DC Velocity - February 2017

18 DC VELOCITY FEBRUARY 2017 www.dcvelocity.com newsworthy

Protectionist impulses by governments to restrict the growth of global trade and commerce will be outweighed by businesses seeking more cost-effective options to source and distribute as a way of controlling rising inventory carrying costs, an analyst said last month.

Alexsander Stewart, managing director, transportation and logistics, for investment firm Stifel, told the SMC3 annual winter meeting in Atlanta in late January that, for the first time in a decade, companies will be confronting an environment of steadily rising interest rates. This is especially true in the U.S., where the Federal Reserve has prepared markets for several interest rate hikes over the next two to three years.

The benchmark federal funds rate, the overnight rate charged by banks and credit unions to lend to each other, is currently between 0.50 and 0.75 percent and has moved little since the 2007–2009 financial crisis and recession.

However, with an improving U.S. economy eliminating the continued need for ultralow rates, some economists forecast the Fed will boost the fed funds rate multiple times by decade’s end until the central bank reaches what it considers a normalized target rate of around 3 percent. In this climate, companies sitting on what is estimated at $1.8 trillion worth of global inventories could face a significant financial hit unless they can find ways to quickly and freely move goods to market, Stewart said.

In his presentation, Stewart predicted an increase in re-shoring and near-shoring activities as businesses look to compress the time to market for their goods. This may result in large global supply chains being replaced by networks supporting shorter, region-based trade flows, he said.

Businesses that have spent years, even decades, erecting and refining a global infrastructure may suffer, he said. “Companies with global networks are finding it difficult and costly to manage increasing customer demand for unique products with short cycle times and multiple reorder points,” he said in his presentation.

Protectionist initiatives could also be overwhelmed by the rising tide of global e-commerce, Stewart said.

Worldwide retail e-commerce sales
will surpass $4 trillion by 2020, forecaster eMarketer said
last August. Even then, e-commerce will represent just 14. 6
percent of total worldwide retail sales, eMarketer said. The
current level is between 10 and 12 percent. Cross-border
e-commerce today accounts for between 10 and 15 percent
of the total volume, led by the Asia-Pacific region, Stewart
said.

The expected tug-o-war between globalist and national-ist/protectionist ideologies began Jan. 24 when President Donald J. Trump issued an executive order removing the U.S. from the Trans-Pacific Partnership (TPP), a 12-nation compact that supporters had said would jumpstart U.S. export activity by removing thousands of tariffs and non-tariff barriers imposed by foreign countries, but which critics said would lower U.S. barriers to foreign trade, thus killing U.S. jobs by making it cheaper to import goods than produce them at home. Trump also said he would seek to renegotiate the 23-year-old North American Free Trade Agreement (NAFTA), which he has also bitterly opposed as a job killer.

Frederick W. Smith, chairman and CEO of Memphis, Tenn.-based FedEx Corp., called withdrawing from TPP a big mistake, saying it will make it harder for American companies to sell to foreign consumers and could cede trans-Pacific trade leadership to China. “The United States being cut off from trade would be like trying to breathe without oxygen,” Smith told Fox Business News. “It’s an essential part of our economy.”

newsmakers

FourKites Inc. has announced that Peter Yost and Rob Kunzler have joined the company as director of strategic alliances and vice president of marketing, respectively. … Bastian Solutions has promoted Jason Nowak to director of Bastian Robotics. … Rick Underwood has joined Crane Worldwide as regional sales manager in the U.S. West region. … Burris Logistics has promoted John Enger to customer account sales manager for Burris Freight Management. … The governing board of Florida’s Port Manatee has elected Vanessa Baugh to a one-year term as chairwoman and appointed its two newest members, Priscilla Whisenant Trace and Stephen R. Jonsson, as well as continuing member Charles B. Smith as officers. …

Kevin Krause has joined Seko Logistics as vice president of ocean services. He will be based at the company’s global headquarters in Chicago. … David Whitehill has joined Logistics Plus Inc., where he will head up the Sourcing Solutions division. … Page International Inc., a Savannah, Ga.-based worldwide logistics service provider, has promoted Jackie Johnson to director of sales. … East Coast Warehouse & Distribution has hired Adrienne Harrison, a logistician with more than 13 years of experience in transportation and supply chain operations management, as senior director of customs examination services.