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Hot Topics in International Business Logistics Charlie Zidek Managing Director SEKO Logistics State of Logistics 2014 Total Logistics Costs = $1.45 Trillion Logistics Costs as a % of GDP = 8.3% Inventory Carrying Costs Increased 2.1% in 2014 Transportation Costs up 3.6% - Strong Shipment Volumes © SEKO Logistics 2013 2 State of Logistics • Trucking Capacity is Tight • Reduced Productivity Due to Regulations • Positive Economic Signs – GDP Growth, Unemployment and Labor Participation Rates • Strong Dollar – Lower Exports, Strong Imports • Interest Rates Still Low – Below 1% • Inventories Growth Slowed in 2014 • Industrial Production Strong 2014 • Retail E-Commerce Sales Continued Growth • Rail Demand Grew in 2014 – 4.5% (Highest on Record) • Freight Forwarding Revenue Up 5.4% in 2014 © SEKO Logistics 2013 3 West Coast Issues • Port Congestion Caused Problems for Retailers and Manufacturers Across the Board • Underlying Issue at Ports Trucks, Chassis and Labor • Large Vessels Bringing More Cargo with in a Condensed Time with Equipment Shortage to Move Products • Congestion Created Longer Times for Drayage Companies – Making Lesser Turns per Day • Lack of ILWU Contract Contributed to Slowdown • US Importers Implemented Emergency Plans to Manage Critical Freight Destined to US – – Canada/Mexico – Air – East Cost © SEKO Logistics 2013 4 Panama Canal As an Option • • • • • • • • Panama Canal Expansion Purpose to Reduce Transit Time $5.25 Billion Cost Scheduled Opening 20015 – Now it is April 2016 Increased Vessel Size from 965 ft. to 1,200 ft. (Length) Increased Width from 106 ft. to 160 ft. 5,000 TEU/Vessel to 13,000 TEU/Vessel 218% increase in Annual Tonnage Today 66% US Bound Containers goes Through West Coast, 20% PC and 14 Suez Canal • Best Case 10% of Current West Coast Freight Could Shift to the PC by 2020 (Reality is 6-7%) • East Coast Port Competition will Increase – Rail, Truck, Chassis Shifting • East Coast Port Expansion will force Shippers and Carriers to Modify Strategies and Operations © SEKO Logistics 2013 5 Tianjin Explosion • August 12, 2015 • Tianjin Shipping Point for Chemicals Used in Electronics Production • Electronics, Retail and Numerous Industries Will be Impacted • Explosion Happened at a Chinese Logistics Company • Over 173 People Killed, Hundreds Missing, 6,000 People Homeless • 1.8 Square Miles Around the Blast Destroyed • Companies Lost Millions of Inventory • Product from the Region Trucked to Qingdao and Shanghai • Product Was Air Freighted to Arrive on Time for 4th Quarter Sales © SEKO Logistics 2013 9 Tianjin Explosion What Have We Learned? • • • • • • The Logistics Challenge Manufacturers Have Inventories Destroyed Lost Revenue What is the Backup Plan? Did The Organizations Have Redundancies? Haven’t We Seen This Before? © SEKO Logistics 2013 10 Hot Topics in International Business Logistics Charlie Zidek Managing Director SEKO Logistics