X

Reshoring is an option – Part 1

According to the most recent (May/June) Covid−19 Manufacturing Survey by Thomas, the number one trend is a stronger interest in reshoring. Of the nearly 750 respondents, more than two in three (69%) manufacturers indicate they are likely to or extremely likely to reshore. This is up from 54% from the survey this past February.

The following sectors reported the highest degree of interest in either bringing sourcing or production back to North America: agriculture, energy/utilities, food and beverage and oil & gas.

As for what materials or products these companies seek access to closer to home, metals, machine parts and tools, personal protective equipment, packaging and electrical and electronic components.

The full survey results are available at: https://www.thomasnet.com/insights/manufacturer-interest-in-reshoring-hiring-and-apprenticeships-increasing-during-covid-19-pandemic-report/

Reshoring is an option – Part 2

In a related note a survey by Gartner found that 335 of global supply chain leaders said they have moved sourcing or manufacturing out of China or plan to do so in the next two to three years. The pandemic was clearly one of the reasons, but tariffs and resiliency concerns were also cited.

Here is another, more quantitative, assessment by the Bank of America. While there is a rising number of businesses seeking to shift their production activities from China to closer to home in the wake of COVID−19 and growing geopolitical tensions this transition could cost of up to US$1 trillion over a five− year period.

The bank’s researchers claim the outlay is “significant but not prohibitive”, arguing that the re−shoring move would have beneficial effects in the long term, and that the pandemic had significantly accelerated businesses’ thinking and supply chain planning.

There will be a lot written about how businesses and their supply chains fared during Covid-19 with industries struggling with supply disruptions, huge swings in customer demand and the ups and down of transportation capacity. The ability of companies to adapt are surely being tested and those that can do so successfully are ones able to change sourcing strategies, switch modes of transportation, re-route shipments and match supply capacity with dynamic demand.

Istanbul Canal

The Bosporus or the Istanbul Strait, located in northwestern Turkey, not only connects the Black Sea with the world’s oceans but is part of the continental boundary between Asia and Europe.

 In 2019, over 41,000 vessels passed through, 3 to 4 times the number transiting either the Suez or Panama Canals.

This internationally significant waterway is narrow, only a half mile wide at one point, and thus a potential chokepoint for maritime trade especially oil transport. Historically there have been numerous vessel mishaps, mostly collisions, in the S−shaped channel.

Turkey is planning to start construction on a 28-mile long Canal Istanbul that will be able to accommodate 185 ships daily upon completion in 2026 so the traffic between the Bosporus and the Dardanelles will see no easing any time soon.

Largest containership

HMM, formerly Hyundai Merchant Marine, recently launched the HMM Algeciras, the largest containership in the world with a nominal capacity of 23, 964 TEUs (twenty−foot equivalent units).

The completion of the 399.9 meter by 61-meter vessel did not take place at an opportune time; further the company plans to take delivery of another 11 sister ships. It might be a struggle to take advantage of this ship’s scale yet alone the scheduled new buildings.

New refrigeration hubs

Lufthansa Cargo, the German air cargo carrier, has announced the opening of facilities at Munich and Chicago airports dedicated to handling pharmaceuticals as a backdrop of the massive expansion of storage capacity for temperature−sensitive freight.

The company's 'Pharma Hub Munich' offers space for up to 96 pallets and loose cargo in two different temperature ranges: cold chain (+2 to +8 ˚C) and Controlled Room Temperature (+15 to +25 ˚C) and a freezer (down to −18 ˚C) on almost 1000 square meters over on several floors. A similar but smaller temperature−sensitive storage facility was opened at O’Hare Airport in June.

Most of the pharmaceutical shipments carried by Lufthansa Cargo are handled at its Frankfurt hub, the first of its facilities and, in fact, the initial International Air Transport Association CEIV Pharma−certified one in the world. By the end of this year, Lufthansa Cargo's worldwide network is expected to comprise 31 CEIV Pharma−certified pharma stations with further expansion is planned beyond this date

Speaking about the creation of state-of-the-art infrastructures for temperature-sensitive goods, a company spokesperson said that will guarantee customers even higher transport quality for their pharma shipments. There is no doubt that the importance of safe and secure transport of medicine will only redouble as therapeutics and vaccines to combat Covid-19 emerge. However, it is not best practice for a service provider to offer “guarantees” especially in a zero-tolerance vertical.

Cold Chain need – Covid 19 vaccine

Assuming a COVID−19 vaccine is on the horizon, the cold chain needs to be prepared for the onslaught of global shipments.

It’s not an easy task, given the number of transfer points from manufacturing to hospitals clinics and doctor’s offices. Pharmaceuticals especially time and temperature−sensitive vaccines will travel by air but there will be truck segments and perhaps even smaller vehicles handling last−mile deliveries. We should expect some downtime while imports clear Customs and perhaps even at truck terminals.

Vaccines lose effectiveness the longer they are outside their optimal temperature range, whether too warm or too cold. Generally, they should be stored and transported between −20˚ Celsius to −50˚ C if frozen, or +2 to +8˚ Celsius if normal cold chain.

Per the IATA Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIVA) a quarter of vaccines are degraded by the time they arrive at their destination, due to incorrect shipping procedures. In dollar terms, temperature excursions cost an estimated $34 billion annually when you factor in cost to replace and related logistics.

The characteristics, such as exact temperature range, of forthcoming COVID-19 vaccines are not yet known, but unless it is in a lyophilized (freeze dried) form it almost certainly will have strict temperature parameters.

Fortunately, we can rightfully expect shippers, transportation providers and other associated actors will be closely scrutinized; additionally, the availability of specialist Life Science/Pharma logistics providers and the entire suite of loT sensors can allow real-time visibility as to location and temperature and thus early intervention.

Covid-19 vaccine transportation guidelines

The International Air Cargo Association (IATA) and Pharma.Aero (pharma.aero) have announced a collaboration to develop global guidance for the air cargo industry to enable the optimal transportation of the COVID−19 vaccine. This guidance will be developed gradually in four work packages through a joint group to ensure feedback from all supply chain participants.

The aim of this program is to provide the air cargo industry with more clarity of the demands, expectations and quality requirements, including but not restricted to critical trade lanes, air cargo capacity, handling and storage, as well as track and trace requirements.

Pharma Aero’s mission is setting up reliable end-to-end air transportation for its members, namely life sciences and pharmaceutical shippers, certified airport communities and air cargo operators. The results from the working group will be shared with the industry through white papers and webinars with a planned completion by the end of the year.

Potential mis-declared detector

The Israeli ocean carrier ZIM one of the top 20 containership operators in the world has developed ZIMGuard an AI−based screening software designed to detect and identify potential mis−declared cargo prior to loading onto one of their vessels. The company says the system scans and flags possible hazardous cargo/dangerous goods shipments in real time.

Harnessing Artificial Intelligence (AI), including Natural Language Processing (NLP) capabilities and Machine Learning, it can analyze documentation and alert operations personnel to occurrences of omission, concealment or erroneous declaration of shipments. Mis−declaration of hazardous cargo has been at the root of major marine incidents, causing loss of life and severe damage to ships and their cargo. Last year, several carriers announced the imposition of additional fees as a partial solution for this recurring problem.

Reportedly ZIMGuard has already proven its efficacy on numerous occasions since its introduction and is now in use in major ports in China, the United States and Israel, and is expected to be deployed in all their trade lanes by the end of 2020.

ZIM views this as a contribution to the safety of vessels, crew and the global supply chain. Therefore, they are willing to offer commercial licensing. We recall a few years ago Hapag- Lloyd had a proprietary algorithm with the same objective. If “code-sharing” is not in the cards, perhaps there can be an international clearinghouse, such as CINS, that can catalogue incidents, with enough relevant details, to thwart would-be repeat offenders.

Mis-declaration of dangerous goods

Mis−declaration and non−declaration of dangerous goods are posing a threat to safety of life at sea. Let’s start with defining terms:

Undeclared dangerous goods mean any goods which are listed in the International Maritime Dangerous Good (IMDG) Code by name or meeting any of the classification criteria of the Code but not declared by the shipper as dangerous goods.

Mis-declared dangerous goods mean any dangerous goods not declared correctly as per the requirement of IMDG Code. This may include incorrect or misleading description of dangerous goods in dangerous goods declaration, misleading marking, labeling and placarding.

An online survey of shippers, forwarders and shipping lines elicited 142 responses conducted from 20 countries.

Four questions were asked:

·         What is the reason for mis−declaration or non−declaration?

·         What promotes willful mis−declaration or non−declaration?

·         How shippers’ mis−declare dangerous goods?

·         How do you think we can eliminate mis−declared dangerous goods?

Reason for mis-declaration

67% respondents said ignorance as the reason for mis−declaration while the other 33% pointed to willful neglect by shippers.

What promotes mis-declaration?

·         The main factors are:

·         Shipment surcharge

·         Restriction/prohibition by carrier with high demand in the market

How shippers’ mis declare dangerous goods?

·         Almost equally respondents chose:

·         Take advantage of special IMDG Code provisions

·         Altering Safety Data Sheets

·         Using less used synonyms

·         Changing cargo name

How to eliminate mis-declaration of dangerous goods?

·         Most respondents agreed to:

·         Random audit by national competent authorities

·         More awareness campaigns

·         Mandatory training verification

·         Know your customer

The study while lacking in breadth was nonetheless instructive. Respondents were also able to offer recommendations not covered elsewhere; these were developing IT systems like ZIM and Hapag-Lloyd must identify potential problems, instituting an inspection regime and one that, to me, could have some traction- publicizing offenders.

Hurricane season

After a frenzied start, the Atlantic hurricane season could turn out to be the most active since 2005, when a record 28 storms formed. Colorado State University has raised its annual forecast to call for 20 named storms, up from its outlook issued in June calling for 19. Of these nine will be hurricanes.

Several tropical storms have already spun out of the western Atlantic this year so far. This is the fastest start in the record books dating to 1851 and, while the storms have been weak, excluding Laura, and short−lived, most forecasters see ominous signs for the rest of the season that ends November 30.

Warm waters are a factor. This year to date, world ocean and land temperatures are second warmest on record, lagging only 2016, according to the National Centers for Environmental Information. Oceans in the Northern Hemisphere were record warm in May.

An average season produces 12 systems of tropical−storm strength or greater in the Atlantic. But warm water, which fuels hurricanes, is building. Last year 18 named storms formed.

The following was reported a few weeks back so quite prescient; the possibility a major hurricane will hit the U.S. coastline, or the oil-rich Gulf of Mexico has also risen. Along the Gulf Coast, the odds of a strike between Brownsville, Texas, and the Florida panhandle are 44%, higher than the 30% average this century.

Why the importance of a Gulf landfall you ask? This region accounts for 16% of U.S. crude production and 2.4% of its natural gas output.

 

The information for much of the content was taken from several public sources that to the best of the undersigned’s knowledge is accurate. The views expressed in this document should be regarded as the opinion of the undersigned and not ones made in his capacity as an employee of Chubb.

Anyone wanting additional information on any of the topics covered should contact the above signers.


The information for much of the content was taken from a number of public sources that, to the best of the undersigned’s knowledge, is accurate. The views expressed in this document should be regarded as the personal opinion of the undersigned and not necessarily of the Chubb.

If anyone wants additional information on any of the topics covered contact the authors.