Five Key Takeaways From TPM 2016

For shippers, carriers and logistics providers, the JOC’s TPM (Trans-Pacific Maritime Conference) is one of the must-attends on the annual events calendar. I caught up with one of Freightos’ delegates after the conference and scoured through the presentation material for insights. So if you too missed out …

1. Transpacific Shipping in 2016

The world’s most popular route is still chock full of surprises, including:

  • Vietnam has emerged as star exporter to the U.S., overtaking South Korea at 2nd spot for Asian supplier of containerized goods to U.S (from IHS).
  • The U.S. has a growing comparative advantages in some industries, like agriculture, and could export more. Incidentally, this message was from economist, Dr. Walter Kemmsies, who also pointed out that the world’s middle class is growing much faster than general population growth. Half the world are projected to be middle class in ten years time. Which means more trade, less poverty.
  • China’s booming e-commerce is a great opportunity for logistics providers given the potential for scaling. CEVA gave as example, that the traditional Chinese New Year gift cards have gone online. 32 billion red e-packets were sent out on WeChat over the holiday.
  • CEVA’s presentation more broadly demonstrated that ambitious global forwarders are benefiting from China’s growing middle class consumption.

2. Cutting costs (and possibly business)

A theme at the conference was sea carriers forced into cutting costs. McKinsey warned that they are alienating customers, thereby exacerbating their problems.

“An asset-intensive industry struggles with persistent financial losses caused by rampant overcapacity and poor customer pricing discipline, resulting in financial distress and, ultimately, large-scale consolidation. Sound familiar? It should.”

This Alix Partners whitepaper drew references to the U.S. domestic passenger airline business from a few years back.

A Barclays presentation picked up on a fascinating shipper-carrier dynamic. In a unsettled market, individual carrier goals to increase returns or market share results in all carriers becoming worse off. Given the market uncertainty, this will continue to deteriorate until some carriers fold, creating a new equilibrium. Sound familiar? It should – this is a perfect example of the Prisoner’s Dilemma.

3. Empty containers

Drewry did the math, and despite last-ditch carrier attempts with cancelled sailings and increased idling of ships, lower ship loads will continue through 2016. No surprise.

According to the urban myth, how many containers lost at sea each year? Actually the real stats came up in conference (about 2,500). Well maybe the new urban myth will be how many containers are sailing around empty? Estimates that we’ve come across when speaking to the CEO of Staxxon is that on some routes, over 60% of containers are empty.

ClearMetal, a new logistics analytics startup estimates that underutilisation of containers costs the industry $2B annually, including repositioning, missed revenue and vessel inefficiencies.

4. Venture Capital Loves Freight

Amazon isn’t the only tech player interested in logistics. As the JOC itself commented after a TPM tech session:

Why does venture capital love logistics startups? The amount of funding for transportation-focused ventures (spiraled up) to $14 billion in 2015.

Speaking to investors and analysts, we’re seeing the same interest. The combination of a huge market looking for efficiency and new, Big Data technology means huge opportunities. Which is why we see more and more logistics startups emerging every week.

Of those featured, my pick was TRAXENS. CMA CGM’s fitted this system into their new ship, the Bouganville. It collects real-time data throughout the container’s transport, including location, temperature, humidity level, vibrations, impacts, attempted burglary, and customs clearance status.

5. Express Logistics

E-commerce has transformed parcel delivery. The industry talk is now on how consumer e-commerce  attitudes are starting to impact freight.

James Tomkins from Tompkins International nailed it with his presentation. Get this acronym: IWI WWIWI OYTMTP.

“I Want It, When and Where I Want It, Once You Tell Me The Price”.

Tomkins continued – the rules for e-commerce have already been set, and supply chains must become more agile. Shippers used to work to landed cost, but now it’s about delivered cost. He goes through ‘the big details’: this new ‘retail earthquake’ is as strong as the ‘China earthquake’ (world factory to world consumption hub). For freight companies to be part of this future, they must re-work their trans-Pacific logistics strategy (and more) to emulate the pioneers – Walmart, Amazon and Alibaba.

This year’s TPM  insights covered implications from growing e-commerce, a changing China, cut-through technology, changing markets, and more. These are uncertain times. So much is changing. Opportunities and threats abound. So, what will be the key takes from next year’s TPM?

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