Second verse, same as the first? In this week’s Friday Five, ports remain congested despite new attempts to move boxes out the door, while the reigning champs of supply chain chaos continue their shopping sprees. Let's take a closer look.
Last month port officials at Los Angeles and Long Beach warned they would begin assessing $100-per-day fines beginning November 1 for each box that sat more than 9 days once unloaded. Welp, that deadline came and went, and some 40,000 containers sitting on the docks of the Port of Los Angeles and 18,900 at neighboring Port of Long Beach are currently being fined for overstaying their welcome, according to Port of Los Angeles Executive Director Gene Seroka.
The real issue is not a “lack of desire to move boxes, but a lack of physical space," explains Corey Bertsch, VP of Solutions Consulting at Slync.io. Many hypothesize that this $100 slap-on-the-wrist will only trickle down to BCOs and eventually consumers in the form of higher retail prices.
The Fenix Marine Services (FMS) terminal, the third largest in terms of capacity in Los Angeles and one of the largest in North America, is being taken back over by the French containerline.
CMA CGM sold 90% of its stake back in 2017 for a mere $875 million. Over the last four years, the terminal invested more than $130 million on technology and new equipment such as cranes. Now, in a deal with an enterprise value of $2.3 billion, CMA CGM beat out other offers for FMS, offering nearly three times what it was worth just four years ago.
In the first six months of 2021, CMA CGM’s sales increased 63% to $23.1 billion from $14.2 billion in the same period last year. Operating profit jumped more than sixfold this year too, so there’s some money to spare.
The FMS terminal operates on a concession from the Port of Los Angeles expiring in 2043. Of course, FMS terminal is just another feather in CMA CGM’s cap as its portfolio has amassed 49 port terminals across 27 countries, through its subsidiaries CMA Terminals and Terminal Link.
Shekar Natarajan, chief supply chain officer at American Eagle Outfitters, sums things up pretty nicely here: “Supply chain is becoming more of a consumer-facing activity. And in that world, you need to basically have consistency and control of your experience.”
This shrewd observation, turned business mantra no doubt led to the fashion retailer’s move this week to acquire Massachusetts-based Quiet Logistics Inc., a digital fulfillment operator with 8 fulfillment centers across 6 U.S. cities. AEO believes this acquisition, along with their purchase of shipper aggregator AirTerra earlier this year, will help level the playing field with the Amazons and Walmarts of the world through greater scale, flexibility and efficiency.
In Q2, AEO’s digital sales made up 35% of its total revenue—which is ten points higher than before the pandemic.
While the U.S. trade deficit hit an all-time record high in September at a whopping $80.9 billion, European manufacturers experienced curbed production growth in October, their slowest month since the recovery began in July 2020.
“A lack of shipping containers, inadequate freight capacity, port congestion, driver shortages, and broader transport delays” were among the reasons reported by Eurozone manufacturers in the October PMI® report conducted by IHS Markit. Not unlike the U.S., the cumulative result of all these challenges is increased transport rates and good ol’ inflation for the population at large. Eurozone inflation reached 3.4 percent in September.
Maersk continues to rake in record-setting profits, reporting Tuesday that it made $5.44 billion in Q3—which is more than Amazon and UPS combined for the same quarter! The company is taking its money and going one-stop shopping, confirming that it plans to scoop up air freight forwarder Senator International for $644 million.
Vincent Clerc, executive VP and CEO of ocean & logistics at Maersk, explained: “We have strengthened our integrated logistics offering through e-commerce logistics acquisitions, tech investments, expanding our warehouse footprint and, as a natural next step, we are now ramping up our air freight capacity significantly, and creating a broader network to cater even better for the needs of customers.”
If this seems like déjà vu, it might be because their rival CMA CGM has similar lofty goals.
That’s it for this week’s Friday Five! In case you missed it, be sure to check out last week’s logistics news roundup which looked at pending supply chain regulations and the beauty of Utah. Also, if you need a better way to navigate peak season, ask us about our award-winning Logistics Orchestration® platform. Until next time!