First it was "Grexit" that, last year, put the international business and trade communities on tenterhooks, before Greece voted in July to stay in the European Union (EU). Then there was "Brexit," which hit everyone right between the eyes Thursday night after Britain voted to leave the EU. But what scares many is a word that, in the wake of Thursday's stunning outcome, is sure to become part of the global blurb lexicon: "Nexit."
Other than dazed and confused reactions from millions in Britain, across Europe, and around the world, it appears to be business as (somewhat) usual on the continent. For example, UPS Inc., the Atlanta-based transport and logistics giant, said Friday it laid the cornerstone on a $100 million package-sorting and delivery hub in the communes of Corbeil-Essonnes and Evry, located south of Paris. The facility, due to open in the first quarter of 2018, represents UPS' biggest-ever investment in France. It is part of the company's US$2 billion program to upgrade its pan-European infrastructure by 2019 in order to shave as many as two days off the normal five-day transit time for cross-border traffic.
Given the momentous outcome, however, there are significant concerns about the fallout. A survey by U.K. supply chain publication Logistics Manager found that more than 80 percent of the 320 respondents had no contingency plan if Britain voted to leave, despite more than 52 percent saying Britain's departure would have an impact on their business. The survey, conducted earlier this month, said that maintaining economic stability would be the respondents' biggest concern if Britain left the EU.
Meanwhile, several transport and logistics firms with strong European networks issued statements Friday that sought to convey continuity. "As the process moves forward, we remain committed to serving our customers with effective and reliable service across our global network," said Memphis-based FedEx Corp., which a month ago completed its US$4.8 billion acquisition of Dutch delivery concern TNT Express LLC, one of the three top European package-delivery firms. The multi-year integration of the two firms will play out during Britain's cord-cutting process.
Ceva Logistics, the Dutch logistics company with one of the largest pan-European freight infrastructures, said it expects no negative impact on its business from Britain's exit. Ceva said it "will use the transition time to adapt to any changes to the operating environment."
The departure of a single country, albeit one which is Europe's second-largest economy, may not be enough to worry folks. And under EU rules, a departing country has up to two years to prepare for the transition to full sovereignty. The question is whether nationalist organizations in other EU countries will feel emboldened to push their governments into holding similar referendums. Other unknowns: whether those countries' citizenry is resentful enough of dictates from EU bureaucrats in Brussels and the influx of immigrants from other member nations to follow Britain out the door.
The departure of several key member nations could cause the EU to unravel, ending a grand experiment in unification that began in 1973.
There have been noises coming from right-wing groups in France, the Netherlands, Denmark, and Italy about distancing their governments from the EU. Greece, while currently out of the headlines, has been concerned that Britain's exit will weaken the eurozone's desire to strengthen Greece's position in the continent's single currency. (Britain never joined Europe's monetary union.)
A logistics executive, who asked for anonymity, said Britain's departure could introduce increased complexity in cross-border flows. Larger providers will have the resources to adapt to a more difficult compliance environment, while smaller providers will find it tough going, the executive said.
James A. Cooke, a principal analyst at consultancy Nucleus Research, said he expects renewed demand for specialized trade-management software as more nations withdraw from trade blocs and exert sovereign control over goods movement.
"Global supply chains have been one of the biggest beneficiaries of free-trade treaties and multinational trading unions like the EU as they have eliminated country regulations and restrictions on cross-border shipments," said Cooke, who believes trading blocs worldwide will splinter in coming years. "Companies will still run global supply chains in this era of renewed nationalism, but they will need software tools ... to help them navigate the coming patchwork" of sovereign regulations and ensure their goods get moved.
Cooke also expects a growing use of "control tower" solutions to give companies the supply chain visibility needed to address issues that arise if shipments get caught in cross-border controls.
For now, however, Britain's impending departure is enough for Europe and the world to digest. The Centre for European Reform, a British think tank, said Friday that although it is highly unlikely another EU country will leave any time soon, "centrist politicians who run nearly every EU member state will henceforth be on the defensive against the populist forces who oppose them and the EU."
But perhaps Britain's overarching dilemma was outlined by the same organization in a paper published two and a half years ago: Whether to negotiate access to the EU's single market and play by its rules, or to lose access in return for regulatory sovereignty that the paper said at the time "would be highly illusory."
Whatever Britain's future, it will move toward it without Prime Minister David Cameron, who will step down by October when a new government is expected to be in place. Cameron, who supported Britain's remaining in the EU, took a huge risk in January 2013 by offering a referendum on EU membership. It backfired on him last week.
For more on the Brexit, see "Brexit to boost U.S. exports to Asia, depress activity to Britain and Europe, economist says."
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
Freight transportation providers and maritime port operators are bracing for rough business impacts if the incoming Trump Administration follows through on its pledge to impose a 25% tariff on Mexico and Canada and an additional 10% tariff on China, analysts say.
Industry contacts say they fear that such heavy fees could prompt importers to “pull forward” a massive surge of goods before the new administration is seated on January 20, and then quickly cut back again once the hefty new fees are instituted, according to a report from TD Cowen.
As a measure of the potential economic impact of that uncertain scenario, transport company stocks were mostly trading down yesterday following Donald Trump’s social media post on Monday night announcing the proposed new policy, TD Cowen said in a note to investors.
But an alternative impact of the tariff jump could be that it doesn’t happen at all, but is merely a threat intended to force other nations to the table to strike new deals on trade, immigration, or drug smuggling. “Trump is perfectly comfortable being a policy paradox and pushing competing policies (and people); this ‘chaos premium’ only increases his leverage in negotiations,” the firm said.
However, if that truly is the new administration’s strategy, it could backfire by sparking a tit-for-tat trade war that includes retaliatory tariffs by other countries on U.S. exports, other analysts said. “The additional tariffs on China that the incoming US administration plans to impose will add to restrictions on China-made products, driving up their prices and fueling an already-under-way surge in efforts to beat the tariffs by importing products before the inauguration,” Andrei Quinn-Barabanov, Senior Director – Supplier Risk Management solutions at Moody’s, said in a statement. “The Mexico and Canada tariffs may be an invitation to negotiations with the U.S. on immigration and other issues. If implemented, they would also be challenging to maintain, because the two nations can threaten the U.S. with significant retaliation and because of a likely pressure from the American business community that would be greatly affected by the costs and supply chain obstacles resulting from the tariffs.”
New tariffs could also damage sensitive supply chains by triggering unintended consequences, according to a report by Matt Lekstutis, Director at Efficio, a global procurement and supply chain procurement consultancy. “While ultimate tariff policy will likely be implemented to achieve specific US re-industrialization and other political objectives, the responses of various nations, companies and trading partners is not easily predicted and companies that even have little or no exposure to Mexico, China or Canada could be impacted. New tariffs may disrupt supply chains dependent on just in time deliveries as they adjust to new trade flows. This could affect all industries dependent on distribution and logistics providers and result in supply shortages,” Lekstutis said.
Grocers and retailers are struggling to get their systems back online just before the winter holiday peak, following a software hack that hit the supply chain software provider Blue Yonder this week.
The ransomware attack is snarling inventory distribution patterns because of its impact on systems such as the employee scheduling system for coffee stalwart Starbucks, according to a published report. Scottsdale, Arizona-based Blue Yonder provides a wide range of supply chain software, including warehouse management system (WMS), transportation management system (TMS), order management and commerce, network and control tower, returns management, and others.
Blue Yonder today acknowledged the disruptions, saying they were the result of a ransomware incident affecting its managed services hosted environment. The company has established a dedicated cybersecurity incident update webpage to communicate its recovery progress, but it had not been updated for nearly two days as of Tuesday afternoon. “Since learning of the incident, the Blue Yonder team has been working diligently together with external cybersecurity firms to make progress in their recovery process. We have implemented several defensive and forensic protocols,” a Blue Yonder spokesperson said in an email.
The timing of the attack suggests that hackers may have targeted Blue Yonder in a calculated attack based on the upcoming Thanksgiving break, since many U.S. organizations downsize their security staffing on holidays and weekends, according to a statement from Dan Lattimer, VP of Semperis, a New Jersey-based computer and network security firm.
“While details on the specifics of the Blue Yonder attack are scant, it is yet another reminder how damaging supply chain disruptions become when suppliers are taken offline. Kudos to Blue Yonder for dealing with this cyberattack head on but we still don’t know how far reaching the business disruptions will be in the UK, U.S. and other countries,” Lattimer said. “Now is time for organizations to fight back against threat actors. Deciding whether or not to pay a ransom is a personal decision that each company has to make, but paying emboldens threat actors and throws more fuel onto an already burning inferno. Simply, it doesn’t pay-to-pay,” he said.
The incident closely followed an unrelated cybersecurity issue at the grocery giant Ahold Delhaize, which has been recovering from impacts to the Stop & Shop chain that it across the U.S. Northeast region. In a statement apologizing to customers for the inconvenience of the cybersecurity issue, Netherlands-based Ahold Delhaize said its top priority is the security of its customers, associates and partners, and that the company’s internal IT security staff was working with external cybersecurity experts and law enforcement to speed recovery. “Our teams are taking steps to assess and mitigate the issue. This includes taking some systems offline to help protect them. This issue and subsequent mitigating actions have affected certain Ahold Delhaize USA brands and services including a number of pharmacies and certain e-commerce operations,” the company said.
Editor's note:This article was revised on November 27 to indicate that the cybersecurity issue at Ahold Delhaize was unrelated to the Blue Yonder hack.
The new funding brings Amazon's total investment in Anthropic to $8 billion, while maintaining the e-commerce giant’s position as a minority investor, according to Anthropic. The partnership was launched in 2023, when Amazon invested its first $4 billion round in the firm.
Anthropic’s “Claude” family of AI assistant models is available on AWS’s Amazon Bedrock, which is a cloud-based managed service that lets companies build specialized generative AI applications by choosing from an array of foundation models (FMs) developed by AI providers like AI21 Labs, Anthropic, Cohere, Meta, Mistral AI, Stability AI, and Amazon itself.
According to Amazon, tens of thousands of customers, from startups to enterprises and government institutions, are currently running their generative AI workloads using Anthropic’s models in the AWS cloud. Those GenAI tools are powering tasks such as customer service chatbots, coding assistants, translation applications, drug discovery, engineering design, and complex business processes.
"The response from AWS customers who are developing generative AI applications powered by Anthropic in Amazon Bedrock has been remarkable," Matt Garman, AWS CEO, said in a release. "By continuing to deploy Anthropic models in Amazon Bedrock and collaborating with Anthropic on the development of our custom Trainium chips, we’ll keep pushing the boundaries of what customers can achieve with generative AI technologies. We’ve been impressed by Anthropic’s pace of innovation and commitment to responsible development of generative AI, and look forward to deepening our collaboration."