When it comes to shipping and logistics, many of the key opportunities and challenges we witnessed in 2015 are still in play today. The potential for new international trade agreements and the immense opportunities for growth in global markets are still prompting companies to reassess their logistics platforms. As companies examine their trade plans and logistics processes, they must also continue to pay close attention to the growth of mobile commerce.
The following article will look at some of the central issues we believe will define shipping and logistics this year.
New Trade Agreements Mean More Global Business
On October 5, 2015, the United States joined 11 nations in negotiating a landmark trade agreement to improve market access and facilitate key trade benefits. If ratified, the Trans-Pacific Partnership (TPP) would cover more than 40% of global GDP, reduce border costs, expedite and simplify border clearance, and offer assistance to developed countries to modernize Customs procedures.
What does the TPP mean for your business in 2016? If approved by Congress, the agreement would make it faster, easier and more affordable to move goods between participating countries. U.S. companies could gain an expanded customer base, a more dynamic supply chain and new opportunities to source affordable materials from partner nations. The trade opportunities are considerable. Consider that participating countries—the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—will be home to more than 60% of the world's middle class population by 2030, according to estimates.
The TPP is not the only major international trade agreement in the works. Looking eastward to the European Union, the Transatlantic Trade and Investment Partnership (TTIP) could create the world's largest free trade zone. Many predict the U.S. and E.U. will move closer to completing TTIP negotiations in 2016. This agreement could affect more than 60% of global trade, harmonize many regulatory rules between the two regions, and create greater market access to an estimated 800 million consumers.
Additionally, after nearly a decade of work between Congress, two presidential administrations and the business community, the Customs Reauthorization Bill went into effect in March 2016. Also known as the Trade Facilitation and Trade Enforcement Act, the bill opens up new international trade opportunities for U.S. businesses of all sizes by streamlining U.S. Customs procedures, decreasing the cost to ship internationally, and strengthening trade enforcement at U.S. borders.
One of the major benefits of the new law is the reduction of the paperwork required for low-value shipments through an increase in the de minimis allowance from $200 to $800. Under this provision, all shipments of non-restricted commodities valued at less than $800 can be passed free of duties and taxes. By increasing the de minimis threshold on the value of goods that an individual can import each day, more doors open for e-commerce.
Collaborative Robots Will Transform Logistics
Used for years in manufacturing, industrial robots just have not been smart enough for logistics, with its highly complex orchestration of combinatory tasks required in warehouses and distribution centers. But with technology finally catching up with the demands of our industry, recent advances in robotics hold real promise for increasing productivity, improving service levels, reducing costs and enhancing the quality of our working lives.
For example, robotics technology may soon be picking, packing and moving goods in the logistics environment. These robots will be able to see, move, react to their environment and work at precision tasks alongside people. Our parent company, DPDHL Group, is currently testing collaborative robots in selected warehouse sites to discover innovative solutions for transforming supply chains.
Sustainability Remains at the Forefront
In 2014, 75% of S&P 500 companies published corporate sustainability reports.
Additionally, 93% of CEOs in a 2013 UN Global Compact—Accenture study called sustainability important to the success of their business. The focus on green business practices continues and will likely grow in 2016 and beyond, as companies continue to analyze the sustainability of their operations and their partners up and down the supply chain.
Why is supply chain sustainability so important? While your carbon footprint may seem well-defined, all the products that you ship and receive make the true impact more difficult to measure. A productive supply chain revolves around efficient shipping practices; businesses that want to appeal to environmentally conscious consumers should start by finding an eco-friendly shipping partner.
Efficient shipping involves multiple steps, from effective route planning to investments in green technology. Check to see what your logistics partner has done to invest in new delivery technologies.
While reducing CO2 emissions through transportation optimization is critical, there are other ways to lighten your carbon footprint across the supply chain. While your shipping partner should offer sustainable packaging options, including packaging made from recycled materials, your organization should also review strategies that will minimize the use of packaging and packing material that may be designed to avoid breakage. With the growth of e-commerce, this becomes ever more important. We do not want to become, as the media has dubbed the proliferation of packages arriving at customers' doors, "the cardboard economy."
Keeping your products safe during shipping is key—after all, re-shipping is costly, uses additional energy and inconveniences your customers. At the same time, it is important to determine the minimal amount of acceptable packing material, and the smallest possible box or container. Like your packaging, your packing material should meet or exceed environmental standards.
Finally, companies should be certain to assess the carbon impact of their shipping accurately. Many shipping companies offer comprehensive impact reports.
Supply Chain Risks Are Changing
As supply chain risks are changing, so should companies' responses to the risks.
All supply chains face risks, and the more complex and global those supply chains, the greater their exposure. As companies seek to understand and plan for these risks, it is important for them to differentiate clearly between major and minor incidents, to understand the difference between the characteristics of various risk types, and to recognize the factors that can cause risk profiles—especially "man-made" risks—to change over time.
It's also important for companies to understand that supply chain disruption is both more common and more costly than many companies realize. For example, according to the more than 400 companies that DHL surveyed for our recent Risk & Resilience report, the average drop in shareholder return following a major supply chain disruption is 40%. Additionally, 60% of companies say supply chain disruption hit performance indicators by 3% or more. Investment in more resilient supply chains doesn't just reduce the impact of disruptive events; it also helps boost overall business performance.
This year, we expect to continue to see companies putting more emphasis on supply chain risk management as volatility around the world continues to increase.
Mobile commerce was big in 2015, and many expect further gains in 2016. A recent report from Forrester Research estimates that mobile commerce transactions exceeded $115 billion in 2015 and predicts they will reach $142 billion in 2016.
The report also outlines the challenges to m-commerce growth, noting that smartphones are the source for one-third of retail web traffic but only 11% of sales.
Additionally. according to the "Shop the World" survey that DHL conducted, m-commerce is most common in Australia, China and Korea, where all orders are placed via mobile devices. The study also shows that in many countries, mobile devices, mainly smartphones, are well on their way to replacing PCs and laptops as the preferred tools for accessing the Internet.
To succeed in this environment, companies need to ensure that their mobile commerce platforms and their logistics remain up to the task.
As we dive deeper into 2016, use these opportunities to stay ahead of the competition, help grow your business and deliver for your customers.
Greg Hewitt is CEO of DHL Express U.S. He started his career with DHL in 2003 in Canada and has held several executive management positions in commercial sales, including international assignments in Europe and the United States. He led the team that negotiated the sale of the DHL Express domestic business in Canada to TransForce in 2011.