This Week in Logistics News (December 9-13, 2013)

Same-day delivery (or is it shipping?) and global trade dominated the news this week, so let’s take a look.

Home Depot grabbed the headlines on Wednesday when the WSJ reported that the company is spending “at least $300 million on supply chain, technology and online improvements in the fiscal year that begins in February, including building new fulfillment centers and overhauling its warehouse technology systems” to enable same-day shipping and delivery of orders. I shared my takeaways from this announcement yesterday, so I won’t repeat myself here. I’m guessing, however, that many supply chain and logistics software vendors (and probably many 3PLs too) rushed to their phones yesterday to call Home Depot’s SVP of Supply Chain Management in hopes of getting a piece of that $300 million pie.

Side note: I received a comment yesterday about my Home Depot posting because the title referenced same-day delivery but I also mentioned same-day shipping in the writeup. The reader was confused by what exactly Home Depot was focusing on. His comment raised an excellent point: There is a huge difference between same-day shipping (getting an order out the same day it’s received) and same-day delivery (getting a product to a customer the same day they order it). Therefore, it’s important to get the words right. In Home Depot’s case, as discussed in more detail in the WSJ article, the company is working to enable both same-day shipping and same-day delivery.

The WSJ also published an article this week highlighting how Sears and many other retailers are ramping up their “ship from store” capabilities. The article states that “about a third of all retailers use brick-and-mortar stores as fulfillment centers for online orders; another 26% plan to do so soon.” And who are among the biggest beneficiaries of this trend? UPS and FedEx. According to the article:

UPS and FedEx…are now eager to help traditional retailers deal with [ship-from-store]. They have engineered new strategies for jockeying inventory across the country to avoid overstocks and markdowns and to keep customers from defecting to Amazon, a big problem last year. 

UPS says it is working with about 40 retailers on implementing these strategies — about double the number a year ago. FedEx said these partnerships helped boost revenue in its ground delivery business 11% in its fiscal first quarter.

Historically, when it came to “IT transformation” projects, companies reached out to the big consulting firms like IBM and Accenture for help. Are UPS and FedEx becoming the equivalent of IBM and Accenture for “logistics transformation” projects like same-day delivery and ship-from-store?

Moving on to global trade, there were two important developments this week. First, the World Trade Organization  announced that it reached its first global trade agreement. It only took 18 years. After more than a decade of failed “Doha Round” negotiations, the 159 members scaled back their ambitions and settled on a more limited agreement called the “Bali Package.” Trade facilitation was a key piece of the agreement. Here’s an excerpt from the press release:

The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.

The benefits to the world economy are calculated to be between $400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.

The WTO is aiming for the General Council to formally adopt the Bali agreement by July 31, 2014. This all sounds good on paper, but realizing the objectives will take many, many years — if ever. Just look at how many years and dollars have been spent here in the U.S. on the Automated Commercial Environment (ACE), which began in 2001, and it’s still not completed. Just saying. Also, whatever gains are achieved via trade facilitation will be reduced or wiped away if countries continue to adopt protectionist measures, which the former head of the WTO warned about earlier this year:

“As long as global economic weakness persists, protectionist pressure will build and could eventually become overwhelming. The threat of protectionism may be greater now than at any time since the start of the crisis, since other polices to restore growth have been tried and found wanting.”

The other global trade development this week was that the Trans-Pacific Partnership (TPP) negotiations have stalled, due in large part to disagreements between the United States and Japan over agriculture and automobiles. The talks are set to resume in late January. In many ways, the TPP is vastly more important to the U.S. than the Bali agreement. Simply put, the countries in the TPP (which includes Canada, Japan, Vietnam, Australia, Singapore, and six other Asian countries) account for 40 percent of U.S. imports and exports. And for every proponent of the deal there’s an opponent, not only here in the U.S. but in the other countries too. Which is why trade agreements take so long to negotiate, and so long to fully enact. Nonetheless, if you’re involved in trans-Pacific trade, you have to stay informed of what’s happening with TPP.

And with that, have a happy weekend!

Song of the Week: “Lost That Easy” by Cold War Kids