With the holidays around the corner, this was a relatively quiet week for news. And I suspect many of you are already in vacation mode, so I’ll keep it brief today.
- A New Threat to UPS and FedEx (Wall Street Journal)
- Whirlpool Shifts Some Production to U.S. From Mexico (Wall Street Journal)
- Big three container shipping lines’ alliance under scrutiny (Financial Times)
A couple of interesting articles in the Wall Street Journal this week. First, an article about the rising importance of regional parcel carriers, driven by online retailers and their push for faster (and less expensive) deliveries. Here’s an excerpt:
While the regional shippers’ total market share is only about 3%—total estimated revenues are expected to reach $1 billion in 2013, compared with a total ground package market of about $32 billion—their revenues have more than doubled since 2009, according to SJ Consulting Group, Inc. These companies separately now serve approximately 90% of all U.S. ZIP Codes, buoyed by the increase in parcel volumes from big customers like Amazon.
One of my predictions for 2014 is that “last mile” logistics will become a competitive weapon for retailers and other companies next year, and couriers and local delivery companies will play a more critical role in transportation networks. It’s important to note, however, that this is a very fragmented segment of the transportation market, and many of these local delivery companies lack the technology to effectively scale their operations and provide customers, both retailers and consumers, with shipment visibility (something the article fails to mention). As a result, I also predict that last mile logistics will be a hot area of the transportation management systems (TMS) market next year.
Side note: I’ve noticed that mainstream publications, when they publish stories about companies like FedEx and UPS, refer to them as “shippers.” The subtitle of this article, for example, is “Networks of ‘Super Regional’ Shippers Handle More Packages for E-Retailers.” It’s time to get the terminology right. “Shippers” are manufacturers, retailers, distributors, and others that ship goods using “carriers” like FedEx, UPS, and others to deliver them.
The other WSJ article talks about Whirlpool moving some of its washing-machine production from a plant in Monterrey, Mexico to one in Clyde, Ohio. Here’s the excerpt that caught my attention:
Wages for production workers in Clyde, typically around $18 to $19 an hour, are roughly five times higher than in Monterrey. But [Jeff Durham, a vice president in charge of U.S. manufacturing at Whirlpool] said the shift should lower costs overall. The Clyde plant is more automated and electricity costs are much lower [emphasis mine] than in Monterrey, he said. Whirlpool also expects to save on transportation because the products won’t have to be shipped across a border before going into the company’s North American distribution network.
This story underscores two more of my predictions for 2014: First, that robots and automation technology will continue to play a growing role in supply chain and logistics operations (both warehousing and transportation). And second, that energy considerations will play a bigger role in supply chain strategies and decisions — a major driving force in reshoring, as Whirlpool’s decision illustrates.
Finally, U.S., European, and Chinese regulators met this week in Washington, DC, at the request of the Federal Maritime Commission, to discuss the proposed P3 Network alliance between Maersk, Mediterranean Shipping Company, and CMA CGM. According to the article, a spokesman for Joaquin Almunia, the European Competition Commissioner, said the following:
“We are assessing whether the creation of P3 may raise antitrust concerns. We are looking both at shipping transport services, which is the core business of P3, and at neighbouring markets, like port terminal services, notably in light of the vertical integration of the parties to the P3 consortium.”
As I wrote about last month in What’s Going On in Ocean Transportation?, although trucking gets the lion share of press coverage, it’s important for supply chain executives to keep an eye on the big picture and understand what’s happening across all modes — and there’s a lot going on in ocean transportation.
And with that, I wish you all Happy Holidays and continued health, happiness, and success in 2014.
Song of the Week: “Video Killed the Radio Star” by the The Buggles (the first video ever played on MTV, although this version was recorded at a live performance 25 years later).