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January 2 2023

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112 Journal of Commerce | J anuar y 2, 2023 EXECUTIVE COMMENTARY ANNUAL REVIEW & OUTLOOK 2023 Logistics to enable more active margin man- agement in a lower freight rate market. As the innovation in contract products continues, the need increases for technology to manage these contracts and the underly- ing performance. At NYSHEX, we are now providing technology to support all contract types, from two-way committed contracts with strict financial penalties to contracts where there may be no consequences for not performing. Regardless of the contract type, technology provides accurate and timely data to enable faster and better decisions; reduces workload and creates efficiencies; and allows carriers, shippers, and NVOs to work together based on a shared system of record. These features create mutual value for shippers, carriers, and NVOs, regardless of where freight rates might end up in 2023. shift in consumer spending from physical goods back to services. This triggered a buildup in inventories and a consequent drop in demand for container shipping, which in turn allowed the carrier networks to untangle, thereby adding capacity to a market now clearly in excess sup - ply. This is the classic supply chain bullwhip effect, and no doubt we'll see more of the bullwhip in 2023. In preparation for 2023, we know that supply chain profes- sionals are contemplating new procurement strategies as they evaluate the trade-offs between cutting costs and managing their supply chain risks. Carrier exec- utives continue to explore new contract products as a means to better position their services in light of unpredictable demand and volatile prices. Similarly, non-vessel- operating common carriers (NVOs) are optimizing their contract mixes Container space utilization is a focal industry pain point that, as the pandemic painfully taught us, must be addressed. Ironically, the high demand and supply chain disruption caused by the pandemic played a role in this field not evolv - ing enough. A standard 40-foot shipping container holds 67 cubic meters of space. While it isn't always possible to load a container to capacity, the indusrty average utilization of 65 percent simply is not good enough. Shippers will be able to utilize capacity more efficiently with the help of a properly developed arti - ficial intelligence (AI) utilization solution. As the AI develops, it could guide shippers on how to pack their goods, including maximiza - tion of the packing itself based on the items shipped, and assist them in assembling their containers most efficiently. A company that moves 10,000 containers per year from China to the West Coast of North America could save roughly $12 million annually by increasing its container utilization from 65 per - cent to 90 percent. Shipping rates are dropping, and we seem to be heading back to normal, but there are still so many digital solutions we can further develop to reduce manual labor, logistics costs, and shipper frustra - tion. Capacity utilization is just one of many issues we have to address. And the cherry on top? Improving utilization will mean fewer contain- ers shipped, bringing the industry one step closer to becoming more environmentally friendly. New York Shipping Exchange (NYSHEX) Gordon Downes CEO As most peo- ple expected, 2022 has been another vola- tile year for container shipping. The relaxing of COVID-19 lockdowns drove a major Mercado Labs Robert Garrison CEO Importing is complex, products are made to order, and it takes on average six months to complete a transaction. That's why the biggest opportunity for improvement in the import supply chain is the first mile. The first mile is defined as "order placed to prod - uct received" and includes purchasing and logistics. I see potential there in three areas: process automation, digiti - zation, and connectivity. Excel and email plateaued decades ago, but they are still the default in this industry. Where I see the greatest innovations is companies using applications (apps) which allow entirely new ways of doing work and connecting their supply chain. A good example is Uber. They didn't try to create a better taxi; instead, they improved their app with new embedded technologies such as GPS, messaging, and navigation to create a completely different experience and outcome for passengers. Importers are still — fig - uratively speaking — standing on Olive Street hoping that a taxi comes by. When we think about automation, we consider two opportunities. The first is where we can automate a physical activity, such as unloading or driving a truck. A lot of work is being done in robotics and full self-driving (FSD) to try to tackle that, and the pandemic was likely a major accelerant. The second is data entry. The supply chain runs almost exclusively on Excel, email, and documents. Much of this can be elim - inated through process automation. The best solution is to make the work go away — for example, using an app versus manual creation. The next best solution is to enhance manual efforts with technology such as chatbots, robotic process automation (RPA), and optimal character recognition (OCR). In terms of visibility, there needs to be progress in the following three areas: 1. End-to-end: There is great work being done in pock - ets (such as project44 for transportation); however, that's only one portion of the supply chain. 2. Exceptions: In most cases, it's more important to know where something isn't versus where it is. 3. Quality: Much of the data available for visibility is very low-fidelity. GPS, ML, tagging, analytics, and process automation must become embedded in all visibility solutions. "Importers are still — figuratively speaking — standing on Olive Street hoping that a taxi comes by." ◀ "As the innovation in contract products continues, the need increases for technology to manage these contracts and the underlying performance. " Gordon Downes

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