Here at the Roundup, we pride ourselves on staying ahead of the curve on many issues related to the supply chain/logistics sectors. Still, admittedly, we are an industry newsletter, not a news organization. So when we focus on an item that gathers steam as a legitimate headline news story before it really takes off, we hold it as a point of pride. Not because we broke the story but because we informed our busy readers about something brewing that likely will impact their business.
Last week, we led off with Amazon.com. A new book by Wall Street Journal reporter Dana Attioli entitled The Everything War chronicles the company’s rise from scrappy underdog to a massive conglomerate and suggests that it has hurt other businesses and consumers. The author contends that Amazon has grown so large that it’s causing price inflation online. The book echoes the allegations in the antitrust lawsuit the Federal Trade Commission filed against the retail giant last year and offers an inside look at how that price inflation happens.
For years, the company undercut the competition to build market share; it didn’t need to make money in its retail business thanks to the steady stream of profits coming from its cloud computing arm. Amazon now makes up about 40% of all online retail, the company started raising prices on the products it sells directly. It also started charging the businesses that sell products on the site’s marketplace, which can best be described as monopoly rent. Nearly 50% of sellers’ revenue goes to Amazon in fees; the FTC lawsuit has a similar number. They pass those charges on to customers through higher prices. The fees include a commission to Amazon, as well as fees for advertising on the platform and using the company’s logistics service.
Now, the Federal Trade Commission is accusing Amazon founder Jeff Bezos and other top company executives of using disappearing messaging apps such as Signal to conceal potential evidence in the agency’s ongoing antitrust case against the eCommerce behemoth. Once a company knows it is being sued or is likely to be sued, it has a legal duty to preserve documents and communications that could prove relevant to the case. If proven, Amazon executives face bigger problems than civil charges.
Free market proponents can argue that the system is working. Sellers and consumers are starting to feel the price crunch. The free press is reporting on corporate misdeeds. All anyone has to do is turn to alternative platforms to buy and sell. All true, but the law is the law. The only question here, if there even is one, is, how crucial is enforcement. The current administration thinks it is. With an election coming up and a potential change in administrations, coupled with the tortoise-paced justice system, Amazon might yet again dodge a regulatory bullet.
Amazon hasn’t exactly pushed the continuing saga of the Key Bridge collapse out of the headlines. The crash of the cargo ship Dali into the vital crossway has turned the U.S. supply chain on its head, yet also reveals the resilience of the sector. This week, we learned that corporate malfeasance is not limited to super-sized corporations like Amazon. The City of Baltimore has said that the owner and manager of the cargo ship that brought down the Francis Scott Key Bridge last month are directly responsible for the accident and should not be allowed to avoid legal liability, according to court documents.
City officials say the ship’s parent company, Grace Ocean Private Ltd, and its operator, Synergy Marine Group, were “potentially criminally negligent” after causing the bridge to collapse on March 26th. The city says the collapse was caused by the owner’s “carelessness, negligence, gross negligence, and recklessness, and as a result of the unseaworthiness” of the ship. Baltimore officials allege that, before leaving port, “alarms showing an inconsistent power supply on the Dali had sounded.” The accusations come on the heels of a motion filed by the owners of the Dali to limit their liability in the deadly crash. Twenty-eight percent of industry executives and workers polled do not believe the shipping sector has learned from this crash, though another 28% believe new regulations and stricter requirements are necessary.
A temporary third channel has been opened by the Port of Baltimore in an effort to help ease congestion caused by the Key Bridge collapse. Two tugboats helped guide the M/V Balsa 94, a Panama-flagged bulk carrier, through the new 35-foot Patapsco River channel. The ship was one of five stuck in the Port of Baltimore since the deadly crash four weeks ago. Domino Sugar welcomed a large shipment of raw sugar last Wednesday, its first since the bridge collapse.
For the past 47 years, the Key Bridge has been a mainstay for cross-country and local freight drivers, many of them looking to avoid the two tunnels that cross the Patapsco River at the mouth of the Chesapeake Bay. The tunnels are notoriously congested and tight for semi-trailer trucks, and some drivers can’t use them because of height and cargo restrictions. The loss of the thoroughfare that carried over 12 million vehicles annually has ratcheted up pressure on already-stressed local truckers who frequented the Key Bridge. Their lives for the foreseeable future now involve more traffic, longer and slower routes, and, for many, a new fear of infrastructure failing in ways they’d never before considered.
The Latest in Freight News
Thanks to a strategic alliance between FedEx Express and Zonos, UK and EU retailers will be able to expand their market reach and improve cross-border eCommerce delivery processes. Stock analysts see FedEx’s cost-cutting as working, suggesting the company’s stock is a good buy. The carrier is shuttering four facilities in southwestern Florida in 2024, according to Worker Adjustment and Retraining Notification (WARN) Act notices filed on April 17. The four closures will result in the layoff of 220 couriers and eight managers. FedEx remained the top supplier to the USPS with $1.6bn in revenue for fiscal year 2023. The numbers do not reflect the new alliance between USPS and UPS due to go into effect this summer.
UPS announced it is increasing fuel surcharges for various service offerings. The company reported better-than-expected quarterly profit last week as cost cuts offset still-soft demand for package delivery. On the earnings call, UPS CEO Carol Tomé said that network flexibility gave it an edge over FedEx in landing a deal with the U.S. Postal Service to become the agency’s primary air cargo provider. She also claimed that she expects its newly won USPS air cargo contract to be profitable in its first year and throughout the more than five-year deal. Big Brown is looking to returns and big-and-bulky deliveries to expand its addressable market at a time when its shipping volumes have been decreasing.
DHL recently expanded its network of U.S. retail locations by introducing a new company owned and operated retail shipping store in Fairfax, Virginia. The company has added eActros 300 fully electric tractor-trailers from Mercedes-Benz Trucks to its fleet of EVs. The international carrier will pay $8.7 million to settle a long-running lawsuit by the U.S. Equal Employment Opportunity Commission accusing the logistics giant’s U.S. arm of assigning undesirable delivery routes and more heavy lifting to Black employees.
Union Pacific opened a new route between Chicago and Southern California, featuring transits of 4-6 days between its Inland Empire terminal in Fontana and Northlake, targeting intermodal traffic that would otherwise move by truck. BNSF Railway said that 650 of its train dispatchers will participate in the Federal Railroad Administration’s Confidential Close Call Reporting System. The railroad company is threatening to sue the city of Gunther, Texas, over a routine approval for a warehouse that hasn’t happened yet. Norfolk Southern Corp. is seeing some pressure in its coal business following the collapse of the Francis Scott Key Bridge in Baltimore last month. The U.S. is trying to eat into China’s infrastructure influence in Africa with a new railroad.
Kuehne + Nagel International saw slightly improving ocean and air transport demand during the first months of 2024, but the freight forwarder said the overall shipping environment remains challenging. Mexico’s box ports continue to boost throughput, fuelled by nearshoring and roaring trade with the US. Eleven electric big rigs are now hauling freight between San Diego and Tijuana through the Otay Mesa Port of Entry. American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index declined 2% in March.
Ryder System shares were trading higher after the company reported better-than-expected adjusted earnings and revenue in the first quarter thanks to used vehicle results and cost-savings efforts. Ryder System advanced its dedicated business segment with its February acquisition of Cardinal Logistics. Heartland Express reported a net loss of $15.1 million in the first quarter of 2024, according to an earnings announcement. Aurora Innovation is testing its autonomous technology without drivers at high speeds at the Transportation Research Center’s 7.5-mile track in Ohio. New trucking industry-backed research finds renewable diesel (RD) fuel to be significantly less costly and more operationally effective than transitioning to battery-powered trucks. XPO driver Dale Williams reached an impressive milestone: four million miles of driving for the logistics company without so much as a fender bender.
The National Motor Freight Traffic Association, Inc. (NMFTA)™ and National Motor Freight Classification (NMFC)® have announced the launch of its comprehensive less-than-truckload (LTL) freight packaging guide, which unveils the secrets to complying with the NMFC minimum LTL packaging requirements. Saia LTL Freight will open two new terminals, one near Trenton, New Jersey, and another in St. George, Utah. Old Dominion Freight Line reported $1.46 billion in revenue for the quarter ended March 2024, representing a year-over-year increase of 1.2%. Old Dominion Freight Line hired 500 new workers since September after allowing its headcount to slide amid an extended freight downcycle.
Knight-Swift Transportation said it is focused on reducing costs throughout the organization. That includes culling trailer counts, as well as tractor counts in some areas, to improve asset utilization. It is prioritizing investment dollars toward the expansion of its less-than-truckload business in the near term. Knight-Swift Transportation says it is looking for potential targets to build out its less-than-truckload network, a market with relatively stable earnings and competition. At the same time, its core business of moving full truckloads for retailers and manufacturers stumbles through a prolonged slump in freight demand. Some key statistics at the U.S. LTL operations of TFI International remain a cause for concern at the Canada-based trucking conglomerate.
Amazon is preparing to open its third distribution center in Kern County, CA, a last-mile hub, after a two-year delay that was part of a nationwide development pullback preceded by lagging sales. Amazon also opened a new last-mile facility in Amarillo, TX. According to the Amarillo Economic Development Corporation, the facility spans 30,000 square feet, has a capital expenditure of $30 million, and is expected to create 30 new positions. Mercedes-Benz Vans is partnering with ONOMOTION to enhance last-mile delivery efficiency through an advanced logistics concept. The collaboration integrates the Mercedes-Benz eSprinter with ONOMOTION’s eCargo bikes.
Lowe’s has teamed up with DoorDash to provide on-demand deliveries from more than 1,700 locations across the U.S. New York City’s Department of Transportation authorized the use of electric cargo bikes on city streets and put some key safety standards in place. The head of the U.S. Postal Service vowed that its on-time performance would bounce back in struggling markets like Atlanta and Richmond, Virginia, that have struggled after adjustments tied to the agency’s wide-ranging network overhaul. Parcel carrier GLS US has integrated its services with its parent company’s European network, giving customers access to direct parcel delivery between the U.S. and Europe.
Logistics, Supply Chain, Warehouse, and Related News
Retailers aren’t pulling the plug on free shipping and returns completely. But they are moving the goalposts and encouraging consumers to change their online habits. Resurgent air cargo demand and rising rates, powered by the quasi-blockade of Red Sea shipping and continued growth in bookings by Chinese eCommerce platforms, during a normally slow shipping period is creating high expectations among air carriers for peak season and making logistics providers nervous about securing adequate capacity. With nearshoring accelerating trade growth between the U.S. and Mexico, experts said both countries need to focus on infrastructure, technology, policies, and cargo security to keep goods flowing seamlessly.
Levi Strauss is leaning into its stand-alone stores to glean insight into shifting consumer tastes, its latest effort to expand beyond its image as a jeans maker. Hasbro, the toy maker, credits actions enacted over the past year, including layoffs and overhauling its supply chain, that have helped improve margins as its core business of selling toys slumps. A report from research firm Gartner warns that while generative artificial intelligence (GenAI) can be a valuable resource for supply chain workers, it also comes with some potential pitfalls.
Apple cut 14 suppliers last year that did not meet its responsible sourcing standards, according to a Conflict Minerals Report filed with the Security and Exchange Commission. AI in robots has scanning capabilities for warehouses. A state judge’s recent decision to block nearly all members of a local planning board from deciding on a warehouse application has sent up caution flags for planning officials across New Jersey as communities struggle to slow the explosive growth of warehouses statewide.
Hundreds of mega-warehouses have been built in Illinois for online shopping in recent years, and the rise in delivery trucks is polluting neighborhoods already burdened with poor air quality, a new study says. The frenzy to build data centers to serve the exploding demand for artificial intelligence is causing a shortage of the parts, property, and power that the sprawling warehouses of supercomputers require. Powered by sophisticated software and artificial intelligence, warehouse robots operate alongside human staff to streamline the order fulfillment process. They navigate through the warehouse, selecting and delivering items to robotic arms equipped with suction cups. This innovative approach improves efficiency and demonstrates the potential of automation in modern logistics operations.
Amazon is winding down its Prime Air drone delivery program in Lockeford, California. Amazon and local leaders cut the ribbon on a new 620,000-square-foot warehousing facility expected to employ up to 1,000 people in the Raleigh-Durham NC area. Amazon Live introduced a shoppable, free, ad-supported channel (FAST) to Prime Video and its Freevee ad-supported video-on-demand (AVOD) streaming service. The company’s cloud-computing arm said it would invest $11 billion in Indiana to build data centers, marking the state’s largest capital investment and promising at least 1,000 jobs.
Online shopping can expose people to a greasy influencer economy. Influencers often join affiliate-revenue networks, such as Amazon’s. When an influencer’s follower clicks a link and buys something, the influencer makes money. That’s why people on your social media feed are crowing about their ten favorite Amazon finds or talking about how an expensive gizmo has changed their lives. X-Cart, a leading automotive eCommerce platform, has announced the expansion of its partnership with Affirm, a payment network. Zippee introduced a full-stack fulfillment platform with a focus on logistics in the thick of the pandemic. It powers same-day delivery for D2C brands through its network of 150 dark stores and last-mile delivery fleet.
eCommerce resale volume is returning to growth after a 6.9% dip YoY in 2022 and a 2.5% one in 2023. UBS analysts suggest that eCommerce isn’t done upending brick-and-mortar retail just yet. An explosion in the number of Chinese eCommerce outfits has been accompanied by an equally strong uptick in scrutiny coming from the halls of Western governments. This week, the U.S. has told the owners of Chinese social media phenomenon TikTok to sell up or face a nationwide ban. President Biden signed a law last week, that would ban Chinese-owned TikTok unless it is sold within a year. The newly public company Ibotta reached a multibillion-dollar market capitalization by giving shoppers cash back on products they buy, sharing the purchase information with brands, and collecting a fee for any sales generated. Now, its sights are set on using AI to help brands decide which discounts to offer which consumers.
Apparel retailer Express filed for Chapter 11 bankruptcy protection on Monday and plans to close 95 Express stores and all of its UpWest locations. Nordstrom’s board of directors has formed a special committee of independent and disinterested directors to carefully evaluate any proposal from Erik and Pete Nordstrom and any proposals from other parties and consider whether they are in the best interests of Nordstrom and all shareholders. Walmart’s majority-owned fintech startup One has begun offering buy now, pay later loans for big-ticket items at some of the retailer’s more than 4,600 U.S. stores. Apparel makers, including Levi Strauss, Skechers, and Canada Goose, are trying to get closer to their customers. Doing that will require nailing the nuts and bolts of retail logistics. The stalwarts of department-store sales are taking the strategic step into direct-to-consumer sales, reasoning that the investment is needed to kick growth into a higher gear and potentially reset the future of their businesses. Netherlands-based Collo-X, part of FarmaSort, has launched the MicroSorter compact sorting system that can sort up to 1,500 products per hour, per unit, making it ideal for companies with high volumes but small footprints.
In Other News
- Gross Domestic Product (GDP) Increased 1.6% In The First 3 Months of 24’
- Blinken In China Demands Fair Treatment For U.S. Companies
- Orders For Durable Goods Up 2.6% In March
- Inflation Can Slow Down Rate Cuts
- Treasury Secretary Yellen Says U.S. Economy Strong
- The Trade Deficit Widened
- Big Union Win: VW Workers Join UAW
- FTC Bans Non-Compete Clauses
- Business Groups Sue To Block Ban
