There are few that disagree with the feeling that change, in this era, is happening at a more rapid pace than in times past. Technology, of course, is a major factor, but so are geopolitical and environmental events. Loyal readers of this newsletter know that we avidly chronicle these transitions as well as try and explain their relevance to the shipping/logistics sector. In the year since we started publishing The Roundup, electric vehicles (EVs) and the infrastructure needed to deploy them have exploded onto the scene on a grand scale. Robotics is ubiquitous in warehouses and distribution centers in far greater numbers. Artificial intelligence, until recently a term more associated with science fiction, is now being used for supply chain forecasting, route, freight, and last mile optimization, warehouse automation, predictive maintenance, and virtual assistants, among other things.
At the same time, some things remain the same. Congress and the Executive Branch negotiated and agreed to an extension of the debt ceiling. Like in previous compromises, it went down to the wire, and the markets trod carefully in anticipation of a positive outcome. Labor issues have not gone away, with potential strikes possible by truckers, cargo pilots, and dockworkers all in the next few weeks. Geopolitics still plays a huge role in determining where our consumer products get made, and environmental issues are as frequent as always. Traditionally, the week before Memorial Day weekend is slow as everyone looks forward to the unofficial start of summer, vacation, barbecues, and time with family. Not so this year, where the pre-Memorial Day week was chock full of news and events. Let’s take a look at what transpired.
The Latest In Freight News
Hundreds of FedEx pilots picketed in front of the FedEx Express Air Operations Center in Memphis, protesting ongoing contract negotiations. According to the Airline Pilots Association, the pilots last signed a contract in 2015. This means they are flying under work rules and pay rates from eight years ago. FedEx’s plan to fully combine its Express and Ground networks adds new complexities to its long-term operational overhaul, but experts say the upsides of the plan are likely to prove worthy of the challenges. Today, FedEx Express and Ground have distinct focuses at their parent company. Express delivers time-sensitive packages via its own employees and aircraft fleet. Ground, meanwhile, delivers less urgent packages in the U.S. and Canada by way of independent contractors who employ their own drivers. Those operational silos will crumble by June 2024, opening the door for $6 billion in savings.
The last time UPS workers walked off the job more than two decades ago; it crippled the shipping company. UPS delivers millions more packages every day than it did just five years ago, and its 350,000 unionized workers, represented by the Teamsters, still seething about a contract they feel was forced on them in 2018. In an environment of energized labor movements and lingering resentment among UPS workers, the Teamsters are expected to dig in; they have set an August 1st deadline. Despite the concern triggered by the possibility of a Teamsters strike against UPS Inc., many UPS shippers may find this to be the best time to renegotiate their contracts. (The SPL Group is a white glove service shipping concierge that has saved shippers tens of millions of dollars doing just that. If you are not yet a client, now is an ideal time to become one.)
CMA CGM Air Cargo, the fledgling freighter venture of the French shipping line by the same name, has pulled out of the U.S. market again and redeployed aircraft to Asia and the Middle East, the company confirmed. The Teamsters union said Wednesday that a strike authorization had been approved by members covered under ABF Freight’s national master freight agreement. The action is likely a negotiating tactic on the part of the union and a sign of potential next steps if talks between the two parties are unable to yield a new agreement. Union Pacific and the Brotherhood of Locomotive Engineers and Trainmen (BLET) have reached a “historic” tentative agreement that seeks to give engineers a more predictable work schedule. The agreement, which still needs to be ratified by union membership, calls for a schedule that would consist of 11 days on call and four days off. Implementation could take place within a year of ratification.
Transportation and logistics provider R&R Express announced the acquisition of truckload carrier Taylor Transportation. EASE Logistics announced that they would soon be the first in the U.S. to deploy connected and automated trucking technology on revenue-generating routes. The technology is known as truck platooning, where a lead truck controls a follower truck on roadways. Another company, Kratos Defense & Security Systems, is expanding its self-driving truck solution across the Midwest. Its platooning technology enables lead vehicles operated by humans to be accompanied and mimicked by unoccupied follower vehicles. We have covered platooning in previous editions; the technology is being put to wider use as a means of saving on fuel costs and reducing greenhouse gas emissions.
Legislation to invest $755 million over three years to expand truck parking in the U.S. advanced in the House on Tuesday after an opponent won assurances that the money would come from funds already authorized by Congress. Electrifying trucks at California’s ports could be the secret to the future, or it could be a huge mess. In recent weeks there have been attention-grabbing headlines that paint an encouraging picture about electric vehicle infrastructure being approved for buildout. However, planned EV charger rollouts are overlooking the needs of one important player in the electric vehicle ecosystem – commercial vehicles. For the second straight month, Laredo, Texas, retained the No. 1 spot among the nation’s 450 international gateways for trade, Chicago O’Hare International Airport ranked No. 2.
U.S. seaports aren’t having a great year, yet they are seeing something of an importing resurgence at the same time. Imports at some of the nation’s busiest container ports have been falling at a double-digit annual pace for several months. Yet business has been increasing month to month at many of the big gateways. Still, a slowdown in orders from big importers is bringing prices to unsustainable levels ahead of ocean shipping’s busiest season. The port of Houston, which was one of the fastest-growing US container gateways last year, continues to draw in new investment. Class I railway BNSF is readying the launch of intermodal services to the Dallas/Fort Worth area and Denver next month, while a developer of cold storage facilities is planning a $102m building with direct rail access to the port’s docks.
A severe drought affecting the Panama Canal is forcing container vessels to lighten their loads and pay higher fees, with further increases in the cost of shipping cargo through the canal expected this summer. A’s lease with the port of Oakland for the Howard Terminal site, where the baseball team was planning to build a multi-billion dollar waterfront ballpark and surrounding development, expired. The team is hoping to move to the Las Vegas Strip by 2027. The Oakland Athletics have agreed to a new ballpark on the Las Vegas strip at the Tropicana casino site. A ship that was grounded in the Suez Canal, has been refloated. You might recall that two years ago, the Suez Canal, one of the busiest waterways in the world, was impassable for almost a week after a giant container ship became stuck.
The Teamsters Union has come out guns blazing in the first of four separate negotiations with freight companies in the United States and Canada over the next year. In what is likely merely a negotiating ploy, the Teamster’s negotiating committee said a strike authorization had been approved by members covered under ABF Freight’s National Master Freight Agreement (NMFA). Last-mile delivery provider Gently is building out its Los Angeles operations further after completing its first delivery in April, with plans to launch in other U.S. markets down the road. Gently uses artificial intelligence and data to place goods closer to the customer and reduce delivery times. Target is increasing its use of larger delivery vehicles in markets served by its sortation centers, improving capacity and creating more efficient routes. The financially ailing Postal Service wants to draw more commercial shippers into its network to generate more revenue and counteract declining mail volumes.
Logistics, Supply Chain and Warehouse News
Three years after a revamped North American trade pact took effect, demands by labor unions and stricter standards for tariff relief are squeezing manufacturers from Japan and elsewhere that have set up shop in Mexico. Companies that set out to build e-commerce fulfillment services when pandemic-driven online sales boomed are now reining in their logistics ambitions. Amid still lingering supply chain disruptions and geopolitical uncertainty, electronics manufacturers are considering new locations to make critical components for their products. India is emerging as a popular choice for these moves, with large technology companies announcing new projects in the country.
Gartner, Inc. has released the results from its annual Global Supply Chain Top 25, identifying leading supply chain organizations, highlighting trends, and sharing best practices. Schneider Electric claimed the top position in the list this year, followed in second place by Cisco Systems. Shipping industry officials are eying a long list of projects along the St. Louis region’s riverways aiming to attract investment and boost volumes of freight shipped on the Mississippi River. Some of the largest, most sophisticated companies in the world overbought or overproduced inventory by many millions of dollars last year. AI is a game changer for supply chain forecasting.
Apple has forged a multibillion-dollar deal with U.S. chipmaker Broadcom to develop 5G radio frequency components for the mobile and computing giant. The deal includes manufacturing FBAR filters for Apple, which the company said in its release will be done at several U.S. manufacturing and technology hubs, including Fort Collins, Colorado, where Broadcom has a major facility. Fourteen countries in U.S.-led Indo-Pacific trade talks are nearing an agreement on supply chain coordination and may announce a deal soon, according to people familiar with the discussions. Car dealerships’ inventory is now back to pre-pandemic levels. The U.S. Needs Minerals for Electric Cars. Everyone Else Wants Them Too. The United States is entering an array of agreements to secure the critical minerals necessary for the energy transition, but it’s not clear which of the arrangements can succeed.
Amazon is opening a new fulfillment center in Canton, Ohio. A $99.4 million plan to build two warehouses on formerly toxic land in Hicksville has won millions of dollars in tax breaks from Nassau County, NY. A Swedish company specializing in electrical motors and generators opened its first warehouse in Lehigh Valley, PA. Vancouver took the first step toward extending a warehouse moratorium. The ban would delay large-scale warehouses for six more months. The business demand for mobile robots used to automate warehouse and factory operations saw a higher-than-expected uptick last year.
Saia opened its fifth new LTL terminal of the year, adding a facility in Muncie, Indiana. The new facility will enable the company to provide faster service, especially to shippers east of Indianapolis, by shortening a driver’s trip to customers’ facilities. An Amazon project in Niagara, NY, is moving slowly but still alive. A.P. Moller – Maersk opened a new center focused on emerging technologies to accelerate supply chain innovation and resilience, located in Jersey City New Jersey. Amazon’s warehouse worker policies are coming under greater scrutiny. |
Big retailers are signaling they are nearly done paring back their excess inventories and are preparing to fill their shelves with new merchandise this fall, potentially brightening prospects for freight carriers looking for revived restocking to drive a shipping rebound. Even though the era of bare shelves is not far behind the industry, many are learning to live on leaner inventories and plan to chase products as needed in 2023 and beyond. Retailers are clamping down on returns. Peak season, the time of year when retailers start importing holiday items, begins in August and runs until October. Logistics managers are hoping for a slight uptick in peak season this year, and back-to-school orders are trending higher. |