Supply Chain, Logistics & Shipping

>>Okay, we’re going to
go ahead and get started. Some other folks may
join us as we go. But welcome to the
Supply Chain Logistics and Shipping Panel Discussion. And for those of you
who are supposed to be in another session, thank you
for accidently selecting ours. I’m Jeff Pratt, I’m
the head of the BDO, the US Supply Chain
Consulting Group. And I’m acting as the moderator
for our panel discussion. And the focus of today’s
discussion will be on supply chain logistics, some
of the developing technologies, you know, services provided by
third party logistics providers, and you know, some of
the emerging issues that are affecting
supply chains. And we bring with it, with our
panel, we have a diverse set of perspectives that we
bring to the discussion. And our thought for today’s
discussion is to, you know, introduce the panel so you
can understand the perspective that each panelist is bringing
and we’ll share some questions and some answers on some
of the emerging issues that are really affecting
supply chains. And then we’re going to turn it
to the audience fairly quickly. Because really, you know, it’s
about what you want to hear and we’ll open up to questions,
we’ll have people, you know, going through the room
with microphones you know, so that we can hear the
questions you have and so with that, I’ll ask each
panelist to give a bit of background on their
role in their organization so you can see the diversity of the perspectives
that we’re bringing. Ned?>>Sure. Good afternoon
everyone. Thank you for coming,
2.30’s a tough time, right? Right after lunch. So I want you guys to make sure
you’re engaged, ask questions, we look forward to that. By education, my background is
in finance and then I segued over the dark side about
ten years ago in operations and supply chain, I’ve
never looked back. It’s been a hell of a ride. So I work for Continental
Automotive. I run manufacturing as well as
supply chain for North America. For those of you who do not
know who Continental is, I’ll just take 90 seconds and just give you a very
high level overview. We develop emerging technologies
in connective mobility. And our company has been around
since 1971, we’re very proud of our product portfolio. We deliver safe,
intelligent, efficient and cost affordable technologies
in many different industries. We provide, well you
heard this morning, in terms of autonomous driving? That’s one of our forefront
technologies directly into vehicles. Products directly into
machines, the traffic industry, as well as transportation. Last year we had
about 44 billion in revenue, in terms of Euros. We employ 250,000
fantastic people. And to bring it a little bit
closer to home for this panel, we are in 22 states here
in the United States in terms of manufacturing. We have 46,000 people
in the region. And if I just look at
our automotive divisions, our three automotive divisions, which is our power trained
division, our chasee division, as well as our interior
division, we partner with about
6,000 suppliers worldwide. And we handle roughly 140
billion components in a year. So we’re extremely diverse. Whether you’re talking amongst
states, amongst borders, across the ocean as my analyst
will allude to, very diverse, ever-changing, very fluid. Look forward to your
questions a little later on.>>Excellent. Hello, everyone. My name’s Darin Bonny. I’m the CEO of MyFreight. We’re an Australian
privately owned business based in Melbourne in Australia. We started our business 28
years ago as a freight broker, freight resaler, more
commonly known these days, the buzzword is freight
managers. So we’re a non-asset based
freight management business. We ventured into a startup
software business five years ago. So within our corporation, we built a cloud-based
freight management system. A system that now sees almost
500 integrated transport and supply chain
businesses interfaced with our system and our clients. And with that comes a
lot of in and out data and of course connections across
ERPs and financial systems across all of our clients. We currently push through
137 million dollars’ worth of freight just in
Australia alone. We’ve just ventured
into New Zealand. We decided to take the step
into a neighboring country first and dip our toe in the water. It’s our client base that’s
actually driving the demand for our business to grow,
our software platform. And where MyFreight sits on
the panel today is not just from a software and
technology point of view, but we too as a business has
done all the due diligence just like some of the people
in the crowd today that are actually looking
to invest in the US. And based on demand, with
a non-asset based business, we were challenged by
American businesses and North American businesses
to sit up office in the US. So with that, we’ve done
all that due diligence, we’ve made all the hard
decisions that a lot of you people in the
audience have to make. And not only that, but we’ve
also had to realign ourselves and work with all the
transport companies that we’ve done remotely
effectively from Australia, New Zealand, for so many years. So understanding that supply
chain, reacquainting ourselves with the landscape here, and
regenerating new relationships. So I look forward to sitting
on the panel this afternoon.>>Thank you. Hans?>>Hans Helmstruck, Hans
Helmstruck, very, very German. Moved over 2001 to San Diego. With at that point, two
kids, pregnant wife. My son was born in
San Diego, beautiful. 2004, I was forced to move
to Charlotte, North Carolina. Didn’t like it at all. Kept the house in San Diego. Thought I would go
back to paradise and have the green
card, never did. Paradise, Charlotte. And actually the Charlotte
region businesses told me I get a B when I say Charlotte. So I work for Kudernagen,
logistics company. We like to say the leading
logistics company in the world. About 80,000 at least. 1,400 offices. I just realized that I had
to change my significant because it still
said 72 and I think that was about two years old. So we’re growing. We do this with a passion. I’m in charge for the
Southeast for Europe, so transatlantic import and
export, ocean, air, [inaudible], trucking, whatever it is. I’m focusing on multiplying with
my sales team in the Southeast. But I also very involved
in North and South Carolina where I have foreign accounts
which we’re not supposed to have but I do and I appreciate
Continental to help us. We ship actually
quite a bit of tires. So I’m looking forward
to talking to you. If we cannot answer any question
today right here in this panel, please reach out to me outside.>>Thank you. Emged?>>Good day, Emged. I think I’m in the wrong room. I didn’t know this
was the logistics… No I am in the right room. I–>>My life just got harder.>>I work with UPS, I’ve
been with UPS 29 years now. I started as a driver with UPS
and have rotated through a lot of the functions that you’ve
already heard about, finance, strategy, mergers/acquisitions,
operations, sales, and learned a lot. And gained about 31 pounds
through that journey. I thought I’d share
with this lovely group. My responsibilities now
revolve around policy, global trade policy,
as well as borders. So I have a team of people
who work on issues related to at the border problems
and behind the border. And how do you change
regulations and policies to enable your businesses
to more fluidly get in and out of countries? So relative to what you’re
sitting here and hearing about, I spent a lot of time
on an agreement TPP, which you might recall, now
called CPTPP, just finished up with USMCA, the new
NAFTA, and have worked on many other digital
agreements. So I look forward to talking
to you a little bit about that. And what we do for small and
medium sized businesses that try to relocate to the
United States.>>Okay, Donavan?>>Good afternoon
everyone, I’m Donavan Murray with Maryland Port
Administration. I’m the general manager of
intermodal trade development. So for those of you in the room, unlike the esteemed panelists
here that have joined us on stage, I’m sort of
with the home team. So the Port of Baltimore,
just right up the road, less than an hour away. By way of background, I went
to the Merchant Marine Academy, which for those of
you who don’t know, is similar to the Naval Academy
with all the military bearing and the requirements
from that component, but rather than training young
men and women to be officers on Naval vessels, we’re
trained to be officers on commercial merchant ships as
well as the land-side support. So I spent most of my career
in the private industry, similar to some of the other
panelists here in various roles from operations and sales
administration, risk management, et cetera, and just
recently transitioned over to the public
sector if you will, with the Maryland Port
Administration falling directly under Maryland State Government. So with the end of the
day, our role is really that of facilitation to make
sure all the stakeholders in a port community and/or
extended port community, in this case an international
one, have all the resources
available to them to make those connection points
and leverage those relationships for the movement of
cargo through the port. Baltimore statistically ranks
number 9 in the United States in tonnage and number
11 in value. Although we are not the
largest container port, I would say we are quite
a diverse port handling over 20 million tons
of boat cargo a year. We’re also the nation’s
number one roll-roll, or roll on roll off,
port in the nation. So that’s automobiles,
that’s tractors, combines, things that you think of
driving on and off a ship. Look forward to the questions.>>Thank you. One question that may be
good to start with, you know, given that we’ve probably
got folks in the room who are considering locating
operations in the US, Emged you’ve probably seen
organizations be successful in locating new operations
in the US and you know, some who have been
not so successful. Good you share some of those
examples and maybe compare and contrast what went right and what helped those
organizations that were successful?>>Sure, I’m going
to make a couple of assumptions depending
on your company size. So I would just say to you,
you know, if you’re VLM, you’re very large
multinational, again, you might be in the wrong room. Because I would say the VLMs or the very large multinationals
probably have the resources to withstand what we’d call a
long tail of investment, right? You’re going to take profits,
a journey to get to profits, or take losses for a long time. If you’re an SMB, and you’re
thinking about your products, your services, and you want to
relocate to the United States, I would tell you through the
three decades of experience that I’ve personally witnessed
and then what we’ve learned at our company is
you really want to now leverage obviously data. Right? You don’t want
to take a blind shot or take a rudderless target
shot at where you want to be, where you want to relocate,
where your customer base is. And if you’re a retailer versus a BDB business they’re
certainly different strategies. But I would tell you the bottom
line is there’s a plethora of data available to you. Start with Google analytics, try
to understand the buyer behavior of what your goods are, who’s
buying it, in what region, when and for how long. How big is the customer base? Who your competitors are? So I’m, you know, I don’t want to insult anybody’s
intelligence, obviously I would tell
you you need to do that as basic number one. And there’s a lot
of consultants, lot of universities, and a lot
of resources available to you for free in order
to get that done. Once you’ve really done that, I think what we’ve seen our
customer base do is not get too ambitious. And what I mean by that is you
really want to ramp up properly. A number of business jump in. Get a lease, get
brick and mortar, let’s get this business started, let’s pick out where the
VIP parking spots are. I would say to you,
you might want to think about reversing that. Right? You want to think about how the leverage the
resources on this panel. How do you use our
infrastructure to your best benefit. And start out by
leveraging the partnerships that are available to you. So I’ll give you an example of a
business that came out of London that we worked with
that now has a footprint in the United States, had
zero when they first started, and now has a footprint
in the United States and about 200 million
dollars in revenue. What they did is they were in the old world a mail
order type business. In the new world, obviously,
an internet business. And they figured out how to
market to the different regions. And then form that
marketing knowledge, ended up building
densities, customer densities. Through their different
programmatic processes. Once they’ve decided, or once
they’ve actually witnessed and grown their revenue
to the point where they can then
put a facility, they didn’t put a facility. They came to us and said hey,
do you have any room in your end of runaway facilities and use
those end of runaway facilities, the warehousing, pick,
pack, and ship, for a period of about three years, until they
built even bigger densities. And then at that point, they
put in their ten pegs and built out their infrastructure. So through that growth
process, which took four to seven years depending on
which area of the United States, they work with the region
economic development people of those states, secured
grants, built their buildings, hired their people,
and went from there. So there’s many different
formulas, but I chose that one because it seemed to me a
story that made sense on how to grow in a low-risk way. But still leverage
everything that’s available to you here in the
United States. There’s so much opportunity. I’ll stop there and
we’ll [inaudible].>>Thank you. And Hans, Emged mentioned you
know, some of the key you know, sort of mathematical and you
know, optimization activities that need to happen
to select the right, you know, logistics footprint. Would you like to
comment on that and..>>Absolutely.>>– Some of the key factors?>>It depends on what
your business looks like. Do you bring in an
ocean freight? Bringing air freight? Bring in small packages, big
packages, crates, [inaudible]? So when you come to the United
States, you definitely want to have a look at also from
a logistics point of view, when you select your site. ELD, electronic login device,
will not allow any driver to drive more than 14 hours duty
time, 11 hours driving time. This is kind of new, about
one and a half years old. Before drivers were not
allowed to drive longer, but they had a pen and a piece
of paper and wrote it down. And guess what they did? They drove 40 hours. Just to make sure they get paid
faster and meet the deadline. Well that’s over. ELD is there. They get fined and
penalized so we cannot play around with this anymore. So if you have ocean freight, you’re considering the United
States as a future site, then please, do not be
further away than 250 miles. Because you can make the
round trip with a container in about 14 hour duty time. Maybe it’s 300 miles. But you’re pushing it. If you cannot make this round
trip, you pay layover fee. 300, 350, 400 dollars. Depends on the trucking company. So you want to think about this. If you’re bringing two
containers a year, who cares? But if you’re bringing 20,
30, 40, and you want to grow and you want to bring in 100
in three years, think about it. Then air freight. Again, I think I get
paid already four beers for saying Charlotte,
sorry for that. Charlotte has, I
picked Charlotte, I could go anywhere
in the Southeast. But I picked Charlotte because
it has the airport, it was close to the port of Charleston,
Savannah, [inaudible], Norfolk, I can use all four if I have
to, and I have interstates. Lots of interstates. So I can go and distribute
my freight, my packages, whatever I want, everywhere. So I knew in this area, the
greater North, South Carolina, the greater area around
Charlotte, there are customers, a lot of customers for
me, who meet my service. Chicago service. So air freight, you want to make
sure you’re close to the airport with good connections. Not one, two, three,
regional flights. I’m talking about
good connections. Make sure that you consider all
these things before you say oh, I’m in XYZ in no man’s land. Yes, you got the land for free. And yes, you got incentives. And yes, it’s all
sweet and dandy. But you struggle to find
people who work for you and you cannot get your
freight on a reasonable cost. Thank you.>>Donavan, Hans mentioned
the selection of ports. Could you talk a bit about the
changing role and the value of ports in the supply
chain selection and globalization process?>>Yeah, absolutely. And I think I’ll touch on both
the previous answers in that. So for the folks that
have been in the shipping or what is now supply chain
industry for many years, you’ve seen a lot of
drastic and radical changes. 20, 30 years ago supply
chain was really sort of an afterthought. Nobody really thought how to
effectively plan the movement of goods and ultimately
to the consumer. And I think a lot of folks an
point to folks like Wal-Mart that differentiated themselves
in that space versus companies like Sears or Kmart that failed
to adapt to those changes and really understand the
savings that could be leveraged, even Amazon, everybody
picks on them, but Jeff Bezos’s famously said that your margin
is my opportunity. And so in that, within
the supply chain, ports have really
changed their role, what used to be just a
fixed note on the map, and geographically every port
could just count on a slice of the pie that they
would receive just based on that geography and consumer
market, that has really shifted. Ports have taken on a much more
active role in the management of the customers and the
relationships of what’s moving through their port
and connecting them to that ultimate consumer. So when you’re looking
at that connection point in a supply chain, it’s
no longer a fixed node. But as a port, we’re as
integrated into the supply chain as your trucker or
your rail provider or your freight forwarder
or your data analytics folks that to echo what was said
earlier, yes data is important but the business
still comes down a lot of times to relationships. And you want to make sure
that your partner with ports that have those relationships
and that can really set through facilitation the
connections to your truckers or your rails or your
terminals or your shippers or those various points
along the supply chain. Because the last thing you
want to do when you’re trying to grow your business is
worry about that component. And again, back to
the earlier point, leveraging the relationships
of folks in that supply chain to really do that work for you.>>Thank you.>>And I’ll stop there.>>And Darin you
talked about some of the emerging technologies
that you’ve helped launch into the supply chain process. Could you, you know, reflecting
on what the guys have talked about in terms of some of
the key considerations, share with us how
big data and some of the new ecommerce
platforms are coming into play?>>Yeah, certainly. Well when we look
across the broader range of supply chain data,
it is important for tracking trades fare and
visibility for businesses. BDB transport movements
are important particularly in manufacturing
areas, for example. To make sure that product’s
coming in on time, and available for the next portion
of your supply chain. So the data needs to be, in
our example, with our software, is integrating with all
the businesses that sit on this panel to track
their freight from cradle to grave, so to speak, right? Down to the last mile. And that’s where ecommerce is
really changing things now. We see it in the marketplace and
for businesses, we’re very used to the demand on freight. We’re aware of what our
freight providers actually have to experience. Whether it be weather, whether
it be a bad time of year, or let’s call it Christmas,
where demand is very high. But ecommerce and the last moral
customer these days is really driving service expectations. Some of the issues
we see now are things that businesses probably
didn’t consider when they were setting
up their businesses. And that is things like
returns of products. Also customers’ demand
or see in the press. Modern technologies like
UberFreight or Lead by Amazon. So they believe that their
order shaded be picked, packed, and available the next
day in the morning. Where businesses
have that high demand and understanding,
the consumer’s not. And where businesses, where
their clientele are consumers, you are experiencing that now, and that’s where
data does kick in. With requirement for last mod
delivery apps or integrating with multiple transport
companies, systems, subcontractors, into modal
systems, starting right at the port when the
freight first comes in. So massive impacts right there,
really driven by ecommerce.>>Thank you. And Ned, as a very large
automotive supplier, one of the largest in the world,
with all of these services and the emerging
technology, how are you and your organization
staying abreast of those to ensure competitiveness
in 2020 and beyond?>>I think it was already
discussed a little bit but I’ll try to give you a
supplier perspective on this. Obviously, the transport
management system is critical. Right? The holistic view end
to end is absolutely critical. But if you’re smaller in
size, it makes no sense for you to develop your own. Right? That is something that
should be done with already that has the expertise. And there’s a couple
of two or three of them sitting up here with me. But you have to look at
actually other things in terms of your manufacturing
process, your supply process. We are seeing more change
in the next five years than I personally
believe we have saw in the last 25 to 35 years. It is out there. It’s not being talked
about anymore. It is out there. The question is do you want
to be an innovator, right? Or a fast follower. And honestly it depends on
your individual strategy. Continental has decided quite
frankly to be an innovator. Right? We are using kolbats
right now in our facilities. Both in logistics as
well as manufacturing. And it’s working out very well. We use automated
guided vehicles already. Not in terms of just
transporting paper from one side of micro logistics to the other. Right? We are literally
delivering palettes. We are literally
delivering parts, et cetera, from our warehouses. You know with the smart
glasses are out there. Geofencing is out there. The RFID technology is
a thing of the past. As soon as geofencing
technology has a price point where it’s more, it has a
better appetite, you’re going to see the integration into
your financial systems. You’re going to be able to
track and trace everything. It is going to be phenomenal. The question is your
strategy in your company. What is your palette? What are you able to invest? I guarantee there’s
an ROI in one of the emerging technologies. I didn’t even talk about
big data analytics. It’s crazy. Predictive forecasting. It is all right there. The question is in terms
of your individual company and your strategy, what are
you willing to invest in and what ROI are
you looking for. But in my opinion, and I saw
this maybe six months ago just very quickly, I was
at a presentation, somebody showed me a
warehouse from the 1950s. And these just showed me
a warehouse, a warehouse, a picture taken the week
before the presentation. The only difference,
unfortunately, is that one was black and
white and one was in color. And I’ll tell you,
that will change. Right? The warehousing is going
to be the future technology. We are going to grasp and we
are going to find savings. And honestly what you see in the next five years will
surpass what you’ve seen in the last 20. I am convinced of it.>>Thank you. With that, what we’d like
to do is turn the discussion to the audience. And ask you if you have specific
questions for the panelists. The one thing that we
talked about that we’d like to stay away from because
there’s so much up in the air with it, are the impact
of tariffs and some of the trade agreements
that are being negotiated. In fact, there’s another
competing session that you know, across the hall somewhere,
to discuss that. So that’s one that’s a little
bit speculative and that we’d like to stay away
from as a panel.>>If you have any
questions, just raise your hand and we’ll bring the mic to you.>>So while it’s quiet in
the audience right now, I’ll just chime in on the end
of Ned’s conversation just then. Just highlighting that
technology changes and that the decisions
that you’re going to be making are going to
be based on when you arrive in the US of A. But be
considerate of what’s out there in the next few years. Don’t look too far ahead, the
adoption of change for us, we all own a car
apparently on average. And I get this from my data,
for 16 years on average. So. So we won’t all be
in electronic vehicles, automated vehicles, or autonomous vehicles
for another 20 years. We will see them out there. But we’re possibly going to
be watching them as well. So take your time on making
a decision based on 2020, rather the next few years.>>Can you hear me? Hi. My name’s Alex,
I’m from Austria. In the business of B2C
logistics, so we’re shipping for our clients basically
across Europe. We have a warehouse network. What I’m looking for is basically we have a
clients shipping to the US and current data setup is very
inefficient because I have to give it to FedEx or
DHL and it takes forever and costs a hell of a lot
of money for our clients. So what I’m looking for
is basically setting up a few strategic locations
in the US to be able to, what we’d like to see, like
a two day delivery window. So my question is what’s
your points on your like, very specific question
I know but, B2C, what would be a good
setup to reach consumers across the US basically?>>Okay, thank you. Hans, do you want to?>>Do you mean like more of
the location or do you mean to set up an infrastructure?>>Sorry [inaudible]. Would it make sense, like is
there one central location where I can get it like
done halfway effectively in three days or
fewer, three at least? And where would you put them?>>Okay. Again, it’s
a whole bunch of things we need to consider. Are you bringing it in ocean,
are you bringing it in air?>>Bringing in palettes
and shipping [inaudible].>>Okay, so you’re bringing the
pallet air freight or ocean?>>Both, possible.>>Both possible? So– . Ocean. So if it’s predominantly
ocean, as I said before, don’t go too far
away from a port. Remember the 250 miles, with
300 you’re pushing your luck. So make sure that’s one key. And definitely if it’s
your own operations think about time zone. West coast is beautiful, I lived
there, I still call it paradise. But it’s nine hours to Austria,
I think it’s Austria, correct? So it’s tough to
communicate to your own team. So I would definitely stay
somewhere on the east coast. And then yes, if you want
to be quick, overnight, make sure you have interstates. And there’s a whole bunch of amazing trucking
companies out there. So make sure you
have interstates and then make sure
you have the airport. So basically what I said
before, if you want to be quick, you got to have the airport. You have to have an airport
worth, there’s so many. I mean I don’t [inaudible] but
Atlanta, Chicago, Charlotte, there’s so many airports
you can go to. Don’t be ten miles
away, it gets expensive. Go 30 miles away. You’re fine. Does that answer your question?>>I think, yeah,
some of the other– . [ Inaudible ] [ Laughter ]>>I was about to say that
but I should probably not.>>I know a guy.>>I know a guy. So there’s three primary colors
playing in the United States. Brown, purple, and yellow. I would just tell you
all those primary colors on the east coast have their
major US east coast facility in either Louisville, Kentucky,
or an hour away in Cincinnati. And that’s because of the
international date line and the time zones. And you could reach it
within, to your point, geographically time in
transit to the BDC customer. But I’d, here’s a couple
other things I’d tell you. Because of changes
in 2015 to US law to allow an 800 dollar
inbound [inaudible] per item without paying any duties,
there’s this whole other layer of ecommerce that’s now
evolving in the United States. So one of the things I
think I like to talk to you without a microphone about
is we started a program at UPS called “Ware to Go.” Like warehouse to go? It’s like somebody
said Uber, it’s, we understand all
the excess capacity in the United States
now in warehouses. And we certify pieces
of warehouses to locate geostrategically. Based on where your
clients’ needs are. And it’s very fluid. So especially if
you’re a resaler or you’re providing the
service, you might have in this region 400 customers
today and 200 shift over– you can nebulously now move
your warehouses depending. So there’s a lot of
opportunities now with technology and
transparency, enabling you to be very fluid in
your real estate. Obviously you’re paying
a bit of a premium. And I wouldn’t say, you know, to use that exclusively
as your source. But it allows you
the flexibility to serve your customers.>>Thank you.>>Thank you. Did you have a comment
or question?>>You’re welcome.>>Anything from a
port perspective?>>Yeah, the only thing I would
add from a port perspective, and really, it echoes
Hans’s earlier comment. You want to make sure, and
particularly for the sea of your model, getting
to the ultimate consumer, which let’s face it, is
really all of us at our homes, whether that’s Amazon
or whatever method gets to our homes, you want to make
sure you look at census data in the United States
and understand where all those seas are,
where the consumers are. So again, just because
we’re in the port business, we happen to know New
York, New Jersey area. By far the largest
in the United States. Southern California, number two. Chicago metro area,
number three. We actually sit in the
middle of the fourth largest in the United States, the
Baltimore Washington corridor. So as you look at that
international strategy, you want to make sure
that you do have good port and air resources. And that’s also in a
population dense area so that you’ve got plenty
of sale capacity there. Absolutely.>>Could you speak
about the impact of the Panama Canal expansion? Are you seeing any
trends with the ports?>>Sure, I’ll take that. So when you look at Panama
Canal expansion, you really have to divide the United
States in half. And it really depends on where
you’re sourcing your product from and ultimately where
that strategy is to sell in the United States,
whether it’s B to B, or again, back to the ultimate consumer. Clearly the west coast
is receiving larger ships than what can transit
the Panama Canal. 14,000 plus is about the
largest that you’ll see on the east coast in
the United States. In part, not only because
of the size of the canal, but you also look at
if the distribution and somewhat fractured
nature of the east coast of the United States, more
population, more ports. Most people believe that
while the Panama Canal at 14,000 TEU’s limits
ship size, which again, is still a monstrous ship
compared to what we had just 10, 15 years ago, the nature
of the transpacific trade that lends itself to much
larger vessels, sometimes, which is a rarity, a true,
pure dump in a load bag in a southern California
port that you won’t find on the east coast, 14,000 TEU
seems to be that accepted size of ship that will
call the east coast. Not only because of Panama
Canal limitations, but also just because of port infrastructure. When you look up and down
the east coast, New York, New Jersey, they raised the bay
on bridge, you may have heard about to the tune of a
couple billion dollars. Which was no cheap investment. Norfolk, they’re at 50,
Baltimore is at 50 feet as well. Charleston, I believe
they’re going to 54. Savannah is somewhat
limited with the title swing. So through all of that, on the
land side, the ports are racing in this infrastructural board to
get the cranes higher, taller, faster, wider, all
of those things. More land expansion, more
intermodal connectivity. But ultimately the
Panama Canal, yes, was able to bring goods
here from primarily Asia to the east coast in
more [inaudible] scale. But again, just based on
a lot of those constraints that I mentioned earlier, 14,000
TEU’s probably the biggest that we’ll see here
on the east coast. So as that tonnage cascades
from the, really the Asia to Europe trade lane
into the transpacific, will eventually make its
way to the transatlantic.>>Yes.>>My question is specific
to the truck drivers. I think Darin, you mentioned the
autonomous truck driver won’t be here for another 20 years.>>Let me correct you there. So it is here already. But you won’t be driving one
yourself in 20 years’ time.>>Okay.>>So just what I was
saying, and I was speaking to the audience, it’s
looking to invest in the US. Make your decisions based
on what’s currently here and what the next
few years hold. Don’t get caught up in the hype
that we will all be operating and that we, as a panel,
we operate autonomously of course on your behalf. We won’t be just yet. But we’re certainly driving all of those new technologies
in supply chain.>>Okay.>>We do see it,
we are seeing it, we’re going to experience that. But I just say, just a caution,
that the adoption rate with all of us, actually, operating
autonomous vehicles while still freight’s moving
just as fast– .>>That’s kind of
my second question.>>Ned, you want to comment on how you’re using
those technologies today?>>Yeah, it’s a little
bit different. What I was referring to,
it’s actually two-sided. What I was referring to is AGVs,
autonomous guided vehicles, within the factory, right? Within micro logistics. So obviously that’s out there. But it’s emerging technology
and quite frankly there’s a lot of opportunity today for that. But then to switch things out
of the supply chain realm, obviously continental’s
a pioneer in autonomous driving, right? We believe in it and we
believe that it brings safety and although I hate to disagree, I think that penetration rate
will be a little bit quicker. But we will see, right? And I do think it will be an all
segments, person segment as well as the trucking segment as well. So I personally am
very excited about it and I think there’s
a heck of a lot of opportunity for all of us.>>That’s my follow-up question. The truck driver
is the number one, most highly turnover profession. And then I also noticed the
truck driver are getting very, very aggressive on the highway. They just changing
lanes like crazy. So my question to you guys is
any way you can make the number one turnover profession
to much more stabler so they won’t be
driving like crazy?>>I cannot talk to the
drivers when they drive crazy. I talked about ELD. I believe ELD was way overdue. I almost lost a friend
on the interstate because a driver just
crashed into him, found out he fell asleep. So long story short,
the drivers, the average driver age right
now is 57 in the United States. So don’t wait eight
years until they’re 65 and then they’re retired, they will retire the
next two, three years. I know for Charleston that a lot of container truck
drivers live in Charleston. Well guess what? There’s Global, Boeing,
and [inaudible] trucks. Instead of being under
stress all the time, never see the baseball practice
of your son or dance class of your daughter, and make only
40, 45,000, sometimes 35,000 without benefits, very
often, you can go to Volvo. Clock in at 8 o’clock. Clock out at 5 o’clock. Get 55,000, 60,000 dollar. Benefit package. So guess what? We’re not finding any driver. If you’re young and
a little bit smart, you’re not driving a truck. But we, what I can say, don’t
want to pitch any sales here, but [inaudible] pace right
now is a daily app day on market level, we decided to pay 75 dollars more
at least per truck. 75. So if the rate on
that lane is right now, let’s pick a number, a thousand
dollars, we’ll pay 1,075. The drivers know that. There’s an extra, I hope
they get it in their pocket, but it’s an extra 75
because we want to make sure that we get the service we need. And I know that the
other competition, competitors do a
very similar thing. We have to understand that
all of us, including myself, have to pay percent,
1% more on my product, so that we have the
infrastructure that we have trucks, we
have things in our stores. I don’t think it takes 1%. It takes much less. But we need to pay a little
bit more to these drivers so they get the job done right.>>So I’m just going
to add two cents’ worth because UPS is the
largest private fleet in the United States. And I started as a driver. And I survived. And I would just tell you
what’s really important, what we’re lobbying
the US government on is creating an
apprenticeship program to really leverage you know,
what some of our partners in Europe do really well. Which is raise people
to want this job. And create the benefit
package for the job. UPS for the last 111
years designed a network where drivers leave in the
morning and go back at night, and sleep in their own bed. Even though we’re moving
6% of US GDP every day, we figured out how to configure
a network so that they switch and come back to
their home every day. So you also got to, you know,
there’s a lot of responsibility on the company to figure out
how to be viable, make a profit, serve your customers, but
also serve your employees. So that’s my answer.>>Thank you.>>Final thought on that as
well in addition as Emged said, raising young folks
to want to be drivers. In a regulatory environment
then we also need to lower the threshold
or that barrier of entry. Here in the United States, you
need to be 21 to have a CDL, a commercial driver’s license. Ironically though,
within state borders, an 18 year old can
drive much farther with an equivalent weighed load than they could ten
minutes across state lines. So again that becomes
somewhat of a regulatory issue. Also from an insurance
standpoint, and this is where we get into
the practical, real-world nuts and bolts, many commercial
underwriters require two years of experience before they will
issue insurance to said driver. So how does that driver actually
get the requisite experience if they don’t get
any wheel time? So again, right now, that’s
actually within the zip code that we’re sitting in. Somewhere in the bowels
of Washington wrestling with that idea how to
actually get younger folks in and new blood into the industry. So as Hans said, 57 years old, drivers aren’t getting
any younger. And we need them, we really do.>>Yes.>>Missed one over there.>>Oh, I’m sorry.>>Oh, it’s all good. Jose Brans from the American
Chamber of Commerce in Mexico. So we help American
companies invest in Mexico and Mexican companies
invest in the US. Right here, it’s all good. So two questions. Number one, have you seen
any trends on, or evaluation in the supply chain or
logistics, from Mexico and the United States? I know at least from
the companies we advise, there’s been a lot of
movement on trucks, but there’s been a push
for using the ports, which I haven’t seen at least in
my experience, I haven’t seen. So can you talk on the trends? And secondly, is
there any circumstance where you’d recommend the
company use a strategy to use the NAFTA
or the new USMCA to get the merchandise
first into Mexico and then use those free
trade agreements to get it into the United States? Thank you.>>Sure. So I’ll take it quick because I see we’re
flashing here. I would just tell you, if you
haven’t done your research, the new USMCA is actually going
to create a great opportunity for North American trade. In the automotive supply
chain, there’s obviously going to be a lot of new
opportunities. One of the problems we’ve
had in the last 25 years since the US NAFTA was signed is
there’s been this whole cottage industry on the southern
border where American drivers of trucks can’t cross
all the way from let’s say Dallas
down to Mexico City. They’re in the LTL business, they’re in the small
package business. We have to consolidate loads, we have to have one
broker cross the border with a consolidated load. You have to unload the load,
it takes four trucks to get across the US-Mexico border. All that is going away with
the new USMCA, there’s going to be a more fluid supply
chain of legitimate goods between the two countries. So I would just double
down on what you said. You need to look at, once
it’s ratified and passed, how your business model changes
for how you’re going to exist in the North American
space between Canada, United States, and Mexico. So it’s a complex
question to answer, circumstances will dictate
it, but we’re going to be in a new day within
the next few months.>>And we do have
about ten more minutes.>>Oh, excellent, thank you.>>So could I dovetail the
second part of that question? Okay. From an automotive
manufacturing perspective, I have to echo what
was just said. We see opportunity in the USMCA. And I personally do
not see a logistics, major shift in logistics
change, right? From the ports or coming
through the US versus Mexico. I really don’t see that. So again, the devil’s
in the details, right? So we’ll have to see when
it’s actually ratified. But we see it as an
opportunity right now. So for our purposes, we
absolutely believe to be in the region for the region. That is a legitimate
strategy that we have. And we’re not going to
change that strategy.>>I think we had
another question here.>>Hello, this is
[inaudible] Krishan, FKACUA. My question is if you are
bringing a product to the US and you want to create
a presence in the US, we have the product in one end and the consumer
in the other end. How much in between can
be outsourced and how much of it needs to be
do it yourself?>>Oh. Do you want to start with
that from a supply perspective?>>My apologies. Repeat your question
again, if you don’t mind? If you can give him
the mic again, please? I thought it was more from a [inaudible]
perspective but go ahead.>>Okay. Bringing
products to the US with bringing the
products first to the US and then to the consumer. So we have the product
in one end and the consumer in the other. How much of the process
can be outsourced and how much you
can do it yourself? Like do I need to have a
warehouse and do the packing and then give it to your company
or this can be outsourced, or what is it that
we can outsource?>>I think it’s more LSB.>>– Hans on that.>>I would say if you ask
me, all can be outsourced.>>That’s a very simple answer.>>Please, let’s meet outside. Everything. No, it all depends
on the product and what is built
into logistics? The cost. You know. It’s cost. So we can do basically
everything. I mean we can iron shirts,
we can put them on a hanger, we can put a little label
on it and we change labels and I’m just giving you
one example for fashion. We can do everything. When I say we, the industry. Not only can [inaudible]
and name them all. They can do this. The question is what
can your product allow? It’s money involved,
it’s not cheap. When you come to
the United States, I can give you one advice. Number one, don’t make
the mistake Kunagin made and hire a German salesperson, look for an American
salesperson, because sales in America’s different. But, outsource as
much as you can. Work, focus on your key market. Your customers. Service them. Be there. Do whatever
you want to do with them. Let other people
do your homework. Your logistics, your accounting. Your taxes, your legal. Outsource it. That’s key.>>And to give you a couple
quick examples, we have people on the factory floors in other
countries, prelabeling goods for customers, consolidating
it based on our knowledge in the United States,
and importing it, acting as the importer of
record on companies we have, distributing, handling
returns, repackaging, relabeling and sending out. So that’s an example. We work for another
laptop company, or laptop [inaudible]
anywhere in the United States, we take it, we take out the
data, put it on another laptop, send you the laptop within 24
hours, you have a new laptop with all your original data. So the cycle of the
opportunity is endless. But there’s a curve where your
costs versus our costs meet in the middle, and
it’s a Venn diagram. You go okay, I’ve reached
the point where I need to either outsource
this piece or I need to do all these pieces myself. I love your comment
about focusing on your key competencies. A number of years
ago, 15 years ago, UPS went to all the
pharmaceutical companies. They’re not in the
business of marketing and outsourcing distribution. They’re in creation
and marketing. We now warehouse all
of the pharmaceuticals, we have a whole healthcare
discipline, because that’s what we do. We’re a logistics company. So figure out your strengths,
especially when you’re growing. Focus on that, and then
outsource what you can.>>And one more thing. There’s actually a whole
bunch of service providers who do exactly what you need. I know one company,
you come to me, and what they do is they
pick up the phone for you. And they will say XYZ imports. Your company’s name. They do the accounting,
they do everything. Everything. So you can be on the road,
selling your products. Wherever you want. There’s not only one
company doing this, there’s a whole bunch. I know one.>>Thank you. And we have just a
couple of minutes. And I’m sure any of the
panelists would be happy to stay behind if you
have specific questions. And I think you probably
have the contact information for all the panelists
in your summit material as well, correct? So Hunter? So with that, did you want to?>>There’s one more.>>Oh I’m sorry,
one more question. Okay.>>So I work in economic
development in the area surrounding Duluth, Minnesota which is the
furthest inland port in the Great Lakes Saint
Lawrence seaway system, number one cargo port
on the Great Lakes. Served by four class one
rail, intermodal container between truck and rail. What trends do you
see as important for international
shipping on the Great Lakes and where do you
see the Great Lakes in the global supply
chain right now? And in the next five
years or so?>>Donavan, do you want to?>>Well we both work in
the port space obviously in two different ends of it. While we’re at the northern
end of the Chesapeake Bay, we don’t have the constraints
that you necessarily have with the locking infrastructure
in the Saint Lawrence seaway. You know, I believe
it’s 59 feet or so in breadth or width on a ship. So we’re not limited
in that capacity. But in terms of changing
environment, I’m not the expert, perhaps Emged could speak to
the new NAFTA if you will, if that creates opportunity
for you in that environment, from Canada to the
United States. I think part of that
also goes back to some of the other comments that
we had discussed in terms of ultimate consumption. What is the driver
of that trade? Is it industry, is it consumer,
where do those two meet? And how can the port
play a role in that? So I’m not giving
you a great answer and a direct answer
to the question.>>I’ve always thought, you
know, I grew up part of my life in Canada, I’ve always thought
the Great Lakes is a great opportunity because I would
tell you now, especially, Canada signed an
agreement with Europe, CETA? And Canada obviously
signed the agreement with the United States
and Mexico. I think Canada has
kind of, in the vortex, especially with the Great Lakes,
because you would know 70% of the economic development
in Canada is around the Great Lakes. The manufacturing sector,
especially in automotive, hydropower, and the
proximity and logistics, really provide a
strategic opportunity for northeastern United
States and Canada. I’ll tell you what’s missing,
there’s an organization on the west coast called PNWER,
Pacific Northwest Economic, I can’t remember what
the R stands for. It’s a number of
provinces and states that decided regionally
we’re an economic powerhouse and we’re going to work
together and cooperate. That’s missing in my belief
in the Great Lakes region. And if you were to do
anything, I think it’s figure out under the new
USMCA and under CETA and under whatever
new Japan-US agreement or Japan-China agreement,
how do you turn that region into the powerhouse
it needs to be based on the infrastructure
that it has?>>Jeff, one final
thing on that. You had mentioned four
class one railroads that call your port right now. If you’re familiar
with the notion or persistent scheduled
railroading that started in Canada with Hunter
Harrison with both CN and CP and eventually migrated to CSX,
that tenant now is starting to take hold in all of
the US class one railroads and they’re actually
forming partnerships to get around the pinpoint of Chicago. I would make sure that you
protect your origin and/or destination in Duluth as the
western railroads are starting to embrace the tenants of PSR. When you look at the western
half of the United States or western two-thirds,
it’s laid out very logical in a linear fashion when
you think about the history of the migration west. But east of the Mississippi
river, it’s sort of this hodge-podge,
it looks like a big bowl of pasta where you have
all these short lines and interconnection points. And we’ve seen hundreds
of origin and destination pairs
just get turned off. When I say turned off, literally
overnight or the next week, the railroad just calls the
customer and says I’m sorry, I can’t service your
port anymore. Best of luck. So just, maybe in a defensive
play, make sure you have that open dialogue with your
railroad partners to protect that origin and destination
service.>>Okay. Thanks to all of our
panelists and thank you all. We’ve kept you a bit late. But we appreciate your time.

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