Biggest U.S. Retailers Charter Private Cargo Ships To Sail Around Port Delays

Source: Biggest U.S. Retailers Charter Private Cargo Ships to Sail Around Port Delays – WSJ

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Forget Finance. Supply-Chain Management Is the Pandemic Era’s Must-Have MBA Degree

The just-in-time inventory systems embraced by many businesses led to empty shelves and costly bottlenecks. That’s put a rare spotlight on supply-chain programs, which are attracting more students.

Stores with no toilet paper. Colossal cargo ships run aground in the Suez Canal. Factory shutdowns in Vietnam. Ports closed in China. It almost seems that not a day goes by without reports of another supply-chain snafu wrought by the pandemic, which dismantled just-in-time inventory systems that couldn’t cope with massive, simultaneous disruptions of supply and demand.

Companies have struggled to adapt, with some taking unusual steps. Walmart Inc. and Home Depot Inc. are chartering their own private cargo vessels so they don’t get caught short as the holiday season approaches, and logistics experts say disruptions from congested ports won’t end anytime soon. The tumult has forced companies to lavish more attention on their supply-chain professionals, who typically toil in obscurity until disaster strikes.

It’s also prompted business schools to refresh their supply-chain curricula to make sure the next generation of logistics managers are prepared for future crises. “For years, we had sort of taken logistics for granted,” says Skrikant Datar, the dean of Harvard Business School. “The pandemic caused us to rethink it.”

The problem, says Hitendra Chaturvedi, a supply-chain management professor at Arizona State University’s W.P. Carey School of Business, was that supply-chain education and theories had grown as rigid as some of the practices out in the real world. “After years of teaching without any tremors,” he says, “our courses had become less flexible.”

In response to those tremors, business schools are now emphasizing things such as risk mitigation, data analytics, and production reshoring—while also carving out room to explore more intangible topics like ethics, communication, and sustainability.

Penn State’s Smeal College of Business is adding a master’s course in supply-chain risk management next year, with lessons taken straight from the pandemic experiences of corporate partners including Hershey Co. and Dell Technologies Inc. The course will count toward a new certificate program in risk management that’s also in the works.

The W.P. Carey School of Business also plans to offer a certificate in supply-chain resilience. “It’s not like we don’t cover risk already, but this would give them a deeper dive,” says Kevin Linderman, chair of Smeal’s Department of Supply Chain and Information Systems, which has grown more popular with students thanks to high-profile incidents such as the grounding of the Ever Given cargo ship in the Suez Canal in March, which snarled global commerce for nearly a week.

This academic year more than 400 juniors in Smeal’s undergrad program have declared their intent to major in supply-chain management, up from about 270 the previous year. Incoming business students who once defaulted to finance or marketing now want to explore supply-chain management, says Alok Baveja, a professor at Rutgers Business School, whose faculty includes former executives of nearby pharmaceutical giants such as Johnson & Johnson.

When they graduate, they’ll have plenty of options: A record 50 companies plan to attend a supply-chain career fair at Georgia Tech in September—about double the number that typically come to recruit students of the program—including newcomers Honda, Honeywell, and Procter & Gamble.

Students who pursue supply-chain degrees this fall are certain to get an earful about the limitations of just-in-time inventory systems, which grew in popularity during the 1990s as companies aimed to mimic the success of auto makers like Toyota Motor Corp., the gold standard of lean manufacturing. For some companies, though, getting lean “became a religion,” says Penn State’s Linderman, and their orthodoxy became their undoing when the pandemic hit and there was no surplus stock to be found.

Covid-19 exposed the weaknesses of legacy inventory systems, which typically emphasize cost reduction above all else, says Hyun-Soo Ahn, a professor at University of Michigan’s Ross School of Business. The pendulum is now shifting the other way: At Walmart, whose bottom-line focus is legendary, U.S. inventory rose 20% last quarter as it doesn’t want product shortages come Christmastime. Still, shuttered factories, port congestion, and trucker shortages have brought more chaos to already overtaxed supply chains, raising prices on groceries and jeopardizing the delivery of millions of presents for the holidays.

Classroom discussions at Penn State and other supply-chain specialists will now delve into the downsides of sourcing too much from China or any single country, while they also explore the role that new technologies like machine learning and artificial intelligence can play in manufacturing and inventory decisions. Old research, meanwhile, is getting reinterpreted through the pandemic’s lens, says Gopalakrishnan Mohan, chair of ASU’s supply-chain department.

What’s also needed, though, is a realization in corporate C-suites that logistics isn’t just an expense—it can actually create value when done well, according to MIT’s Jarrod Goentzel. He’s the principal research scientist at the school’s Center for Transportation and Logistics, which works with corporations such as Amazon.com Inc. and Intel Corp. and also a lecturer in the center’s one-year master’s program in supply-chain management.

It helps that high-profile chief executive officers like Apple Inc.’s Tim Cook and Mary Barra of General Motors Co. spent time running complex supply chains before they got the top jobs, but logistics educators say greater boardroom acknowledgement of the make-or-break role such skills play is long overdue.

“Any company that says they fully understand their supply chain is lying,” says Goentzel, who believes that supply-chain practitioners should be certified just like accountants. “It’s time for the profession to wake up. The 20th century was about finance. The 21st century should be about supply chains.”

By: Matthew Boyle

Source: Business School: MBA Students Forgo Finance for Supply-Chain Management Degree – Bloomberg

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How ‘Chaos’ In The Shipping Industry Is Choking The Economy

Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.

“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.

The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.

Economists credit these metal boxes with increasing the efficiency of shipping so much that it stitched the modern global economy together more than anything else — more than all free-trade agreements put together.

Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analysts say, that we’re seeing consumer prices surge.

How did shipping get topsy-turvy?

In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.

At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.

“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.

He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.

It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.

That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.

As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.

The effects on the American economy

With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.

Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.

As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.

By:

Source: How ‘Chaos’ In The Shipping Industry Is Choking The Economy : Planet Money : NPR

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References:

Shipbuilding NewsCruise Ship News, Ports News ,Salvage News ,Training News ,Government News, Environment News,Corporate News, Maritime Executive , Volga Targets Market, Nuclear-Powered Cargo Ship, China’s Exports, American Vulkan’s Service Team, JFE Steel, OMSA, OceanManager Inc.

Airlines Will Play Key Role In The Distribution of COVID-19 Vaccines

The airline industry will play a crucial role delivering coronavirus vaccines worldwide after pharmaceutical companies like Pfizer (PFE) win approval for their pandemic fighting inoculations. “This is sort of an all hands on deck for distribution,” Cowen Managing Director and senior research analyst Helane Becker told Yahoo Finance Live.

The International Air Transport Association (IATA) recently urged governments worldwide to prepare for vaccine delivery. “Air cargo plays a key role in the distribution of vaccines in normal times through well established global time and temperature sensitive distribution systems.”

However, IATA cautions that “delivering billions of doses of vaccine to the entire world efficiently will involve hugely complex logistical and programmatic obstacles” such as building refrigeration storage units.

Pfizer announced earlier this week that its experimental vaccine, which proved 90% effective at preventing COVID-19 in recent trials, must be stored at sub-zero temperatures.

An airborne armada

Airlines like New York-based Atlas Air Worldwide Holdings (AAWW) will be among the global airborne armada eventually shipping billions of doses of vaccine, according to Becker. The cold storage requirements make it difficult.

“This is going to be one of the biggest challenges for the transportation industry,” Michael Steen, chief commercial officer at Atlas Air told the Wall Street Journal last month.

Atlas Air has the largest fleet of 747 freighters in the world but that alone won’t be enough. Becker said Atlas Air, FedEx (FDX) and United Parcel Service (UPS) will all be enlisted to deliver vaccines.

“UPS has the largest freezer farms I think in the world. They’ve got one big one at Louisville, Kentucky, which is their US Air hub, and they have one in the Netherlands,” which Becker said prepares them for the upcoming distribution task.

UPS (UPS) stock is up 42% year-to-date. FedEx (FDX) is up 77% and Atlas Air (AAWW) is up 87%. “We think Atlas has legs, the stocks really performed well,” Becker said.

IATA said the job ahead is enormous. “Just providing a single dose to 7.8 billion people would fill 8,000 747 cargo aircraft.”

U.S. carriers shipped 58,000 tons of cargo a day before the pandemic and passenger airlines like American Airlines (AAL) and United Airlines (UAL) will be needed, according to Becker. “American and United also have cold storage facilities. American in Philadelphia and United in New York, so they’ll be able to participate,” she said.

As the world anxiously awaits approval of effective coronavirus vaccines, IATA’s Director General and CEO Alexandre de Juniac described what lies ahead “Safely delivering COVID-19 vaccines will be the mission of the century for the global air cargo industry.”

Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm.

By: Adam Shapiro

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