This Week in Logistics News (January 6-10, 2014)

By Adrian Gonzalez

I learned a new term this week: Polar Vortex. I also learned that if you toss boiling water into -40C air it turns to snow. But if you try it, you can also get burned.

Remember how hot it was this summer, driving around with a broken air conditioner? Yeah, me neither.

In this week’s news…

XPO Logistics ended 2013 with a couple of acquisitions (NLM and Optima Service Solutions), and the company didn’t waste any time announcing another acquisition to start 2014: Pacer International, the third largest provider of intermodal transportation services in North America. The cash and stock deal is valued at $335 million. According to the press release, Pacer facilitates about 10 percent of all domestic intermodal freight movements, is the largest provider of intermodal services between the U.S. and Mexico, and generated total revenue of $1.0 billion for the trailing 12 months ended November 30, 2013.

One of my predictions for 2014 is that shippers and carriers will continue to shift away from long-haul trucking and one-way freight. As I highlighted in What is the Future of Truckload Transportation?, many large carriers and 3PLs have diversified their service offerings, and truckload transportation is now at best a fourth priority for them, behind intermodal, dedicated, and brokerage. It’s clear that XPO Logistics is going after the fastest-growing segments of the 3PL industry, including intermodal, same-day delivery, and cross-border shipments. I don’t have any knowledge of XPO’s integration strategy, but I view that as the company’s biggest challenge moving forward — and not just integrating technology platforms and processes, but also training the combined sales team to “solution sell” versus selling a collection of services.

In other 3PL news, Menlo Worldwide Logistics completed trials of a new product picking solution involving ‘Pick to Light Carts’ developed by Inther Logistics Engineering. Menlo’s Maastricht facility in the Netherlands is the first operation to use the system in support of a medical device client. Here are some details from the press release:

With guidance lights on the reception bins of picking carts, which move from aisle to aisle, rather than on the storage racking, product location display and confirmation buttons are also positioned on the carts. This configuration allows operators to locate and secure product more quickly than more traditional picking methods.

Menlo’s Functional IT Consultant Michel Kil is excited by the new system, “We have data that is already showing savings of 2 to 3 hours per day just on the picking list printing process, a further 30 minutes on manual order consolidation and picking performance improvements of up to 50%…overall we are experiencing consistent levels of between 15 and 20% increased productivity. This is indeed impressive.”

This is just another example of the how warehouse operators continue to invest in new technology — such as pick-to-light and voice recognition systems, robots and flexible automation systems, and smart glasses and wearable devices — to improve productivity

Which brick-and-mortar industry is leading the way in omni-channel fulfillment? You can make the case that it’s grocers in the UK. According to an article in The Guardian, “grocers are cutting back on megastores, but rising internet food sales will see supermarkets sign up for twice as much online warehouse space this year.” The article goes on to say:

The major supermarkets – including Tesco, Asda and Waitrose – will this year commit to doubling the space devoted to internet distribution centres, known as dark stores, according to property agent Jones Lang LaSalle…The internet is set to become a key battleground for the grocers in 2014 as Morrisons finally launches its online service in partnership with Ocado on Friday and rival supermarkets vie to entice shoppers with services such as same-day delivery and convenient “click and collect” locations.

For a variety of reasons, online grocery has had limited success here in the United States, but as retailers in other industries embark on their omni-channel fulfillment strategies, taking a look at what grocers in the UK are doing could provide them with some valuable insights.

Another of my predictions for this year is that trade agreements will dominate global trade news in first half of 2014. This week, as negotiations on the Trans-Pacific Partnership are set to resume and free trade talks between the US and EU continue, senators Max Baucus (D-MT), Orrin Hatch (R-Utah), and Dave Camp (R-MI) introduced legislation (The Bipartisan Congressional Trade Priorities Act of 2014) that will establish “strong rules for trade negotiations and Congressional approval of trade pacts, to deliver trade agreements that boost U.S. exports and create American jobs.”

What I find is that you either support free trade agreements or you hate them. The National Retail Federation applauded the proposed legislation, with NRF President and CEO Matthew Shay saying…

“In order to sustain our economic recovery, spur further growth, and create opportunity through investment and job creation domestically, the country needs to renew its commitment to free markets and free enterprise internationally. The trade agreements that will follow this legislation will strengthen our recovery and provide the framework for future economic and employment growth.”

While the folks at Democracy for America (DFA) announced its “staunch opposition” to the Baucus-Camp “Fast Track” bill and the TPP, with DFA Executive Director Charles Chamberlain saying…

“The Trans-Pacific Partnership would be an unmitigated disaster for everything from the environment to internet freedom and working families. Members of Congress must be able to work to ensure that any proposed trade agreement is a fair deal for all Americans, not just the rich and powerful who have a seat at the table during closed-door negotiations. Let’s be clear: A vote for fast track authority on the TPP is a vote for a deal that will hurt hardworking Americans and haunt every single member of Congress, Republican or Democrat, who votes for it.”

Speaking of trade agreements, the poster child (or punching bag, depending on your position) is NAFTA, and the Bureau of Transportation Statistics reported this week that “U.S. trade with…Canada and Mexico in October 2013 was $103.1 billion, up 4.5 percent from October 2012 and exceeding $100 billion for the first month on record.” This data underscores why 3PLs are so focused on growing their cross-border shipping services.

Finally, from the “The Forecast is Always Wrong” file, a Kraft representative is saying that “consumers may not be able to find some Velveeta products on store shelves over the next couple of weeks” due in large part to increased seasonal demand as the NFL playoffs kick-off. I guess Americans will have to eat real cheese instead.

And with that, have a happy (and warm) weekend!

Song of the Week: “House of Gold” by twenty one pilots