JULY 2016: Ocean Freight Market Updates (Asia – USA Trade Lanes)

The last few quarters were very bad for carriers financially. Q2 is expected to be even worse with industry analysts forecasting over $6 billion in total losses for 2016.

In an attempt to drive up prices and stem this long period of industry-wide decline, carriers have begun to reduce their total container carrying capacity.

In summary: carriers’ reduction of total container space + a rising demand for shipping services = higher container costs.

Below, you will find:

  • The announced General Rate Increase (GRI) and Peak Season Surcharge (PSS)
  • High level ocean freight market analysis
  • Recommended steps

 

GENERAL RATE INCREASE & PEAK SEASON SURCHARGE

The following rate increases are scheduled to take effect in July for cargo moving from Asia into all U.S. Ports:

Announced for July 2016 and August 2016 (in $USD)

DATE 20’ 40’ 40HQ 45’
General Rate Increase Jul 1, 2016 $540 $600 $600 $760
Peak Season Surcharge Jul 15, 2016 $320 $400 $450 $506
General Rate Increase Aug 1, 2016 $900 $1000 $1125 $1265

OCEAN FREIGHT MARKET ANALYSIS: JULY 2016

Our pricing team continuously monitors the status of proposed rate hikes to ensure that we are able to mitigate increases as quickly as the market conditions allows.

To better understand these rate increases, here are the key market factors at play:

  • Stormy financial waters for carriers
    • To stem the tidal wave of financial losses (forecasted to exceed $6 billion) carriers are trying to increase rates.
    • The July increase appears to be the first rate increase to “stick” in the pricing game between the carriers
    • For more context, read our game theory analysis of ocean carrier competition
  • Carriers are actively reducing supply (to drive up demand):
    • Cancellation of services – CMA-CGM the world’s third largest ocean freight carrier recently announced the cancellation of their “Taiwan Strait” service between South China and the US East Coast
    • Merger of sailing schedules – CMA-CGM merged their “Yellow Star” and “Bohai” services between China, Southeast Asia and the US West Coast
    • Blank sailingscarriers (including the G6 alliance) had a few “blank sailings” – basically cancelling a ship or port of call on a given route to further reduce capacity for Transpacific trade
    • Ripple effects on alliances – UASC and CSCL (CMA’s alliance partners) as well as all other carriers buying slots on these vessels will also be affected by this change

 

What do these carrier updates and changes in the market ultimately mean for you?

Delays. When ships are full, containers are rolled to subsequent sailings, which are likely to also be overbooked.
Increased costs. Container slots go to highest bidder — it’s as simple as that — be prepared to pay more to keep your supply chain full (even if you have a contract!).
Inflexibility. When this space reduction is compounded with the normal volume increase of the “peak season” months of July-November, it will become extremely difficult to reserve last-minute space on ships.

 

RECOMMENDED STEPS

  • Plan ahead! – Make bookings as far ahead as possible and at a minimum of 2.5 weeks ahead of your desired sailing date. Carriers expect an accurate booking forecast at least 14 days prior to vessel departure.
  • Communicate Work closely with your vendors and ensure that they can meet the deadlines. When space is tight, carriers will put you at the end of the line, if you cancel bookings.
  • Lean on Flexport – Your dedicated Flexport Team will keep you abreast of shipment status and update any changes at origin, empowering you to make real-time business decisions to manage your supply chain.

Following this protocol will go a long way to facilitate your shipments with minimal disruption and to the greatest extent possible, avoid delays at origin due to space issues.

If you have any questions, please feel free to contact nerijus@flexport.com (Flexport’s Director of Pricing & Procurement) or your Logistics Manager & Account Executive.

Thank you for shipping with Flexport!

Flexport Named One of the “Best Places to Work” by San Francisco Business Times

Flexport is named as one of the Bay Area's Best Places to Work.

We’re thrilled and honored that Flexport was named one of the Best Places to Work in the San Francisco Bay Area by the San Francisco Business Times and Silicon Valley Business Journal!

This annual award recognizes companies with outstanding workplace environments that attract and retain happy, engaged, and productive employees. More than 400 Bay Area companies participated in the survey, and were ranked on topics like personal growth, workplace satisfaction, and managerial effectiveness.

“We are honored to be named one of the ‘Best Places to Work’ in the Bay Area,” said Ryan Petersen, CEO of Flexport. “Our employees are essential to our company and our customers’ continued success, and we take great pride in cultivating an environment and culture for employees to thrive.”

As our company grows, headcount and physical expansion can put serious strain on a culture. In the last year alone, we’ve grown our company significantly, from 25 people in San Francisco to over 97 employees across four different locations around the world: San Francisco, New York, Amsterdam and Hong Kong.  

So, what contributes to Flexport’s DNA?

  • Open Lines of Communication: As a fast-growing company, we encourage employees to speak up when they see opportunity for improvement. This includes an ongoing “ideas” email channel, where various initiatives have been conceived and owned. In addition, we hold “AMA” (Ask Me Anything) sessions during each All-Hands meetings, where team members submit anonymous questions in advance.
  • Autonomous Squads: We operate in agile teams called squads. Squads allow us to fulfill both individual autonomy and team synchronicity. Each squad member (e.g., logistics manager, account executive, customs broker) brings their unique expertise to ensure we balance our focus of client success, operational excellence, and driving revenue.
  • A Place to Learn and Grow: With weekly lunch and learns, scholarships for industry certifications, and a sponsored book program for personal and professional development books, we invest in developing a team of continuous learners so that our team grows on the job and beyond.
  • Treating Employees Well: From catered lunches to ordering your favorite snacks, and a dog-friendly environment, we strive to create an environment of comfort that allows our team to do their best work. In addition, we encourage wellness activities (such as weekly meditation) and flexible time off.
  • Financial Incentives: Among other things, we want to invest in our employees’ future. That’s why we offer them a 10-year expiration for stock options, a 401k program, and life/disability insurance.  

We do our best to make sure that we are always guided by employee-centered values. As we continue to grow and expand internationally, we are committed to putting our team members first and open to new ideas to help keep them happy and innovative.

HUAo-26

Learn more about joining our efforts to change the world of trade at flexport.com/careers!

Flexport Product Announcement: New User Roles

One of the biggest challenges facing old-world freight forwarders in the tech-savvy world of today is having the ability to answer critical business questions about your goods that inform timely, actionable business planning:

  • “How can I better optimize this supply chain?” – Analysts
  • “What are my landed costs per unit for this product line?” – Finance
  • “Where are my goods in transit & what needs my attention today?” – Operations
  • “When can I expect these SKUs to be on the shelf for our customer?” – Sales
  • “Why is nothing where I expect it to be?” – Management

For most forwarders, these can be difficult questions to answer: We’ll have someone get back to you”, “You’ll need to reach out to your account manager for that information”, “You’ll need to talk to a different department about that request”, “That’s not something we can get our arms around easily.” We see things a little differently at Flexport. Running a business with a global footprint at the speed of data means you don’t just need access to critical business insights, you need them at your fingertips in real-time.

One of the key benefits Flexport provides our customers is structured data about their supply chain, captured in real-time by a modern software platform. For many of our clients this is a game-changer—they’ve never had such easy access to insights about how their freight business actually runs. Often their immediate impulse was to share these insights with the rest of their organization, but many worried that providing access to infrequent users who might unknowingly cancel, re-route, or modify a shipment was too big a risk.

We listened and understood this concern, so starting today we’re giving Administrators more granular control over user permissions in the Flexport app so they never have to worry about that risk again!

Analyst - Watcher Role

Under the “user settings” section of the navigation toolbar, Administrators now have the ability to designate stakeholders in their organization as an Analyst or a Tracker.

Analyst permissions are very similar to those already provided to normal Member’s, except they won’t be able to modify or delete anything in your Flexport account. This role is perfect for executives, senior stakeholders or analysts who need access to rich shipment information, but likely aren’t familiar with how the app works or what they can really do with the data we collect. Analyst permissions allow these stakeholders the freedom to play around in the app without the risk of “breaking” anything in your Flexport account.

Tracker permissions are intended for those stakeholders who might need to follow the status of shipments closely, but don’t need access to analytical reporting, landed cost data or other billing details. This role is perfect for account executives, your sales team or anyone who just needs to answer the question “Where is my cargo?”

In addition to the shipment “share” feature, these new roles should provide the granular controls necessary to keep anyone in your supply chain informed with the data they need to make timely business decisions.

Please give these user roles a try & let us know what you think, we’d love to hear from you.

Happy shipping!

Kyle Olney is a product manager at Flexport.

CBP’s Automated Commercial Environment Can Make It Easier to Clear Shipments—If It’s Properly Implemented

Importers and exporters have to file up to 200 different forms to clear their shipments with the government. Many of these filings have to be completed on paper and then either hand delivered or faxed to the right department. In addition, shippers find that they often have to submit the same data to the Customs and Border Protection as well as 47 other agencies. But change is coming: The government is building a single electronic window so that shippers will only have to file information once.

The system is called the Automated Commercial Environment (ACE), but it hasn’t quite been implemented as planned. Congress passed a bill to begin work in 1994, with the expectation that it would be wrapped up in a matter of a few years. Over two decades later, government agencies are still not quite prepared to adopt the system, even as the Government Accountability Office has identified it as a project that has suffered serious cost overruns. (GAO estimates that its final cost will exceed $4 billion.)

ACE has been enormously difficult to implement. But once it’s ready, ACE is supposed to make it significantly easier for shippers and brokers to trade goods.

What will ACE do for shippers?

ACE will bring importing and exporting into the digital world. Instead of always relying on paper, fax machines, and original signatures, shippers will be able to use electronic submission processes to clear shipments.

Shippers currently use Automated Commercial System (ACS) to clear shipments with Customs. ACS is slated to be replaced by the ACE. Government agencies are on a staggered schedule to drop ACS and transition to ACE, with the first deadline set as March 31st, 2016; the National Highway Traffic Safety Administration and the Animal and Plant Health Inspection Service are the first two agencies to move to ACE. Most agencies will have to be moved to ACE in the summer of 2016, including the EPA, the DEA, and the CDC.

ACE will radically change the way products flow into the country. When fully implemented, ACE will make it easier to clear shipments. It promises to consolidate, automate, and modernize border processing by bringing all government processes through a single web portal, instead of having to send the same information to different agencies. Shippers will be able to use this portal to share trade data with government agencies, saving time and money for themselves and their brokers.

Shippers will also have greater control over their import and export activities. They can use the ACE web portal to see the work done by their brokers, the duty statements they’ve filed, and access to more reports over their processes.

Jayson Gispan, Director of Customs Brokerage Operations at Flexport, identifies two important benefits he’s already seen from using the new system: “First, ACE is making it much easier to process shipment splits. And second, instead of having to use a manual document submission to correct duty payments, we can now do it electronically.”

ACE implementation delays

March 31st is the first upcoming deadline for the adoption of ACE. Other “mandatory use dates” are May 28th, 2016, Summer 2016, and finally, October 2016. All government agencies are supposed to adopt ACE by the end of 2016; by then, ACS will be completely dropped.

That’s how it’s supposed to work in principle. In practice, the deadlines have been continually pushed back because government agencies have not been ready to adopt it.

We’re long past the initial deadline set by the government for agencies to adopt ACE. Instead of the end of March 2016, as it currently is, it was supposed to be the end of February 2016. And before that, it was supposed to be November 2015. There’s a chance that the March deadline will be pushed back once again.

The problem is that government agencies have not been ready. In spite of billions spent, in spite of the fact that the project was initiated two decades ago, and in spite of the multiple executive orders signed by the President to expedite the process, agencies have not been able to build software to integrate with the system.

The 48 government agencies have been individually tasked to adapt their systems to ACE. Certain agencies have been more ready than others. The Food and Drug Administration was supposed to be one of the first agencies to adopt ACE, but it’s gotten so far derailed that CBP no longer gives it a firm deadline to be integrated into the system.

This is a government project that doesn’t require action from shippers. So why should they care about its progress? The danger is that the system is not ready before ACS is dropped. ACE currently still has significant bugs that prevent shipments from being cleared. Jon Kent, spokesman for the National Customs Brokers and Forwarders Association of America, has already warned in the JOC that a non-functional ACE can cause significant interruptions to the flow of commerce. That would be in no one’s interest.

Given the continuous delays, we might expect the deadline to be moved back once more. But when completely ready, shippers will have an easier time dealing with filing.

Safely Transporting Hazmat and Other Dangerous Goods

Shipping hazardous materials (hazmat) by air, ocean, or by land is heavily regulated by many different agencies. It’s highly risky and must be done correctly. DHL, an experienced carrier, was fined as recently as last month for violating hazmat regulations. Here’s reporting from American Shipper:

“The U.S. Federal Aviation Administration on February 12th proposed levying $455,000 in civil penalties against parcel carrier DHL Express for seven alleged violations of hazardous materials regulations. The agency said DHL accepted shipments in 2013 and 2014 that were not properly prepared for air transportation and failed to ensure its employees or agents received required hazardous materials training.”

Shipping hazmat is heavily regulated for good reason: It’s dangerous and has cost people their lives. The fines for non-compliance can exceed $100K and lead to criminal indictments and jail time.

If you want to pack, ship, and certify hazmat for transportation, you need to go through formalized training and certification. It’s up to the manufacturer to recognize whether what they’re producing are classified as dangerous goods or not. If they are, then they must fill out official declarations of dangerous goods before they can be transported.

The shipper’s declaration (which must be completed by the supplier or manufacturer) is the most important document in hazmat transportation. It details exactly what is being shipped, how dangerous it is, how it must be packed and labeled, and how it must be transported. Shippers are required by CFR Title 49, the International Air Transport Association, and other regulators to ensure the safety of the cargo and everyone on board the flight.

Here’s an example of a properly completed shipper’s declaration of dangerous goods:

shippers_declaration_437x600

That’s all the responsibility of the shipper up to this point. They’re required by law to correctly prepare the shipment. Now let’s get to where other responsibilities lie.

Over the course of the hazmat shipment, everyone has to assume responsibility for safe transport. That’s why every carrier has to employ certified hazardous materials inspectors to check for safety and regulatory compliance. It’s not just that carriers accept only correctly documented, packaged, and labeled hazmat shipments; they have to ensure that they’re loaded correctly.

To better understand how hazmat compatibility works, let’s dive into the nine classes of dangerous goods:

Class 1: Explosives

HAZMAT_Class_1_Explosives

 

 

 

 

 

 

Class 2: Compressed Gasses

DOT_Placard_Class_2-new

 

 

 

 

 

Class 3: Flammable Liquids

hazardous-materials-label-class-3-flammable-liquid-roll-of-500-6-hml-r-500

 

 

 

 

 

 

Class 4: Flammable Solids

DOT_Placard_Class_4-new0412

 

 

 

 

 

Class 5: Oxidizers

DOT_Placard_Class_5-new

 

 

 

 

 

Class 6: Poison/Toxic

DOT_Placard_Class_6-new0412

 

 

 

 

 

Class 7: Radioactive

K5633

 

 

 

 

 

 

Class 8: Corrosive

HAZMAT_Class_8_Corrosive

 

 

 

 

 

 

Class 9: Miscellaneous (Dry ice, magnets, vehicles, etc)

HAZMAT_Class_9_Miscellaneous

 

 

 

 

 

It’s not sufficient to document, package, and label. You also have to figure out how which other goods materials they can be stored and transported together. Here’s a table to figure that out.

Screen Shot 2016-02-03 at 4.34.00 PM

(Green indicates no restrictions. Yellow indicates that classes can be transported together with some restrictions. Red indicates that there are no circumstances under which these goods can be transported or stored together.) Improperly storing hazmat together can be catastrophic as we saw in the recent explosion in the port of Tianjin

If you’re transporting hazmat, we can’t emphasize enough that everyone along the supply chain is responsible for knowing the regulations around their safe handling. Even the most innocent looking items, like the batteries that power everyday toys, can be classified as hazardous materials depending on how they’re packed and shipped. It’s not always apparent what constitutes a dangerous good for transport and for this reason, personnel must be specially certified to take on these challenges. In the world of transporting hazardous materials, safety is no accident.

By Travis Falasco, global operations associate at Flexport.

What will happen if lithium ion batteries are banned on passenger planes?

The United Nations International Civil Aviation Organization has issued a directive to ban lithium ion and metal batteries from passenger flights, effective April 1st, 2016. Lithium ion and metal batteries can still be transported on cargo flights. This prohibition on passenger flights is meant to be temporary until investigators have more time to research how to prevent battery fires.

Although the U.N. agency doesn’t have actual enforcement power, national regulators generally follow its directives. The U.S. Federal Aviation Agency is expected to support the ban, in spite of protests from industry groups.

Lithium batteries are dangerous goods that sometimes spontaneously combust. Once the fire starts, it burns so hot and fast that the current firefighting equipment cannot extinguish the fire. This has actually brought down a plane before: In 2010, a UPS cargo plane crashed, killing both members of the crew; an investigation revealed that the fire was caused by the combustion of a pallet carrying batteries.

Here’s what shippers should know about the U.N. battery ban

Here are three major takeaways from the guidance issued by IATA, effective as of April 1st, 2016:

  • Lithium batteries, packed on their own, are forbidden from passenger aircrafts.
  • In addition to the standard labels, lithium battery shipments are to bear a “Cargo Aircraft Only” label.
  • Batteries must be shipped at a state of charge not more than 30% of rated design capacity. You must obtain approval from the State of Origin and the State of the Operator if you ship batteries that are over 30% charged.

The prohibition doesn’t apply to lithium batteries packed with equipment or in equipment (UN 3481).

The ban will continue until there’s more research into the combustibility of batteries. Investigators are also looking into a new fire-resistant packaging standard that will be used to transport the batteries. That new packaging standard is expected by 2018.

Passengers won’t be directly affected: You’ll still be able to keep the batteries in your cellphone and laptop in your carry-on. The greater danger is the close-packing of batteries in the cargo holds of passenger planes.

Here’s how the change might affect the industry

The Rechargeable Battery Association, an industry group, has opposed this move. It has called talk of banning batteries on passenger planes to be “outrageous rhetoric.”

Many shippers are displeased: It’s just gotten more difficult to get batteries at short notice because they have to rely on cargo planes. This is especially true for consumer electronics companies, which make significant use of rechargeable batteries. Their difficulties will likely also be felt by consumers.

The ban will likely benefit cargo-only airlines and specialized carriers like FedEx or UPS. Passenger airlines have just lost a reliable source of income, and cargo airlines will find that their space is in greater demand.

 

10 Most Helpful Online Tools for Amazon Sellers

With Q1 still in full gear and the holiday rush over with, this is the perfect time to optimize your business. It’s not just enough to private label and sell your products. You have to retain your customers and optimize the way you develop a relationship with them.

Any of these e-commerce applications can give you the edge you need to continue to grow.

Chad Rubin, CEO of Crucial Vacuum, a direct-to-consumer brand founded in 2009, is a successful Multi-Channel seller and also a Flexport customer. Today, Chad Rubin shares with us his top recommended e-commerce applications to automate operations and take your business to the next level.

E-commerce Tools

E-commerce store tools like these are used to research your product, your competitors and then dominate the category. Don’t leave home without it.

Jungle Scout

Amazon.com is a jungle of products and category branches. It’s easy to get lost and assume that your prospective product is better than another. However, due to the size of Amazon’s marketplace, it’s really difficult to gather accurate results when researching your prospective products. Jungle Scout is a paid application that compares product pricings, product performances, calculated fees and display historical data. While Jungle Scout does all this automatically, it also allows you to track your competitors at the same time to ensure you stay at the top. This intuitive tool allows you to purchase smarter and efficiently. Jungle Scout starts at $39/month.

Panjiva

Tired of working with distributors and want to work directly with a manufacturer? A lot of sellers feel that pressure from distributors taking a heavy cut. Then the question becomes “how do I meet manufacturers when most are overseas?” Panjiva is an incredible e-commerce application where they match sellers to manufacturers. You can choose your suppliers based on locations or their top customers. Panjiva also provides you with the top trends in the import and export activities, competitor activities, sales leads, and an intricate risk analysis of trade lanes for supply chains. Panjiva starts at $99/month.

BQool

As customers peruse your products, one of the major deciding factors of whether or not they’ll complete the purchase are honest reviews of your product. BQool is an e-commerce application that compiles all of your product reviews and allows you to contact your customers and resolve their issues with ease. Don’t let a negative review bring your product down. Instead, work with the upset customer and get the review fixed. BQool has a 14-day free trial, but billing starts at $22.50/month.

Skubana

We’re going to do our best to refrain from patting ourselves on the back too hard, but we love our software. Skubana is an ERP platform that handles your entire multi-channel e-commerce operation after the checkout. Skubana tracks shipments, manages your orders, generates your purchase orders, and provides state of the art analytics reports that provide precise profitability reports – and the kicker is that all of this runs on our cloud so you could access your entire business, all through a webpage. Whether it is off of your phone, tablet or computer, manage your business across all of your sales channels, from anywhere, at any time. After our free 14-day trial, we utilize a pay as you use pricing, however pricing starts at $499/month. Check out our pricing page for an estimate.

Productivity Apps

These productivity apps further your business by optimizing the way you communicate with your teams, and conduct business.

Boomerang

As business owners, we’re swamped with important e-mails. Because of this high influx of e-mails, it is easy to have a few urgent ones slip through the cracks without a response. Boomerang hooks up with your Gmail/Google Apps and allows you to set e-mail reminders, schedule e-mail dispatches, response tracking, read receipts and more. This tool revolutionizes your e-mail, and allows you to communicate flawlessly for your business. Boomerang’s basic plan is free, but subscriptions start at $4.99/month.

Trello

There are many organizational tools out there to organize projects. There’s Pinterest for design ideas and there’s Trello for Business collaboration. Trello, like Pinterest, utilizes cards and boards to organize your tasks to do, what’s currently being worked on, and then completion. Trello could be used to organize each of your teams’ tasks while you’re aware of what everyone is currently working on. Trello is a free platform but if you’d like extra business integrations with Salesforce, Slack and more, Trello Business Class starts at $8.33 per User/month.

Customer Retention Tools

It doesn’t end after the customer makes the purchase. You have to sell to them, again and again. These tools ensure that you maintain a relationship with your customer by keeping contact to refrain from becoming their one night stand.

Help Scout

To master your customer retention, you have to optimize your customer interaction. Help Scout is an e-commerce application service that provides you with an intuitive mail service, customizable knowledge base and more – all with the intention of increasing customer interaction. This service will help you convert customers into life-long patrons. Help Scout starts at $15/month.

MailChimp

If you’re looking to have a starting e-mail marketing solution, look no further than Mailchimp. This email application service allows you to create custom e-mail blasts to your customers. You can create lists to differentiate consumer groups so that you could have a focused e-mail going out. Mailchimp is exceptional for customer retention as it allows you as a seller to connect with them on a personal level, while providing them exclusive offers and discounts that they may be interested in. Mailchimp is free to sign up, however if you have over 1500 customer contacts, subscriptions start at $25/month.

Windsor Circle

This e-commerce application service integrates with Mailchimp to maximize your customer retention. Windsor Circle’s system auto generates recommended products for your customers, predicts order dates, predicts replenishment dates, customer analytics, segment your customers into efficient lists, purchase history and more. Windsor Circle focuses on ensuring that your customer doesn’t just leave after the purchase but remembers what they purchased, recommends what should be their next, and sends email reminders. Contact them for a pricing estimate after your free 60-Day Trial.

Klaviyo

Sometimes it isn’t enough to just send out e-mails and newsletter blasts to all of your customers. They aren’t just numbers but rather a unique personality per person. Klaviyo’s service allows you to segment your customers into lists and provide unique profiles to these groups. With customized and unique profiles you can better target your customers to cater to their needs and wants with efficient marketing. Klaviyo lets you set up drip campaigns, recommended products and establish sign up forms to carefully filter your customers into their appropriate groups, thus selling to your customers exactly what they want. Klaviyo starts at $25/month.

This post is contributed by Chad Rubin, CEO of Skubana and Crucial Vacuum. Skubana is an all-in-one ERP system that seamlessly integrates with e-commerce businesses, 3PLs and warehouses, provides state-of-the-art profitability reports and more.

The World’s Largest Contract Manufacturers and the CEOs Who Made Them

You might be surprised to learn that most of your electronics—from your iPhone to your laptop to your video game console—weren’t actually made by the company you bought them from. In fact, outsourcing consumer electronics to third-party contract manufacturers (or CMs) is the rule rather than the exception. Often operating out of facilities in developing countries, where labor and materials are less expensive, these CMs save businesses like Apple, Intel, and Microsoft a lot of money.

Despite having never been heard of by the average consumer, the following CMs have come to dominate an industry valued in the hundreds of billions of dollars. As some of the most influential enterprises on the planet, the following companies—and the leaders that put them on the map—are worth knowing a little more about.

Foxconn

Mkt Cap: $43B; Employees: 1,290,000

Foxconn is world’s largest electronics manufacturing service (or EMS) and its third biggest employer. It was founded by Terry Gou in 1974 to make plastic parts for television sets. More than forty years later, Taiwan-based Foxconn (the trade name of Hon Hai Precision Industry Co., Ltd) specializes in the world’s most popular consumer products, as well as in supply chain solutions, industrial automation, and telecommunications. Perhaps best-known as the manufacturer of the iPhone, Foxconn’s CV also includes Amazon’s Kindle Fire and the Microsoft’s XBox One. While in recent years its biggest customer, Apple, has shifted a significant portion of its business over to its competitors, Foxconn still managed to move up a notch on the 2015 Fortune 500 list, coming out at #31 in global revenue this year.

Known as much for his business acumen as his idiosyncratic management style, CEO Gou appears to have attained his success through sheer force of will. In the face of his vision and relentless drive—he’s admitted to forcing Apple founder Steve Jobs to give him his business card—perhaps empire was inevitable. Even fierce international scrutiny after the highly-publicized suicides of 14 Shenzhen factory workers in 2010 was met with an almost dismissive confidence. “We are certainly not running a sweatshop,” Gou said in 2014. “We are confident we’ll be able to stabilize the situation soon. A manufacturing team of 800,000 people is very difficult to manage.”

Despite Gou’s polarizing public image, Foxconn has come to be known as one of the best-run CMs on the planet. But rising costs in the manufacturing sector have led it to make a concerted shift towards automating production. Diversification is also an objective: despite its roots in electronics manufacturing—it earns half its revenue from Apple products—plans to expand into software development and telecommunications services, as well as further diversification of its manufacturing capabilities, are well underway.

Flextronics

Mkt Cap: $5.66B; Employees: 150,000

Flextronics International Ltd. began making PCBs for Silicon Valley back in 1969. In the 1980s, it went public and expanded its operations overseas, but went private again in 1990, and then public again in 1994. Rebranded as Flex in 2015, it now provides design, manufacturing, distribution, and aftermarket services to companies like Apple, and makes products like HP’s Notebook laptop.

While nowhere near as dramatic a figure as Gou, CEO Michael Marks is just as iconoclastic. After taking over in 1994, Marks catapulted Flex into the top five CMs of the world almost overnight, doubling its size after winning the bid for manufacturing Ericsson SpA’s telephone network equipment in 1996. Inspired by Toyota’s philosophy of lean manufacturing, Marks bucked conventional management styles by transforming the Flex supply chain, prioritizing the reduction of inventory by reducing waste and focusing on quality of product.

Like Foxconn, Flex has also sought to diversify against loss of market share to competitors, focusing on more profitable enterprises like engineering design, intellectual property, and startup investment. Marks’ legacy will be his repositioning of Flex as the original design manufacturer, or ODM, of the future: one that specializes in a multitude of services far beyond manufacturing.

Jabil

Mkt Cap: $3.78B; Employees: 161,000

Founded in Detroit by James Golden and William E. Morean in 1966, Jabil Circuit, Inc., remains headquartered in the United States a half century later. Today, Jabil—a portmanteau of the founders’ first names—boasts 101 facilities in 23 countries and $17.9 billion in fiscal revenue. In 2015, it was listed as #18 on the Forbes Top Technology Companies of the Fortune 500, and #191 overall. From its humble beginnings as a PCB manufacturer, Jabil went on to be recognized by Fortune Magazine as one of the Fortune 500 Most Admired Companies in 2012.

It was Morean’s son, William D. Morean, who brought this small EMS onto the global stage. When he took over the company in 1978 at the age of 24, it was commanding less than $700,000 in annual revenue. An outdoor and motorcycle enthusiast often described as a rebel, Morean helped Jabil clinch a deal with auto parts manufacturer AC Delco the following year, the company’s first step towards becoming the international powerhouse it is today.

Sanmina

Mkt Cap: $1.42B; Employees: 44,000

Like three other companies on this list, Sanmina Corporation was established as a PCB manufacturer in 1980 in San Jose, California. Although its capabilities have grown to include fabrication, injection-molded plastics, and optics, its expertise remains in the telecom, aerospace, and medical systems, with products like ultrasound systems and blood glucose meters. In 2015, it reported $6.37 billion in revenue and marked its fifteenth year on the Fortune 500, with a ranking of #432.

Of Sanmina’s two original founders, only one remains with the company. Croatian-born Jure Sola has been CEO and Chairman since 1991. Serbian-American Milan Mandarić, who as a child was a World War II refugee and has described his financial success as the “classic American dream,” has made yet another fortune buying and selling European soccer teams.

Celestica

Mkt Cap: $1.31B; Employees: 25,000

A product of IBM’s transition from hardware to software in the early 1990s, Celestica was formed as a subsidiary in the early 1990s. Now a world-class EMS based in Toronto, its global manufacturing network services corporations like Sun Microsystems, HP, and Lucent. Until 2012, one of its biggest products was the Blackberry smartphone, accounting for 20% of its revenue. But after deteriorating sales caused Blackberry to outsource its manufacturing to Asia, Celestica reinvented itself, investing in other industries like big data storage, health care technology, and green energy. Its global suite of services continues to include design and engineering, systems assembly, fulfillment, after-market services, and supply chain managed services.

It was IBM’s head of manufacturing, Eugene Polistuk, who engineered the Celestica spinoff. Recognizing what he saw as the weaknesses in the original management structure, Polistuk overhauled it completely. One of his first big changes was offering the same share offerings to everyone in the company, rather than reserving the best prices for executives. Polistuk was looking for a buyout, but Celestica’s growing clientele—thanks to his efforts—made IBM unwilling to lose it. Eventually, however, they agreed to sell to Onex Corporation, an equity investment firm, in 1996. By 1998, Onex had taken the company public.

The Future of Electronics Contract Manufacturing

Advancing technology has always changed the face of enterprise, and by most accounts, the emerging Internet of Things (IoT) is already making its mark. Over the last few years, the IoT has exploded to the forefront of the tech industry, and with it, speculation as to its long-term impact. Many predict that as IoT capability continues to improve, so will demand for the smart devices that support it.

Of course, these capabilities will have significant impacts on production itself: IoT-enabled equipment will optimize efficiency, safety, and agility for manufacturers. The question is, will today’s heavy hitters of EMS capitalize on these advances? While some from this list have already positioned themselves as contenders in this new IoT ecosystem—like Jabil, for example, with its Blue Sky Innovation facility—whether these giants can stay on top remains to be seen.  

Davey Davis is the Copywriter and Marketing Coordinator at Blue Clover Devices, an electronics ODM specializing in the design and manufacture of power, wireless, and IoT products. Follow BCD on Twitter or check out the website for industry updates from San Francisco.

What Importers Should Know for Chinese New Year 2016

2016’s Chinese New Year will last from February 7th to February 13th. It’s also known as the Lunar New Year or Spring Festival, and it’s the biggest Chinese celebration of the year.

This is an important event for importing companies to know. Your supply chain may be disrupted for a significant period of that time.

Factories will be closed for the entire week. Keep in mind that the majority of Chinese laborers have jobs that are far from their hometowns; their return to family is one of the largest migration events every year. Businesses typically allow workers to start packing up as much as two weeks before the celebration. They’ll also take a week or more to return. All in all, factories may not resume production by the third week of February. That may take you to almost four week’s disruption, compounded with delays in transportation.

Here’s another issue: Even after factories re-open, it will take a while for them to return to production at full capacity. That’s because up to a third of employees never return to work. The inexperience from new workers can cause longer delays and lower product quality.

A top-tier supply is likely to have all these issues worked out or at least mitigated. So not the entire manufacturing sector is going to be affected in the same way, but you should be aware of these general effects.

What can you do to plan ahead?

Because of record low ocean rates, ocean carriers are planning capacity reductions for Chinese New Year. Some report that they’ll reduce capacity by up to 40%

That could be an issue if you don’t have protected space. Carriers and Freight Forwarders have an allocation based system which rewards shippers who consistently move freight throughout the year. If you’re not moving freight regularly, it may be a challenge to find space.

How can you avoid this challenge?

Plan ahead and work closely with your freight forwarder. Your forwarder can work with carrier partners to protect allocations or might be able to get space from another carrier. Forwarders may also have the chance to get allocation space from another shipper.

You should also plan to order at least three weeks prior to Chinese New Year. If you do, containers should be at the port by the second week of January.

Finally, consider shipping by air if you have a strict deadline from a retailer or are running out of stock. Paying for stock expensively might be better than having no stock at all. Don’t leave that decision for the last minute: flights just before Chinese New Year are often overbooked and carry a higher premium . Consider non-direct flight options and makes sure that your connection is outside of China.

Price increases during Chinese New Year

Seafreight and airfreight costs will increase before Chinese New Year. Carriers get overbooked earlier than usual. Be warned that even if you get a booking confirmation, your containers may still get rolled to the next available sailing. Carriers are especially eager to increase rates at this time.

Ocean carriers have already announced a Far East Asia to United States and Canada General Rate Increase (GRI) effective as of January 1st, 2016. Rates are meant to be as high as these levels:

Imports to the East Coast of the United States and Canada: US$1600 per 40’ container.

Imports to the West Coast of the United States and Canada: US$1200 per 40’ container.

Carriers have also announced a Peak Season Surcharge for all dry cargo in this tradelane. A US$400 surcharge per 40’ container will be effective as of January 15th, 2016. Furthermore, carriers have announced a $600 surcharge effective as of February 1st, 2016.

These are pretty high announced rate increases! But just because carriers have announced them doesn’t mean that they’ll be exactly this high. In the current market, it’s possible that the GRIs will be mitigated. The Peak Season Surcharge, though, is more likely to stick.

***

Don’t wait until the last minute. If you can manage it, place your orders now and avoid unnecessary delays next month.

Update, 1.21:

Ocean carriers successfully implemented a General Rate Increase (GRI from Far East Asia to United States and) effective as of January 1st, 2016.

Here’s data from the Shanghai Containerized Freight Index:

Dec 2015-Jan 2016, rates per 40’

12/25/15 1/1/16 1/8/16 1/15/16
USWC $766.00 $1,519.00 $1,498.00 $1,417.00
USEC $1,448.00 $2,555.00 $2,542.00 $2,457.00

USWC = United States West Coast Ports

USEC = United States East Coast Ports

The Jan. 15th Peak Season Surcharge (PSS) was postponed to February 1st. Rates are expected to drop between now and February 1st.

It remains to been seen if February 1st increases will stick or not, we will update you as soon updates are available in the market.

By Nerijus Poskus, logistics manager at Flexport.

Come see Flexport’s shipping container at CES 2016!

CES-2016-Flexport-Booth

90% of everything you see around you has been carried inside a shipping container like this one. And Flexport is bringing our own shipping container to Las Vegas!

We are very excited about showing some of our coolest clients and their featured products.

Bellabeat – as featured on Forbes, TechCrunch, Wall Street Journal, WIRED.

Nod – as featured on BBC, TechCrunch, TIME.com, WIRED.

Osmo – as featured on Bloomberg Business, Forbes, NBC, Wall Street Journal.

Electric Objects – as featured on Bloomberg Business, Forbes, the New York Times, TIME.com.

Ring – as featured on FORTUNE, Mashable, TechCrunch, Wall Street Journal.

 

Flexport-Clients-CES-2016


Looking to chat with someone on our team at CES 2016?

We’d be happy to connect at CES@flexport.com!

Looking to learn more cool facts about shipping?

Check out www.flexport.com/blog