster,” he said.

The head of ocean freight for a top 10 global logistics provider confirmed the trend of customers asking about zero rates and he warned the market was currently so unstable it was heading for a meltdown.

“Something dramatic is going to happen. The question is not if, but when, and it will hit everyone like a ton of bricks with service disruptions as carriers merge or go out of business,” the Shanghai-based logistics executive said.

The Asia-Pacific head of a European forwarder said he was seeing requests for spot and long term rates of between $50 and $100 per container. “We are not taking up this business, but today average rates offered by shipping lines are around $75-100 per TEU and 150 per 40-foot container,” he said.

“We have no intention to go below cost and we still sell with a profit in most cases, but indeed the margins are very much under pressure.” The forwarder said it was clear from meetings with carriers that they are ready to do whatever it takes to raise rates. “They cannot survive at today’s levels.”

With carrier profitability at such precarious levels, he said bankruptcies were becoming a very real possibility. “Imagine what happens to a sailing schedule if one of your alliance partners suddenly becomes insolvent. Looking the situation today, there is a real possibility of this happening. It is not a desirable situation for anyone,” he said.

For forwarders to quote zero freight rates, it would have to either be offered by container shipping lines, or the rate would be low enough to enable forwarders to offer zero freight and recover the difference through excessive haulage and delivery charges. However, it is worth bearing in mind that in China, the Ministry of Transport forbids the offering of freight rates of below $50 per TEU, with the Shanghai Shipping Exchange monitoring tarrifs and deals on behalf of the MOT.

The three major container carriers contacted by JOC.com said they had no hard evidence of lines offering rates at such give-away levels. An executive from an Asian shipping line said there were rumors in the market that zero freight was being quoted, but he said such a trend, if real, would not be sustainable and would result in problems for the shipping industry.

“Carriers would be better off laying up ships and shippers would not be in a position to maintain a smooth operation in their supply chain,” he said.

Another carrier executive agreed that rate levels have now reached the point where laying up vessels has become financially attractive. “It is getting quite ugly, but as long as we have carriers going for market share and others are subsidized by their governments, things will not necessarily improve,” he said.

The continued operation of loss-making carriers was also questioned by a major Asia-North Europe shipper, who pointed to new rumors of debt-wracked Hyundai Merchant Marine being merged with loss-making Hanjin Shipping.

“I just don’t understand the reasoning behind that. Why merge a loss with a loss in the hope that it becomes a positive?” he said, expressing frustration with the extreme volatility that has consumed the market in the past two years.

“We contract 70 percent of our cargo for the year and every week the rate drops. That means me, and everyone else in the business, has to continually explain our position and defend the contracts. These days we don’t even know where the vessel will be next week — it could be idled, or cancelled, or even scrapped.”

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

Plowz & Mowz: Just Like UBER!

Knew it would happen! An “APP-BASED” business like UBER for driveway plowing.

Source: J&R Lawns & Landscapes
J&R Lawns & Landscapes in Syracuse uses new app to order plows from an phone app.

In the winter of 2012, after a major snow blast to Syracuse, New York, Wills Mahoney’s mother got stuck in her driveway. As she sat, she watched several plows go by, but couldn’t get one to her property. And there it was, the inspiration for Plowz & Mowz, an on-demand, residential plowing and mowing company, founded by 33-year-old Mahoney and college friend Andrew Englander.

“We are truly the only on-demand snow plowing app on the market today. You can go with other websites, but their turnaround time is about 48 hours, and they’re going to have to give you an estimate,” claimed Mahoney, whose company now serves 30 markets, including Boston, Cleveland, Chicago, Minneapolis and Milwaukee.

Customers download the app, type in their information, get an exact price on a snowplow and then that request is dispatched to drivers who contract with the company. Generally, those drivers are already out on their routes. They can accept or reject the job, depending on distance and schedules.

“It’s very similar to the Uber model,” said Mahoney.

Residential snowplowing is actually a growing business, as harsher storms hit the nation with increased frequency. There are approximately 30,000 residential plowing companies and three times as many who plow commercial properties, like malls and offices.

“The vast majority of the residential market is single contractors. It is highly fragmented,” said Martin Tirado, CEO of the Snow and Ice Management Association, who calls the app a “disruptor.”

“Some of the bigger companies that do this,” he added, “like Brightview, [formerly Rockville, Maryland-based Brickman] they only comprise 3 to 4 percent of market share, and they’re the biggest one out there.”

Jeff DeLine, a Plowz & Mowz provider for three years, said he has seen demand for snowplows surge dramatically.

“Easily hundreds more requests for each event,” said DeLine, owner of J&R Lawns and Landscapes in Syracuse.

DeLine employs about 30 drivers and uses Plowz & Mowz for additional revenue that he said comes without extra hassle.

“It just fills a gap in our current routes,” said DeLine. “We don’t have to gather customer information, we don’t have to gather their billing information, and we don’t have to bill them after the service is completed. All we have to do is show up to the job, plow it and send a picture when it’s completed.”

Last winter, when Syracuse was unusually dry, DeLine dispatched five trucks to Boston, which was seeing record snowfall. He said he made $15,000 on the trip and could not have done it without the app.

“It wouldn’t have been feasible to travel there and do that based on the amount of work that we would have had to do to gain customers there at the drop of a hat,” he said.

While there is no significant competition to Plowz & Mowz yet, there are still challenges to this model. It works for residential, but would need to be much larger scale to serve commercial properties, which require heavy equipment. The model also does away with old-fashioned customer relationships.

“It’s going to be a significant change and more challenging. Before this, people had a route, operators, drivers, they were familiar with the properties in advance. Now they don’t know,” said Tirado. “The property could have steep inclines and declines, sensitive landscaping, where are you going to put the snow? Before, people did on-site inspections. It’s going to be more challenging, but I certainly think people will adapt to it.”

Mahoney said he hasn’t had many issues with customer satisfaction. He notes that drivers have Google Maps, providing a picture of the property, and that customers can upload photos and instructions to their requests. Mahoney claims to have grown his app into a “multimillion-dollar company” in just three years. He said he has help from an angel investor and will be raising more funds soon.

No question, the promise of quick help after a storm is very attractive. With a possibly epic winter storm bearing down on Washington, D.C., where Plowz & Mowz does not yet operate, CNBC.com put a call in to a northern Virginia plow company Thursday to find out about weekend service. After sitting on hold for at least 10 minutes, we were told they could not guarantee a plow before Monday.

 

 

 

 

Omnichannel Marketing, Visibility and Perfect Order

One of the biggest business changes wrought by the rise of the Internet is omnichannel retailing – the ability for consumers to make purchases at any time in any place, and then have the product directly delivered to any address in the world.
This creates a major challenge for suppliers who don’t yet have fully operational EDI and automated, real-time processing. Consumers don’t just want products on demand – they also want accurate information concerning product availability, when the product will ship, and when it will arrive. Providing this information requires that the supplier’s ERP and EDI systems are integrated, and that real-time updates flow between EDI systems, the retailer’s ERP, and the customer interface.

EDI providers make much of the technical coordination easier by providing infrastructure that seamlessly connects the supplier’s and retailer’s EDI systems. This, in turn, makes it easier for perfect orders (orders that meet 20 criteria first specified by R. Wang at Constellation research) to be accomplished, with suppliers fully participating in omnichannel orders.

Visibility
Perfect orders aren’t necessary, most of the time, to satisfy consumers’ needs. But many of the criteria are crucially important. Just as visible, real-time order tracking is vital for omnichannel sales, the same visibility for all orders can work wonders in getting orders perfect (or close to it).

EDI Made Simple: A New Approach
This paper will present a clear, simple path to successful implementation of a highly productive and profitable EDI initiative in your company. If you’re about to bring EDI into your processes, this brief will help you avoid the potential pitfalls encountered when approaching it without this guidance. If you’ve attempted to implement EDI already, you’ll likely recognize at least some of the problems we describe, and gain from our explanations on how to avoid them.