Global Trade This Week – October 10th, 2022
What’s going on in Global Trade this Week? Today Doug Draper of ACME Distribution and Keenan Brugh of ICOSA Media cover:
0:54 -Cyberattack Hits Websites Of Major US Airports
7:35 -Packaging for Parcel Efficiency
13:37 Halftime
18:22 -Excess of Air Capacity
21:38 -FedEx Ground reduces holiday demand projections
-
Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:10
Welcome to another episode of global trade your week. My name is Doug Draper. And I am your your host. Mr. Pete mento usually pops us on the other side of the United States in New Hampshire. But he is on assignment. Not quite sure exactly what that means. But Keenan is going to fill in for us today. So not only producer, but host of the show. So Keenan, thanks for bumping on my man.
Keenan Brugh 0:36
Well, thank you. So it was great wearing multiple hats. And I'm excited about our topics here today.
Doug Draper 0:41
Yeah, that is good. That's good. So with that being said, I think we just jump into it. I think you and I talked about a speed round for this for this global trade this week. So let's just start hammering out, man.
Keenan Brugh 0:53
Absolutely. And so my first topic is something we've discussed on the show previously as a growing threat. But the news here today, Monday, October 10 2022. We are experiencing cyber attacks hitting several major US airports today as we speak. Now, fortunately, it does not appear that transportation security operations or air traffic control are actually being affected by this cyber attack, it seems to be much more of a distributed denial of service type attack on the websites of these airports themselves. So there probably are a lot of inconveniences happening on the passenger side as people are trying to check in or check and see what wait times are all the information of, you know, local affairs, as you're getting to an airport seems like a lot of those are being disrupted today. So far, not the actual operations of the planes themselves, which is good for CFD, and for the flow of economic goods. But it does point to the fact that they are targets. And, you know, DDoS, as it's called, or distributed denial of service is a relatively low tech cyber attack. The idea for people who aren't familiar is that when you have a computer and you call to a website, it takes a little bit of time and a little bit of resources for them on the server side to say, hey, Keenan wants to go to the website here will serve the website. But you can very easily with programs you buy off the dark web or just write a very simple Python script. Deny other people that service by just war dialing, calling over and over and over for that information. So if I set up a script, and go to you know, Denver, dia A's website, and just tell it to ping, ping, ping, ping, ping, ping, ping, then when you as a legitimate customer, try to go to that website, you're in a long list of queue that a bunch of fake requests are in front of and so you may just get a website, not available type of situation. So it's something that is still relevant, it's still a relevant threat, and it has impacted companies stocks in the past and different things. But it's not so bad. If it's like a zero day on the back end system shutting down or it's not one of those malware We shut out all the airport systems is just the websites on the public facing side are kind of being impacted. So yeah, what are your initial thoughts on cybersecurity and not being able to go to some of these websites here so far today?
Doug Draper 3:18
Yeah, well, I love the fact that all of our work, topics are topical and timely, maybe that's a better better word. And, and Pete will give you a thumbs up because he's all into the cybersecurity piece. So good. Some good call it a topic. You know, my my take, I guess it's twofold. Is that are there going to be minimal cyber attacks, attacks I use in quotes, like what you describe to the point where people just become numb, right? Hey, I'm aware that there's an attack, it's just inconvenient, I'll log off, they'll fix it in an hour or something, and then I'll go back on, or we're going to become numb to the point where we don't really pay attention to something that is a cat, you know, a much larger type of thing where that's where it's the navigation systems at the airport. So I'm thinking, you know, what it's talked about a lot. You get a lot of these little ones that are inconvenient. Do we become numb and put our guard down a little bit when something catastrophic could happen? Yeah, yeah. Yeah. And the other piece that kind of is interesting is that even with an inconvenience like this, and maybe the inconvenience could stay for a longer duration, or slight other inconvenience, that can impact stock price, right? So is it not, you know, am I paying it for a day or two and things of that nature, but I don't see and let me preface this by saying I don't follow the stock market in relation to what cyber security attacks do directly, but I could see it taking a blip where in this day and age people just blow up, you know, the social media and the socials to say, I'm having trouble. Yeah, I did, too. and all of a sudden, the stock drops for a couple of days or a day. So I think those two things are real as far as implications, but I'm more worried about people become numb, and, and unaware and lose our guard when it comes to, to bigger things, specifically the navigation systems of airports.
Keenan Brugh 5:19
I think you're right, we as a society, we're all kind of learning about this new world with websites and cyber attacks and different things. And I think both of your points are legitimate. There definitely have been cases of bad actors playing the market at the same time of them doing some of these attacks, and especially if it's timed with like a new product launch or something, you could make a pretty big swing. And if you're trading options, you could capitalize on a relatively small swing with a lot of money. Though, I think in our everyday practice, back to your first point, we are sort of becoming numb. I mean, we're talking about here, and it's a big deal. But I'm not anticipating seeing this in too many news articles. They'll just fix it to your point, there's a whole industry now of alright, we'll switch our servers or IP addresses will will counter this particular inconvenient attack and get back up and going. And people do kind of get complacent about it. This one's not that bad, though, I have seen examples of attacks that do impact company stocks. And then I've also seen pretty bad hacks worse than this website. DDoS attack like, you know, stealing all of let's say, Lowe's, I'm just making this example up. But maybe it was a Home Depot or target several years ago, did have millions of customer credit card information stolen. And some of those have played out on the stock market. But some of those big ones haven't even made a blip. I think sometimes investors either don't know, or also just kind of get complacent of Oh, it's another attack is this one real, like gonna really change anything, where it's like, wow, that stock didn't move at all. And that was a major attack. And so I think we're all trying to learn, how do we protect ourselves? What does this actually mean for valuations of business? And maybe that's a good thing. People aren't overreacting to some of these. But we got to stay vigilant. Because besides just this being a timely topic here today, this has been a threat we've talked about in the past. And undoubtedly there will be disruptions in the future, how do we prepare for them. So everyone, stay sharp out there, do your job, be careful on clicking suspicious links in your text, or your emails, do the right thing for your company. And if all of us do that, we'll have a more robust transportation system as a whole.
Doug Draper 7:23
Nice. I love that. That's that's a PSA public service announcement you just dropped. Awesome. Yes, with your
Unknown Speaker 7:33
first topic.
Doug Draper 7:34
So my first topic is, is packaging kind of the secret sauce related to parcel efficiency. And it kind of comes around with some of the discussions with rate increases, the monumental rate increases. But first, I know that all of us at some point have ordered something online, it could be through Amazon or other retailers, it doesn't really matter the the origin, where you get this box, that's like five times larger than what the product is. And it's got tons of paper and packaging. And other than, you know, people taken to social media and taking a picture and posted on like next door or something and complaining about it. People say yeah, I've had that experience before, and then they break the box down. And hopefully they recycle it or just throw it away. And that's the end of it. But I think there is a tremendous opportunity with not only the efficiency of the throughput, how a package literally moves through the automated source system, how it's loaded on a truck or a plane to get it there. And people don't think really about that. I know that UPS and FedEx have, you know, over dimensional OSD or over dimensional things that Hey, can't move down the belts. So I think the smaller tighter the shipment is, the more efficient it's going to be. And then with you know, these rate increases that the parcel carriers are starting to come out with, you want your footprint moving through their system as small as possible. And so I hope point in this thing is I think on site and of line like kind of production line and on demand, packaging, to right size, the box is going to gain a lot of momentum. So you know, think of something coming out the box that looks like we play this game at my house called is it bigger than a breadbox and then you just got to go through a bunch of stuff and figure out what the what the item is that the other person's thinking of. So I'll use bread box as an example right? Or shoe box. It goes to the system and you don't have to have the same box for that versus a jewelry case or something like that. So it comes off down the line. The box just hugs it shrinks, it puts whatever packaging needed around it and it goes out so it's not like here's our 15 box sizes that will try to fit everything in. Here's the unique packaging size and require meant to protect it on a transactional case by case basis. So I think that has a huge amount of potential for, you know, a couple different reasons, like I said, parcels getting more expensive, the smaller your footprint, the cheaper it's going to be. I know that there's some talk about ups, reach reducing their partnership with Amazon, then you can read other stories that said, Amazon is reducing their footprint with UPS, nothing has materialized just just conjecture right now. But there's some uncertainty in the number of carriers and how they will be moving your products. And I think the environmental piece of it is huge, right? If you have a retailer that comes up with some ingenious packaging, and you can, you know, brand it appropriately, I think that the environmental impact perception from the customer, and the reality of putting lesson to our landfills is, is key. And I think there's some marketing and message branding that you can do on demand, if you got a machine that can right size the packaging on an order by order basis, I guarantee they can, you know, blast, a marketing piece, or a QR code or something on that packaging as well. So my whole point in this keynote is, I think the packaging aspect to help Mark manage parcel efficiencies, we're gonna see some cool stuff. I know some of that already exists. So if you're aware of that, please ping us as you listen to the show and in the comments field. But I think that's going to draw a lot more attention in the upcoming year than you have I knew and I have seen in the past.
Keenan Brugh 11:39
Yeah, I think there are some of those things out already. And we're probably going to see a lot more of it. You know, just as a consumer, some examples that come to mind are Amazon packages where, you know, they try to bundle all your orders into the same box, if they can try to make it a little bit more efficient for economic reasons, as well as carbon reasons, which I don't know if they've been advertising yet. But someone will be talking about that, because it does overlap. If you can, right size, the partial package for the shipment moving, you're going to be having better economic returns, as well as less wasted space, less carbon going unnecessarily. And so marketing departments will probably use that as a way of differentiating or look what we're doing. We're saving you money and saving the environment. Also check out what's now streaming on Amazon Prime, you know, they have some of that custom tape, as Amazon does a lot of their packaging, and they're starting to utilize that retail space or that marketing space. We'll probably see more of that. And yeah, it'll be interesting to see who the players are and what they decide to do with it right size the package and make things more efficient and a little cleaner.
Doug Draper 12:51
Yeah, yeah. And I was just thinking this when you made one of those comments, Keenan is that you know, the warehouse situation that we're in the craziness in order to provide using the example I gave him 12 Different box sizes, in order to have enough of each one of those box boxes, the amount of warehouse space involved to mass produce 30,000 box a 30,000, box B and then having to warehouse it, and then having to ship it to the destination? efficiencies, carbon footprint things that nature. So yeah, I think there's a lot of ways you could look at this for for a benefit financially and for the consumer.
Keenan Brugh 13:29
Great points. We'll be keeping an eye on it. As I'm sure we'll be seeing more and more of this stuff. come down the pipe. Go ahead and kick us off into halftime here.
Doug Draper 13:39
Yeah, of course. I don't know if you've ever hit halftime before, like the 15 minute mark. That's why we're rockin and rollin. I love it. I love it. But as you know, halftime is brought to you by CAP logistics. Please visit their website at cap logistics.com For all your supply chain and logistics needs. We wouldn't be here Pete and I Kenan without the support of those guys. So take a look at your logistics needs. Alright, man, here's the here's the halftime and I probably butcher this a little bit. And I just saw it pop up on LinkedIn yesterday. So some of our viewers may have seen this. But it's related to a history lesson. Last year or last week, it was financial advice. This week. It's a history lesson, global trade this week style. And it's essentially why is the railroad Why is the gauge between the two rails, four feet eight and a half inches wide? And it kind of goes through and we're just going to kind of Rewind, right? So here in the US they're four foot eight and a half inches wide. Because whenever the rail industry happened here in the US a lot of engineers and resources were used from England. Help us build it. So that's kind of what England use us. As far as a gauge so the next question is, well, why in England is four feet eight and a half inches, because it was the gauge of the initial tramways, which is the predecessor to the traditional rail that that you and I know. And that's relevant because hand tools and the other equipment used to go from the tram ways to the rail were the same. So everything is already set up. Let's just plug it in and use the same. But then the question is, alright, well then why were the tramways at four and a half. And that's because wagons just keep rewinding with Makina. And follow along right. Away wagons were built at four feet eight and a half inches wide, because the wheels of those wagons would break and the axles would break is it just would. Because if they weren't in the ruts that were created from the infrastructure from years ago, they would break. And so they're like, well, we'll just build everything to fit into these ruts that are in existence. So we can move travel. And the next question is, well, why are those ruts, four foot eight and a half inches? This is the paradigm shift here, man is that the not the paradigm shift. But the interesting piece is that those roads were initially built by the Roman Empire, and the infrastructure that they had. And the reason that they had those roads is because they were out conquering the world. And they needed to have their chariots and their war horses all hooked up. And, you know, and right across the European continent and beyond. And so all right, that's cool. So why the chariots? Why are they four foot eight and a half? Fine. It's because that's exactly the width of two horses. So if you measure the backside of two horses, they needed them together, not not one in front of the other, but in tandem, in order to have the War Horse mentality. And that's exactly how far it was across. So you think about why the rails in the US of A are four feet eight and a half inches wide. It all goes back to the Roman Empire hundreds and hundreds and 1000s of years ago. So that's, yeah, I saw that. And I'm like, man, what am I gonna do for halftime history lesson? Are people come here for knowledge, Keenan and I just dropped some.
Keenan Brugh 17:13
That was great. I love seeing the connections of where we are today and how that happened throughout time. As you were describing that you reminded me of a great BBC series, I think it was in the 70s called connections with James Burke. And he would do that talk about different industry or technology and kind of reverse throughout history of why we ended up with the way things are today from where they were. And sometimes there's really good reasons the whole way through. But more often than not, it's a little bit of happenstance or because the Roman Empire did their horses this way. The roads were this wide and later, much later in the UK that led to this size roads or this sides trolleys. And then you end up getting network effects where to your point, once the toolings a certain way or once some of the roads railroads in America are certain with it makes sense to have them all standardized, because then you can have the same equipment, go on a different rails or the same equipment build or fix different rail systems. So there's that network effect that often leads to one state.
Doug Draper 18:19
Yeah, love it and love it. So well, I am going to jump into my second topic. And this is my thought we're always Ford forward leaning on the show here. So I'm going to kind of step out on a little bit of a of a ledge here. But the question I pose is, do we have too much excess air capacity in our supply chain right now? And I think that the answer that may not be right, the second but we're trending towards that. I think during the supply chain chaos you saw so much stuff sitting in so much demand for air freight to get product to where it needs to be quickly so that consumers can purchase it or the item can be used in final manufacturing is that the acquisition of aircraft, whether it's gaining access or acquiring additional planes to support you know, another service offering just exploded. We've talked about large companies buying more assets we've we've talked about purchase orders Airbus Boeing that are out there and repurposing aircraft, flipping aircraft from passenger and cargo only. So I think that we are going to be in an excess capacity. A worldwide recession that's on the brink or maybe we're already in it is going to ground a lot of equipment. I think that's going to result in selling off of assets or at least decommissioning them and parking them out somewhere in the Mojave Desert. So if you're looking to buy some aging equipment, I think you're gonna have a fire sale coming up. And I gotta mention that I think there's a lot of The new orders on planes is that the new planes don't go into cargo, right? They bring on the new clients for the commercial use and air travel humans, and then they kind of move the the older freight down the older aircraft down to freight carrier. So I think we're gonna see excess capacity, and that there's going to be a lot of market shifting and those assets. And I don't think it's happening now, but I think it will happen next year. And so that's kind of my take the other half, I was just thinking about literally while we're while I was talking about this Canada's it, well, maybe high fuel prices, the war in Ukraine, the parity in currency values with the dollar, maybe that'll stave off the overcapacity, and we'll be able to, you know, manipulate the volume, but it's not quite like OPEC, or the steam steamship industry where they can pull things out of rotation to increase their profit margins. There's a little bit more regulatory piece behind it. But anyway, my whole take on this is I think we're heading towards excess capacity in the air freight market, we're gonna see it after this holiday season.
Keenan Brugh 21:12
I think you're right on there are those cycles where there's a shortage of ability to move things during pandemic with various challenges, new orders being made. Pretty sure Boeing had a long list of orders to fulfill before the pandemic, then during the pandemic, as regular supply chains broke down, you needed more and more airfreight to try to fix the supply chains. And then there has been more brought on. And so now we're seeing softening. And that kind of leads into my next topic here. FedEx is moving down its projections for the holiday traffic season. And so they're citing macroeconomic forces. You know, employment still relatively low, but a lot of people are feeling pinches in various forms or another right now economically. This kind of ties into previous topics we've talked about where there's supply already in warehouses already on storefronts. And so those companies clearing out that supply are lowering prices, consumers and tight financial times are probably going to be buying a cheap TV rather than the newest, latest and greatest, something else that needs to be shipped. So seems FedEx like others are seeing a little bit of softening on that demand side. But that ties into to what you're talking about the hits the capacity side, too. So I know Pete would know more about maritime construction and those ships, but things like ships, things like planes take longer to build longer to get into commission, then some of the other economic forces like finance and rate changes and demand, those things move quicker. And so you end up getting some lag in the pendulum back and forth of under supplied on the air cargo side over supplied on the air cargo side. And I think you're right, we're going to be seeing the swing back down where maybe there's too much air capacity right now. And there will be some fire sales, if anyone's in the market for a couple decade old Boeing 737. That's rigged to cargo? Who knows maybe there's some rock stars out there that will get some good deals on those. But for most of the economy. Yeah, we're seeing softening and FedEx is down regulating its projection. So that kind of ties in nicely.
Doug Draper 23:27
Now that's spot on. And agree almost. This isn't related directly to your topic, Kim, but it's been a common theme. And it made me think of when you're talking is that I think the pivot changes in the world, not necessarily with America happens so quick now that our ability to overlay metrics on what's going to happen, things move so fast that the traditional ways that we analyze trends with economy trends with consumer buying habits, trends, in general, move way too fast for the traditional metrics and measuring models. I think we saw that, you know, I counted on the roaring 20s. You know, post pandemic, that's pretty much over and we talked about that for 12 to 18 month old dec in the real world. The real world. That's exactly the real roaring 20s was a decade. Right, and we've gone into recessions I think we'll spike out of this thing pretty quick. But I just think that the world moves so gosh darn fast that trying to base trends and give solid feedback on what's going to happen is more difficult than ever. Because things pivots so gosh darn fast. And your example or what you just said is a perfect example of that.
Unknown Speaker 24:41
Absolutely. Interesting time. Yeah.
Doug Draper 24:44
Yeah. Well, one thing that doesn't pivot quickly, Keenan is global trade. This week on our annual show our listeners can rely on us every single week. bringing you great content, forward leaning perspective on international Trade, transportation and logistics. And of course, all of that wouldn't be possible without our friends at CAP logistics. So visit cap logistics.com. And I really enjoyed this week, Ken, I think we did a hell of a job Mark are. You know, he's talking about this literally while we were just about to go on errors when he told me your topic, so like, one minute beforehand, and we jived well, they meshed well, and I want to thank you for being a fill in host you did an excellent job.
Keenan Brugh 25:29
Excellent. Thank you very much for having me. And thanks, everyone for listening here today.
Doug Draper 25:34
You got it. All right. We'll catch you guys next week. Thanks for listening to global trade this week. Bye.