From World Trade Magazine, 01/02/2002 http://www.worldtrademag.com/wt/cda/articleinformation/coverstory/bnpcoverstoryitem/0,3481,68968,00.html

Forecasting the Year Ahead

By Lara L. Sowinski

Key Industry Executives Share Their Visions for 2002

2001 was a year few could have imagined. In an effort to make sense of the past 12 months, some bold leaders are still willing to part with predictions for the future.

It's time to look at our present circumstances and commit to making improvements. There seems to be more uncertainty than in recent years as we move into 2002. The global economy remains in a state of considerable flux and, at the same time, technological advances are changing the business landscape daily, creating disparities between the companies who remain on the leading edge versus those, who for a variety of reasons, simply haven't kept up.

The backdrop to the assortment of issues facing business executives are the events of Sept. 11, 2001. The resulting impact of the terrorist attacks continues to ripple through many aspects of daily life, and business is obviously not immune. Adjusting to this new reality is ongoing, and there will undoubtedly be significant changes in how business is conducted, especially when it comes to international trade.

WORLD TRADE MAGAZINE asked executives from the trade and transportation industries what they expect for the upcoming year, not only within their sector but for global trade at large. The discussions yielded several prominent themes. Most importantly, there is a sense that, despite the challenges ahead, there are real opportunities, too. Likewise, executives say they're more determined and willing to confront these challenges.

One Door Opens as Another Closes

According to Lee Harrington, president and CEO of the World Trade Center Association of Los Angeles-Long Beach, "We've experienced an increase in activity. Many businesses are trying to figure out a new angle and they're coming to us, as well as the Department of Commerce and others, for help." Harrington adds that it's an opportune time to "look for new suppliers and markets, both locally and globally." He says that markets in Eastern Europe, "especially Poland and the Czech Republic," are growing, as are countries like South Africa.

Jerry Leary, president and CEO of Tower Group International, offers similar sentiments. Despite some downward pressure in the marketplace, "we're actually optimistic that business will continue to expand," he says. Tower Group International is the largest customs broker along the U.S.-Canada border, and Leary says although shipments have come under greater scrutiny since September, the trade community is finding ways to effectively adapt to the new requirements without sacrificing customer service and shipper demands.

Indeed, the trade community has its work cut out for it as it tries to balance the increased security requirements with the need to keep cargo flowing without interruption. The challenge for the intermodal industry is to ride out and overcome the economic slowdown compounded by the uncertain environment created by the events of September, says Joni Casey, president of the Intermodal Association of North America. "The economic effects of the attacks are as yet unknown. It is clear, however, that increased and necessary security measures have caused some delays at major ports and border crossings," Casey says. "This has disrupted the supply chain and affected just-in-time inventories; the very innovations that have made companies more efficient and profitable. Optimistically, with service integrity reaching its most consistent levels in recent times, our industry is encouraged by the positive response to the many time-guaranteed products now being utilized by intermodal shippers."

While many importers expect to have flat or lower sales growth in the coming year, especially in the retail sector, that's not the case for everyone. Consumers are focusing their attention on spending more time at home and they're spending money on home accessories and decorative items. This shift in consumer spending will benefit importers like Ft. Worth, Texas-based Pier 1 Imports. Rich Markovich, director of international logistics, says "we're actually pretty optimistic about 2002." The company is one of the top twenty largest ocean importers in the U.S. However, Markovich says he doesn't expect any slowdown in cargo clearance due to extra security measures. "We've already implemented stringent security measures into our operations," he says. Pier 1 also has the advantage of qualifying as a "low-risk importer" by U.S. Customs' standards.

In fact, "this is a good time for importers to review their customs compliance procedures," says Michelle Rodenborn, a customs and international trade attorney in Long Beach, Calif. "U.S. Customs has redirected some of its resources to provide added assistance in anti-terrorism and law enforcement," she says. And, while U.S. Customs will continue conducting importer audits, a temporary shift in resources may affect the number of personnel available for such assignments. Furthermore, importers with excellent compliance programs in place may be less likely to be targeted by audits. Meanwhile, Rodenborn notes importers should also watch for the possible lifting of trade sanctions in countries like Russia, Azerbaijan, and other nations, which are members of the anti-terrorism coalition.

Adapting to New Business Realities

"Economic downturns are cyclical," says Joe DeLuca, director of marketing services for Con-Way NOW, "We're taking a 'wait-and-see' attitude." Nonetheless, DeLuca says his company is "maintaining our service levels and performance standards." As for business as a whole, "we're optimistic, but cautious," he says.

Mark Hirzel, import-export manager for Meiko America, says his company's business has been affected by Japan's struggling economy. Therefore, they've had time to prepare for the inevitable slowdown in business growth. "Business is still moving forward," Hirzel says. "Since September, we've seen cost increases in such items as insurance risk coverage," he says.

There's no escaping the urgency for cutting costs, however, and shippers are turning to their logistics partners for help in achieving this objective. Rodger Mullen, president of Schneider Logistics, says customers are beginning to demand, "individual, leading logistics providers" with the ability to manage an entire supply chain instead of "multiple providers." At the same time, "We're working to get to the balance sheet now, in order to trim costs," Mullen says, "Tools that provide increased visibility are helping us do this." Mullen says these visibility tools are "already available 'domestically,' but are not quite there yet in the international environment." (For more insight on this issue, see sidebar).

It's clear that information technology has played a key role in international trade, from more effective management of global supply chains to improved communication with suppliers and partners. And, while there are a number of excellent products on the market, developers have still not succeeded in creating a single product capable of managing today's extremely complex supply chains.

"Supply chain collaboration has been the buzzword for some time," says Robin Y. Roberts, research analyst with Stephens, Inc. But she says a real collaboration product is not expected to be on the market until 2003. The same applies for SCM products. While they've attained a respectable level of development, "an end-to-end SCM suite is still not available." Leading software developers agree: "Collaboration is still evolving, we're not there yet," says Lora Cecere, vice president of marketing for Descartes Systems Group, Inc. "We're still working to improve operational efficiency." Part of the problem may be reluctance by shippers to use more effective tools, though. For instance, Cecere notes a large percentage of businesses still rely heavily on fax and EDI transmissions in their daily operations.

Executives from i2 Technologies concur that shippers and carriers will be under increased pressure to reduce costs this year. The focus will be on how to gain greater efficiencies from the supply chain. One way involves offering increased visibility. But, that alone is not enough, "You also need to provide the intelligence to do something about it," says Andy De, i2's director of product marketing, SCM. "We've moved beyond products that simply track and trace." The next generation of products must offer "detection, resolution, and management."

The value of incorporating information technology will be all the more apparent in the year ahead. Not only is it a necessity for maintaining competitiveness in the global marketplace, but it will also play a fundamental role in conforming to new security demands.

Tom Weidemeyer, COO of UPS and president of UPS Airlines, recently outlined several areas in which shippers and carriers could take action to revitalize the flow of international commerce. One includes fine-tuning strategies and contingency plans to absorb threats to time sensitivity.

"In the global supply chain, time is measured not just in speed, but in precision. Carriers and customers have already modified just-in-time strategies by positioning just-in-case inventories closer at hand," Weidemeyer says. "We can go further, applying our logistics expertise to help customers identify alternative shipment modes and create multiple scenarios for moving cargo."

While no one can pinpoint what 2002 will hold, the consensus among executives in the trade community is that despite the tough times ahead, viable prospects are out there. Perhaps what's called for is a little more American ingenuity to bring them to fruition.

World Trade Magazine Readership

World Trade readers are an exceptionally valuable and powerful audience not easily reached through other media. World Trade is targeted to the senior management of mid-sized American manufacturers actively involved in exporting and importing, as well as the service industries supporting their efforts. These companies represent the fastest growing sector of the U.S. economy in terms of revenues and job growth, and no other publication reaches the heart of this market more efficiently than World Trade. In addition, more than 95% of the Fortune 500 and Global 1000 companies subscribe to World Trade, assuring coverage of multinational companies and the largest exporters. Finally, World Trade magazine is also carried on two major airlines including; United and Delta offering exceptional visibility to high-level business travelers.

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