S2E5: Steering through Stormy Seas with Maritime Expert Don Maier

In our January episode, Ted Stank and Tom Goldsby speak with maritime expert Don Maier about the state of international shipping, including shifts in trade lanes, the challenges of forecasting and capital planning, and the industry impact of issues from the Panama Canal to bubbling international conflicts.

Before joining UT’s faculty as an associate professor of practice, Maier served as dean for the Maine Maritime and Cal Maritime Academies. As the founding dean of the School of Maritime Transportation, Logistics, & Management at California State University-Maritime Academy, he oversaw programs in marine transportation, international logistics, and naval science. He serves on advisory boards for the International Association of Maritime and Port Executives and the Containerization & Intermodal Institute.

In their opening recap, Ted and Tom also discuss holiday season spending, reports on U.S. jobs and manufacturing, and more.

This episode was recorded on January 5, 2024.

Related links:

• Americans spent a record $222 billion shopping online this holiday season
• Major retailers offering returnless refunds this holiday season
• U.S. employers add 216,000 jobs in a sign of continued economic growth
• Manufacturing increased in December while warehouse availability surges to highest levels since pandemic 
• Congressional leaders reach a deal to avert shutdown
• Red Sea attacks pose another threat to global economy
• Panama Canal enmeshed in a crisis disrupting global trade
• Don Maier writes in The Conversation about global shipping climate strategy
• Progress on U.S.-Mexico rail-ferry service
• China names a new naval chief as maritime tensions climb
• Subscribe to GSCI’s monthly newsletter
• Read the latest news and insights from GSCI
• Register for the 2024 SCM Leadership Academy or SCM Finance Academy

Text the Tennessee on Supply Chain Management team!

Episode Transcript

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Introduction (00:37):
Welcome to the Tennessee on Supply Chain
Management podcast.
Listen in as co-hosts Ted Stankand Tom Goldsby set sail into
the world of end-to-end supplychain management, diving deep
into today's most relevantbusiness topics.
They'll share insights andpressing industry issues and
tackle the challenges keepingsupply chain professionals up at
night.
If you're enjoying the ride,download and subscribe to

(00:59):
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Ted Stank (01:05):
Hey everybody and welcome to the Tennessee on
Supply Chain Management podcast.
We're coming to you here inearly January 2024.
We're going to try to cover alot of hot topics looking
forward this year, as well assome of the reports on the
broader economy.
Then we're going to pivot toour guest, Dr Don Meyer, expert
in maritime transportation onour faculty.

(01:27):
We'll introduce him a bit lateron.
He's got a great background andbrings a lot of insights into
what's going on in the worldtoday related to maritime
transportation and some of thecrazy geopolitical things we've
got going on here with my goodfriend Tom Goldsby.
Tom, how you doing.

Tom Goldsby (01:44):
Ted, I'm really proud of you on these first
episodes.
I would understand if we'dstill refer to the year as 2023.
It's kind of like writing thosefirst checks of the year and so
forth for those who still writechecks.
Loyal listeners want to know,Ted, something right here at the
outset of our first podcast of2024.
How are you doing on your NewYear's resolution?

(02:07):
I remember that you closed outthe year promising that you
weren't going to have anysurgeries.
How are we doing?

Ted Stank (02:14):
No, it was to stay out of a hospital.

Tom Goldsby (02:16):
'I don't want to be in a hospital.
' Even more broadly defined.

Ted Stank (02:21):
Yes.

Tom Goldsby (02:21):
Okay, so tell me.
I'm not aware that you'vebroken that commitment yet.
How are we doing?

Ted Stank (02:26):
Well, it's 10:53 a.
m.
Eastern US time on January 5th.
So far, nothing inside ahospital.

Tom Goldsby (02:36):
All right, we'll insert applause the celebration.
Let's try to keep that streakgoing a little bit longer, maybe
throughout the whole year.

Ted Stank (02:44):
I also danced around with Dry January, but I've
already broken that.

Tom Goldsby (02:48):
You know, something they always say about
resolutions is they need to bereasonable, right?
In your case, I think that's awholly unreasonable assertion.
But hey, kudos to even thinkingthat way.

Ted Stank (02:58):
Well, there's a new thing they're talking about
called Damp January, so I'mgoing to stick with that.

Tom Goldsby (03:04):
I've never heard of that.
Well, hey, a lot to talk aboutother than personal commitments
to the New Year.
There are a lot of action inthe world of supply chain
business and the world ingeneral, so where do we want to
get started?
Let's take a quick look, maybe,at those holiday sales recap.
When we last spoke, we had hadBlack Friday, we had had Cyber

(03:26):
Monday and even Cyber Week andthose were up and in total it
looked like holiday sales wereup by 3.1 percent and online, in
particular, doing well withspending up 5 percent.
That was a record $222 billionover the months of November and
December U.
S.
online sales.
Also very robust restaurantspending in that holiday season,

(03:49):
up 7.8 percent.
So folks are opening up thepocketbooks and also registering
credit and bringing up credittoo, to make that happen.

Ted Stank (03:59):
Consumer confidence is up again pretty considerably
over previous months, so peopleare feeling better about things
and spending.
But I know, Tom, that you tracka lot.
That will be interesting forthose of us in supply chain
management, particularly inreverse logistics.
Standard numbers are about 16percent of all online purchases

(04:19):
are returned.
So as we make records in onlinespending, that also means we're
going to have records, probablyfor returns.
So stand by for that right,you're right.

Tom Goldsby (04:31):
We're going to be watching out for those numbers
in the coming weeks.
However, there is starting tobe a little bit of pushback, and
maybe our listeners are seeingthat, in the form of retailers
setting time limits or trying todirect people to return that
merchandise to stores ratherthan free pickups and things
like that.
So it will be prettyinteresting to see if some of
those retail overtures arestarting to register and take

(04:54):
effect and, as you point out, weare doing a lot of work in
return.
So we're going to be keenlywatching that.
Something else we keenly watcharound here are the jobs report.
A new one just came out justthis morning for December.
That really surprised people.
I think the pros were quitesurprised that 216,000 jobs
added in the US last month, andparticularly in areas of health

(05:18):
care, government andconstruction.
I think we were talking beforewe started recording.
The expectation was going to beabout 160 or something like
that 160.
So we're way up there.
And also, notably in December,wages outpacing inflation, with
wages up 5.2% compared toinflation at 3.1%.
That's going back to Novembernumbers, but things are starting

(05:41):
to come back in line.

Ted Stank (05:42):
Unemployment clicking in at around 3.7%, and so
you're starting to hear a lotmore from financial markets of
that proverbial soft landing.
Although we're not expecting USGDP growth to be particularly
strong this year projections ofalmost only between 1% and 2%.

(06:03):
If we can get inflation down,have at least some growth.
Keep employment up, we shouldbe okay, and have gotten through
this.
So, barring any other crazything happening in the world
which we know, we're in such aconsistent, stable time and
we'll talk with Don Meyer quitea bit about some of the things
going on, these shock pointsthat are always there waiting to

(06:26):
happen and increasingly makingtheir way to supply chains.

Tom Goldsby (06:30):
That said, supply chains held up very well
throughout the holiday,particularly on the domestic
side of things.
It seems like those inventorieswere right-sized and, by and
large, in the right places.
We're not hearing abouttremendous challenges with
on-time deliveries or on-shelfavailability.
It sounds like, again, supplychains held up pretty well

(06:51):
despite some blustery weatherthat occurred in various parts
of the country late in the year.

Ted Stank (06:56):
That always kills me.
You see these big weatherreports.
It's late December and Januaryand there's blustery weather.

Tom Goldsby (07:03):
Well, you and I both lived in Iowa, right, we've
experienced those Januarys inIowa first year.
Come on media, can't we focuson?

Ted Stank (07:09):
something else.
I'm going to make a lot ofpeople mad right now, but let's
find something else that JimHarbaugh did to prevent him from
coaching in the naturalchampionship game, right?

Tom Goldsby (07:19):
Well, don't get me started, but anyway.

Ted Stank (07:21):
Hey, manufacturing starts are up, but it's uneven
across industries again.
But in general manufacturingstarts up improving, although
they're still in contractionzone, but it's above where it's
been, so that looks good.
We're seeing warehouse vacancyrates increase, so potentially
we can see rents and warehousinggo down a bit this year.

(07:43):
Domestic freight still a toughmarketplace but again, as
manufacturing improves and maybesome restocking after the
holidays, we'll see some freightvolume returning as well.

Tom Goldsby (07:55):
Something else we're keeping an eye on
obviously are the unforced heirsof our own federal government
and the possibility that by thetime of our next podcast, there
could be a government shutdown.
We continue to kick that candown the road, but it sounds
like House Republicans aretrying to make an issue of
immigration hardlining thattopic, and they just might try
to force the issue, which couldmake life hard on.

Ted Stank (08:18):
To me, Tom, that's about like talking about a
snowstorm in January.

Tom Goldsby (08:21):
Yeah, fair enough, it's just here.

Ted Stank (08:24):
It's with us.
Unfortunately, it's notseasonal, it's all year round.

Tom Goldsby (08:28):
It is year round.
But yeah, it's predictable,right, we know what is it.
January 19th is when that couldgo down.
So well, you can almost setyour watch to it.

Ted Stank (08:35):
Yeah.
So we're going to have a littlebrinksmanship coming up in a
couple of weeks and we'll seewhat happens.
I wouldn't be surprised if agovernment shutdown happened
this time.
A lot of big things happeningaround the world in 2024,
several major economies havingelections Canada, us, russia,
the UK, india, taiwan, southKorea it's kind of like the

(08:57):
who's who of the industrializedworld.
Wow, a few in the, I think, theeurozone having European Union
elections.
So there's a lot going on, allof which could have major impact
on government policies, ontrade, on migration, all
different things that impact usin supply chain management, and

(09:17):
we should probably talk aboutthat a bit later, when we bring
Don in with us as well.

Tom Goldsby (09:21):
Yeah, and some of the issues that we're starting
to percolate there toward theend continue.
The drought, the challenge,shipping through the Panama
Canal and, of course,geopolitics rear in its ugly
head with regard to the Red Seacrisis that we're facing right
now, with the Iranian-backedHouthis routinely attacking, and

(09:42):
I've been trying to keep upwith the news as well as the
action there, but you and I arekind of hacks when it comes to
ocean shipping, right, I mean,I'm in Landlock, tennessee.
You're closer to the coast,recording today in Carolina.

Ted Stank (09:57):
Absolutely.
I spent a lot of time at sea,but those tankers and container
ships were things that we justhad to dodge in the middle of
the ocean Because they neverchanged course whether they were
going to run you down or not.
So, yeah, let's bring on ourguest, Dr Don Meyer.
He's a professor of practicewith us here at University of
Tennessee.
He's formerly Dean of MaineMaritime Academy and California

(10:19):
Maritime Academy, Also has lotsof industry time in logistics
with the likes of Monsanto,Penske, Office Depot and FedEx.
Don, we are extremely happy tohave you with us today, as well
as to have you with us on thefaculty here at UT.
Don brings an element to ourprograms at Tennessee that we

(10:39):
probably haven't had in quite awhile, which is a real expertise
in ocean maritimetransportation.
Don, what are some of thethings you're thinking?
Give us a little bit about thekind of things that keep you up
at night and things you'refocusing on.

Don Maier (10:53):
Well, it's kind of like what we had talked about
before, as you, and when youguys invited me to be on the
podcast, which thank you verymuch for being here with you
guys.
It's an honor to be invited.
Now we're actually getting itdone.
But when we first talked aboutthis, maritime World was
relatively quiet and then, allof a sudden, everything just
broke loose.
So on the one hand, it's like,yeah, I'm being invited, because
it's January, nobody else isaround Yet at the same time,

(11:16):
it's like, boy, this was perfecttiming.
So you guys, with your magiccrystal ball, I think this has
worked out very well for us, orfor all of us.

Ted Stank (11:24):
If you swirl your beer mug around and then look
down into the bottom of it, youcan read those.

Don Maier (11:30):
Those tea leaves.

Ted Stank (11:31):
Yeah, that's right, yeah perfect, perfect.

Tom Goldsby (11:33):
Well, it's something that Ted and I have
been accused of.
We're pretty good at seeing thefuture.
We just don't know exactly whenthat future might manifest.
And in this case we got verylucky, because it is a tender
box out there, as you pointedout, don.
I mean rates had finallysubsided.
We're starting to makereference to pre-pandemic rate
levels and volumes and thingslike that.

(11:55):
And just almost a moment'snotice later I alluded to it
earlier the havoc of the Red Sea, with the Houthi attacks on
vessels of various kinds,targeted primarily toward
certainly Israeli, but also USships.
Also European vessels seem tobe at target here.

Ted Stank (12:13):
I was this great champion, starting in 2016, of
shifting trade lanes Asia to USEast Coast ports through the
Panama Canal.
That was a marvel.
Seeing the new locks of thePanama Canal in 2016, 17, etc
Still an engineering marvel.
But what the engineers didn'tbank on was the lake water

(12:33):
dropping six feet and stayingsix feet down.
The marvel of engineering inthe Panama Canal has been that
they've never used anymechanisms to pump water.
It was all natural that waterwould rain in the mountains in
the middle of the isthmus and itwould flow into the canals and
everything was good.
And now they're talking abouthaving to potentially start
doing pumping from one of theother rivers and dams and

(12:57):
various different things.
So, okay, we can't use thePanama Canal, no problem, we'll
go through the Suez Canal to hitUS East Coast ports.
And then, starting in October7th, the war in Israel and Gaza,
which has to me, I hold mybreath every day, with the risk
of that spreading to the broaderregion.
Don, what are you saying withthat?

Don Maier (13:18):
Like you guys said, I remember speaking with my class
right before the end of thesemester back in early December
saying, oh yeah, jewelry justcame out with their container
index, which they just came outyesterday, and I believe it was
about $1,400, the global spotrate for a container, which is
really inexpensive.
Actually, it may have been lessthan that once.
They was like 12, maybe $1,300,give or take, and now it's up

(13:42):
roughly 30% just going to LA.
It's up roughly 170%, I think,going into Rotterdam from Asia.
So we really begin to see howmuch this kind of a situation
will have on the impact ofmaritime shipping and, like you
guys had just said, we've seenhow there's been this large
shift in global trade over thepast 20 or so years, when that

(14:06):
we're beginning to understandthat there's a lot more politics
involved with just moving ourfreight across international
borders.
The Red Sea I mean we had justtalked about it.
You guys hit it dead on.
It's like, okay, I was going tocome on it probably talk about
Panama and the canals.
Certainly then, ted, you hadjust mentioned that our next
option is well, yeah, sure, wecan go through the Red Sea, not

(14:27):
a problem, we can go through theSuez Canal, I can cover the
East Coast, we're all good.
And then this situation hits,and I think it's something that
we as consumers and as peopleacross the world really need to
understand is this one situationis also a microcosm of a number
of other different situations.
So we have the Ukrainiansituation going on, we have the

(14:48):
situation like Ted justmentioned in Israel, the Panama
Canal, there's the situation inthe Taiwan Strait, so you have
the Chinese Navy actuallychartering fishing trawlers,
tying them up, and there's likethree dozen of them all tied up,
anchored all together as aflotilla.
But it's there and these boatsare in immaculate condition.

(15:11):
There's no fishy equipment onboard, so why would they be
there other than to just disruptshipping?
And they're right near what thePhilippines call part of their
economic enterprise zone.
So now, all of a sudden, wehave more international trade
law issues that are beingdisputed.
The Hague has come out and said, hey, china, you have no claims
on this, and China stillignores it.

(15:32):
So now the US Navy is actuallyexercising with the Philippine
Navy currently doing someexercise in the area, and China
is saying, hey, you guysshouldn't be doing this, that's
a potential tinderbox and thatwill then lead to your Straits
of Malacca, which is also one ofthe other major trade routes
that maritime side, are going tomove our freight from Asia over

(15:52):
to Europe and certainly over tothe east coast of the US.
So all of these things willbegin to play in.

Ted Stank (15:58):
You know, as a former US Navy destroyer man again,
this is no surprise to me rightFor centuries, one of the ways
of waging economic war was tocontrol trade lanes and cut off
lanes of traffic flow andcommercial flow.
And you know, once again wewake up and we think this is new
, right, tom?

Don Maier (16:16):
But it's, there's not a new one to the sun.
Yeah, there is absolutelynothing new that if it's not one
situation and it's another.
So, you know, telling thestudents that it's kind of like
the butterfly effect, that, hey,when that butterfly flaps and
swings in Asia, somebody's goingto sneeze in New York.
And that's the things that wereally need to watch in supply
chain is all of these littlepieces in the world and what's
that impact going to be to oursupply chain and my logistics

(16:40):
operation?
Right, and it's not just fortoday, it's what am I going to
be planning on for, you know,the near future.
One of the things is, you knowthis, at this time of year,
especially if you know, comingout of industry, this was our
quiet time, you know.
You guys should have said that.
You know inventory levels arestarting to be right, size,
right.
I think the inventory rate waslike 1.3, which is actually good

(17:02):
.
But yet this would also be thetime that, as a manufacturer,
I'm going to be pulling someinventory forward, because I got
the lunar new year coming up inFebruary, right, so that's
going to shut down everything.
So now, all of a sudden, I haveto hurry up, pull inventory
forward, which is good, but I'mgoing to have delay because most
of my container ships are nowgoing around to keep a good hope

(17:23):
, which is going to addadditional time.
So I go from one situation intoanother.
So any kind of pre-planning hasjust been changed.

Tom Goldsby (17:32):
Hey, don you know there's been some suggestion
that the shipping lines havebeen I'm gonna use this word
manipulating freight rates byvirtue of capacity, and hey,
that's their right and privilegeto do so, so long as it doesn't
affect national defense andother matters.
What circumstance or card doyou think the shipping lines

(17:55):
would be playing right about now?
Do they have the capacity tocome back online?
Would it be sufficient capacity, given what you noted about
these longer transit timesaround Cape Good Hope and around
the Horn of Africa and so forth, and as well as South America?
I mean, do they have thatcapacity?
Do they want to bring thatcapacity on, or are they

(18:16):
enjoying those elevated freightrates that we're seeing?

Don Maier (18:20):
Let's say yes to everything just because it's
easier, right?
So the elevated freight ratesreally have only come about
because of this Red Seasituation.
So it literally has been since,well, I believe December 22nd
so roughly two weeks is thatwe've seen that 150% increase in
container rates.
Everything prior to that itliterally has been on the spot

(18:41):
rate.
The global average has been onthe decline.
So on the one hand, you knowagain, as if I'm a company and
I'm trying to manage my assets,I'm certainly gonna tie up some
of my vessels because I need towatch the assets and the costs
of my operating costs andproviding that I'm still meeting
my commitments to my customers.
I'm good so I can have thoseblank sailings, readjust some of

(19:03):
my capacity levels to thecertain trade lanes that the
demand is there, so I'm managingmy assets better.
And then all of a sudden wecome into this situation.
So certainly that the rates aregoing up.
But it's almost necessarybecause my costs of operating
have also gone up.
So it's not necessarily becauseof a supply-demand type
situation, it's.
I now have to take a longerroute.

(19:25):
So I'm gonna give you anexample of like a dry tanker
Roughly it's about $123,000 aday to charge that vessel Now,
because if I go around the Cape,I'm gonna add on an additional
15 days.
Those 15 days, at that $123,000charter rate, has now increased
my costs by $1.8 million.

(19:45):
Well, how am I gonna absorbthat?
So that's part of the reasonwhy some of those rates are
going up.
So do the shipping lines havethe capacity?
They have the capacity to takecare of the demand.
I think they have the capacityto take care of the extra or the
longer transits.
I believe that they are gonnabe able to recoup some of their

(20:05):
additional operating costsbecause of this situation.
Then we have a longer route andit's also in the back of all of
your ocean bill of ladings that, hey, in terms of piracy, war
zones, force-missure, basically,that they can actually change
the contract rates and we canincrease the rate because of
these different situations, andthat's what they've done.
So that's nothing new.

(20:26):
So that's something that mostlogisticians should understand,
especially on the internationalside.
That's gonna happen.
The fact that it's hittingeverybody, or both sides of the
US for the most part to someextent, is a bigger challenge.
So, yeah, I think we have thecapacity.
I don't wanna say that.
Certainly they enjoy havingadditional revenue.
Do they wanna have thatadditional revenue because of

(20:48):
the situation?
Probably not.

Ted Stank (20:50):
And Don, it's also true that there's a lot of
capacity coming online, correct?
Isn't there a tidal wave ofcapacity coming online?
Yeah?

Don Maier (20:57):
yeah, so there's an additional capacity.
I believe I saw a report thatthere's like in 2024, I believe
it's like seven or 8% additionalgrowth and capacity.
So we got more container shipscoming on and then in 2025, it
goes down to about four or 5%.
So it's not a huge amount, butin terms of the size of the
vessels and the containerscoming on board, it's a lot more

(21:17):
capacity and the demand isactually lower.
So they're actually forecastingthat the global demand is going
to be three or 4% for the nexttwo years, but we have 7% or 8%
capacity coming on.
So the capacity is there.

Ted Stank (21:29):
I would not wanna be a capital planner for any of the
big ocean carriers becausetheir lead times for bringing
capacity on is so long that yourcrystal ball has to be five
years out, and we all know intoday's environment.

Don Maier (21:41):
Yeah, and then even on the maritime side so you
brought it up, ted is that Ineed to forecast and do some
capital planning, which means Ihave to get the financing ahead
of time for a vessel that I'mnot gonna have in my fleet for
another two or three years Great.
So I book that ship to be built.
It's gonna take 18 months totwo years before it comes into

(22:02):
my fleet.
But in the meantime we now had,back in July, the IMOs,
international Marine TermOrganization changed the fuel
requirements.
It says oh hey, by the way, youguys now had to have better,
more emission controls on all ofyour ships.
Okay, great, but what kind offuel do you want me to use?
And the IMO doesn't give anykind of requirements on that.

(22:24):
So everybody, all of the shiplines, are like well, what kind
of systems do I put, kind ofengine do I put into my ship?
That's gonna be built.
That's gonna come online in twoyears when the IMO rules and
regulations are also gonna behitting.
So there's all of that issuesthat are also being fumbled
through and those also are gonnaimpact all of the shippers,

(22:45):
your BCOs that are trying to putcontainers on the ships.

Tom Goldsby (22:49):
Yeah, let's get to that shipper perspective, don.
I think you've done a great jobkind of laying out the
landscape and the decisions thatthe shipping lines are
evaluating and having thatcapacity and choosing to deploy
it in this circumstance.
But what about shippers?
We're seeing European shippers,as you pointed out, are the
ones that are on the bleedingedge of the Red Sea issue right

(23:11):
now.
But the question is what aboutNorth American shippers?
When are we gonna really startto see it?
As you pointed out, 30% rateincreases in the last few weeks.
So we're feeling that, perhaps,but what about these ideas of
alternative routes and evenmaybe bringing other modes,
notably air, into the picture?

Don Maier (23:28):
Yeah, so there has been a little bit of a shift to
the air side, not a significantamount, because I think a lot of
the shippers, in terms of theinventory that's on the water
now, that was alreadypre-planned, so they know it was
already coming.
What I think, what they'retrying to figure out, is well,
how long is this situation goingto prolong itself?
And the longer it goes, then Imay have to shift to a different
type of a mode where air comesinto play.

(23:50):
So it'll give the chance forI'm gonna shift the air.
If I'm one of the manufacturers, of the shippers, I'm gonna
shift train change to air tobring in some of the inventory,
to buy me time for theadditional two weeks until I can
get into a more of a recurringcycle.
So in supply chain we lovebeing able to manage time as

(24:10):
best as we can.
I know it's gonna cost me more,but as long as I know I got a
reliable service that's gonnatake two weeks more.
I may not like the additionaltwo weeks, but as long as I know
it's gonna take two weeks, I'mgonna make the adjustments now
and when those two weeks comethrough, I'm used to it.
It becomes more reliable and Ithink that's what the shippers
are going to have to experienceA 30% increase in rates.

(24:31):
Yeah, we're getting closer towhat the rate may have looked
like back in like 2019.
So it's not too significant onthe US side, but it's certainly
something that we need to becognizant of.
The other big picture that Ithink, if I was one of the
shippers negotiating with thelines is we're walking into
contract season, so in thatcontract rates usually they'll

(24:54):
run May 1st to April 30th of thefollowing year, but we started
our negotiations betweenFebruary, march and April.
So if I'm a shipping line and Ihave these issues currently
Occurring right now and I havethese spot rates that are also
going up, theoretically thatactually pushes my contract
rates up too.
So if I'm a shipper, I betterbe expecting that my shipping

(25:15):
lines are going to say, hey, wewill have to have a higher
contract rate or, by the way,you can also just go on this
plot rate and hope that weactually have the capacity for
you.
So let's go back to okay, is itbetter for me to pay more with
better, reliable service, or canI save money and hope for the
best right?
So it's a crystal ballsituation.
So Me, as a shipper, Icertainly would be looking at

(25:38):
different alternative routes,like we started talked about
earlier.
There's not a lot ofalternative routes that we're
looking at right now.
We can send, you know, vesselsthrough the Panama Canal.
They increase the transits upto about 24 ships not a lot
compared to what they were doing, but it's a little bit more.
But it's gonna cost me morebecause I have to pay an
additional $800,000, I believe,just to get into the reservation

(26:00):
system.
Well, I have to push thosecosts on on to somebody, because
I can't absorb that kind of acost.
Okay, so as a shipper, I betterbe aware of that.
Now, one thing that I've beenkind of watching is let's go
back to 2021 ish, when theCanadian Pacific bought the KCS,
the Kansas City Southern right.
So now you have the CP KC.

(26:21):
So if you look at their railline, they're going all the way
across Canada, right through themiddle of the United States,
all the way through the middleof Mexico, and they connect to
both oceans.
So now we have an option thatwe know that in 23.
We just resolved the issue withthe West Coast ports with the
ILWU 2024.
By the way, the ILA on the EastCoast has already said we are

(26:44):
not going to do any kind of acontract extension.
We will have a new contract asof I think it's September 30th,
but we will strike as of October1st.
There's gonna be no extensionlike we did on the West Coast.
So as a shipper I need to beprepared for that if I'm doing
anything for Maine, all the waydown the Brownsville, texas,
those port potentially could betied up.

(27:04):
Now, if I'm looking at adifferent alternative, well, the
West Coast are still going tobe operating, but if everybody
shifts over to the West Coastnow we have a lot more
congestion and the West Coastports can't handle it for a
number of other differentreasons.
So this whole Acquisition fromtwo years ago now begins to make
a lot more strategic sense as anew route.

(27:25):
If I'm a shipper thinking Hmm, Iwould want to know what
steamship lines are going on tothe Pacific side of Mexico so I
could tie into that CP KC lineto run all the way up to the
middle of the United States,whether it's in the Memphis or
up in Chicago, and then I can'tbuy sick the United States.
Here's another interestingthing that has just come up,
probably since the middle ofDecember, us Customs and Border

(27:46):
Patrol has actually stopped anumber of the trains Crossing
over.
Well, in fact I just saw it forCalifornia, arizona and Texas
again.
So I know in Texas they wereshut down for the BNSF and the
UP for about five, six days.
So think about that no trainscrossing that border for six
days.
And each of those rail lineshave roughly what three trains a

(28:08):
day crossing over those bridgesand they were stopped.
So now that creates more of anissue.
Okay, so this whole plan of methinking, okay, Maybe I can go
into the West Coast of Mexico,then go into the Midwest, maybe
that may not be an option.
But here's an interesting thingalso that just came out a few
days ago the Genesee Wyomingshort line Signed a partnership

(28:31):
with Grupo Mexico.
So Grupo Mexico is is a largeLogistics infrastructure type
company.
They also own Ferre-Mex, whichis the Mexican railroad, and in
this partnership they are notgoing to have a weekly sailing
from Mobile, alabama, all theway down to Costa-Cola Mexico on
the Atlantic side, and they'regoing to have a railcar ferry,

(28:54):
so the trains can literally justdrive right on board the ship
when they get into Mobile.
They're going to come right offthat ship on a track, go right
onto the railroad track and thenthey can move up.
So as a shipper, here's one ofthose things that that might be
a nice option.
So even if I go from thePacific side in the Mexico,

(29:14):
ferro-mex and Grupo Mexico havealready started the project a
hundred eighty mile corridorgoing from the Pacific side by
train over to the Atlantic side,right where this railcar ferry
service is going to take effect,and now I can go right into
Mobile, alabama, so I can startto shift and avoid different
areas.
But I got a plan for that andknow who are the different lines

(29:37):
operating at those differentports.
So the other piece is it's notjust on the shipping side and
the maritime piece.
The other big thing that'sreally going to impact United
States shippers and consumers iswhat's going to happen at the
ports.
So the ports are still thebottleneck in the US supply
chain system.
We saw that during COVID, youknow, and the ILA or the ILWU

(29:59):
said, hey, we have all of ourfolks working.
They weren't working.
We saw what happens when youstill have a significant
increase in demand and there'snot enough throughput coming
through.
So because we don't have thethroughput going through.
Now we're gonna have a biggerchallenge.
California and CARB CaliforniaAir Resources Board has come out
and said Every Draman or everyDRAE vehicle coming into a

(30:22):
California port has to beregistered.
Okay, they were trying to tackon a $30 charge To register.
That's gonna be a challenge,which was upheld in the course.
Say no, you can't do that, butthey can still register all of
those vehicles.
And, by the way, by 2035, anytractor going into a California

(30:43):
port also has to be an Aziriummission vehicle.
When now you just increase mycost by two, three, three and a
half times, how am I going to dothat?
So these are the things thatare going to impact us more on
the US side is what's going tohappen to the port congestion.
I got to have that throughput.

Ted Stank (31:00):
Don, you're making me nostalgic for 2021 and 2022.

Tom Goldsby (31:04):
Come on now.
Let's not go to extremes here.
That's crazy talk.
But it is fascinating, right?
So many moving parts at leastwe hope they're moving.
That's the whole premise oflogistics.
But it's really fascinating tohear one on one regard the
creative solutions, but thenalso the introduction of new
constraints.
It means it's such a dynamicand rapidly changing problem and

(31:27):
we're also just tied up, as Tedpointed out, with international
politics, global politics andkind of a pawn in many ways
there.
But do you see a time in 2024when this all just kind of
settles down?
I mean, if we force the crystalball back to you, Don, what do
you see All?

Don Maier (31:45):
right.
So if I'm going to forecast in2024, if there is going to be a
pause, I think it's going to beprobably November, because by
that time we're going to havegone through the ILA contract
negotiations, hopefully theresolve.
By then, I'm going to hope thatthe Houdi situation is resolved
, hopefully that the rest of theconflicts in Israel are also
resolved.
That'd be awesome.

(32:05):
So because of that and we'vealready gotten through the
Christmas rush of inventorycoming in that's when the pause
should come about, which isactually what we saw in 2023.
So that's why all thosecontainer rates dropped is
because things are starting tosettle out.
And then you have just one moreother political issue, however.
So it gives us that littlepause in November.
The other big challenge, though, ted and that's in Thomas is

(32:27):
just how we kind of started wasthis is an election year, it's
November 4th, guys, so who knowswhat could happen?
So that pause, it's going to bevery short, from like October
15th to November 4th.

Ted Stank (32:39):
You know, election season in the United States
traditionally has been a time ofinteresting change.
This year could be a time ofvery tumultuous change, with
also stoppages of economics andcommerce because of what may
happen depending on the resultson November 4th.

Tom Goldsby (32:55):
So, ted, you're making my head and stomach hurt.
Let's.

Ted Stank (32:58):
I'll tell you what, though.
If there's nothing else thatI've seen in my 30 plus years of
doing this, and particularly inthe last several years, is I am
always astounded at theresilience of supply chain and
logistics managers to find waysthrough all the challenges we
have.
Don, your insights have beenabsolutely incredible.

(33:20):
I hope our listeners take awaya lot of notes from you about
some things they might bethinking about to try to manage
through these tough times.

Don Maier (33:28):
Well, hopefully I didn't scare them, though,
either.
I mean, ted, like you just said, I always loved having the
conversation, and I told thestudents today in logistics, we
can get anything you want,anywhere you want, at any time,
as long as you're okay with thecost.

Tom Goldsby (33:41):
You want it there.

Don Maier (33:42):
I'll get it there and I'll figure out a way to make
it happen.
So that's what I loved aboutlogistics it's like this
constantly changing puzzle whichwas makes our world so exciting
.

Ted Stank (33:51):
Reminds me of what a contractor told my wife one time
when she was wanting all kindsof craziness done in a new job.
She's like ma'am, I can doanything you want, as long as
you're willing to pay.

Tom Goldsby (34:02):
Yeah, very good.
Well, don, you are certainly aman of international intrigue.
Thank you very much for notonly bringing it to the podcast,
but for bringing it to theUniversity of Tennessee.
We are so fortunate to have youon the team.
You've been with us a littlemore than a year now and you've
made such a huge impact already.
It's clear that you have muchmore to do and we really welcome

(34:24):
that.
So thank you very much, don.
Today and as well as the thingsyou're going to offer into the
future.
Speaking of how fortunate we areto have you on our team, we are
losing a very vital member ofour team.
I think it's incumbent on us torecognize Casey Keith, who's
been our marketing director anda real champion for this podcast
.
She's really helped to up ourgame in the podcast and so many

(34:47):
other areas, what we do at theGlobal Supply Chain Institute.
Casey, best wishes to you.
We're moving to another gig inthis fine institution as you
move over toward ourE-University initiative, the
online branch.
So I know we're going to stayin touch, but we're going to
miss you over here at GSEI.

Ted Stank (35:06):
You're going to miss you Casey.
She's produced all of ourpodcasts over the last two years
.
Brian Kenever is our newproducer.
He's been an assistant producerto Casey and he's got big shoes
to fill, but he's certainly upto the task.

Tom Goldsby (35:20):
That's what we do at GSEI is we bring in the most
talented people and then try toprovide the right opportunities.
And hey, sometimes betteropportunities come along and we
just can't deny that.
But, casey, thank you so muchfor what you brought to GSEI and
the podcast.
We're just so pleased With that.
I think we need to sign off Ifyou want to reach us.
You know the address by nowGSEI at utkedu.

(35:42):
Until next time, be well.

Introduction (35:47):
Thanks for tuning in to Tennessee on Supply Chain
Management.
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Join us next time as wecontinue pulling back the

(36:10):
curtain on the world of supplychain, educating and
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Until then, listeners.