This Week in Logistics News (January 20-24, 2014)

Participating in conference calls is a big part of our work life, and the experience is not always fun or productive, which is what makes this video — A Conference Call in Real Life — so hilarious. Enjoy the diversion, then read on for this week’s news.

I shared my thoughts on Amazon’s news earlier this week, as well as on LinkedIn Pulse, where it sparked a conversation with more than 50 comments so far. Therefore, I won’t repeat myself here, except to say that Amazon is on a hot streak of capturing the headlines in recent months (see Amazon to Deliver Packages Using Drones and Amazon Partners with USPS for Sunday Deliveries).

On the earnings front, SAP reported that Non-IFRS total revenue for 2013 grew 8 percent at constant currencies (4 percent at actual currencies to €16.90 billion). Software revenue grew only 2 percent for the year, while cloud subscriptions and support grew 130 percent (at constant currencies and including contributions from acquisitions). The shift in customer demand for cloud applications has prompted SAP to push out its profitability target by two years. The company now plans to reach its 35 percent operating margin target by 2017 instead of 2015. Here’s an excerpt from a Reuters article that quotes SAP Co-CEO Bill McDermott :

“Revenue from cloud services does not come up front. It is a subscription cycle with recurring revenues. So three years down the road, revenues and profits will climb based on that subscription model. But in the short term it lowers your margin rate,” McDermott said.

He said SAP wants 65 percent of its revenue to be recurring by 2017. That compares with about 50 percent now.

When it comes to cloud solutions, most people (especially in the financial community) focus on the revenue model and the “less upfront costs, faster implementation” value proposition. But when it comes to supply chain and logistics solutions, the game-changing differentiator of cloud solutions is providing customers with access to a network of trading partners. Put differently, cloud-based supply chain and logistics solutions, if architected correctly, have the potential to become the Facebook/LinkedIn equivalent for the industry — and solution providers and customers that tap this opportunity first will gain a big advantage over the competition (for related commentary, see The Rise of Supply Chain Operating Networks, Facebook Graph Search, Through a Supply Chain Lens, and Ariba: At the Intersection of Social and Business Networks).

By now, we all know that UPS failed to deliver many packages before Christmas (see my commentary about it here). Well, this week the company reported that the surge in online shipping negatively impacted its Q4 2013 financial results by driving up costs. Here’s an excerpt from the press release:

U.S. results were negatively impacted by the challenges of the compressed peak season coupled with an unprecedented level of online shopping [emphasis mine] that included a surge of last-minute orders. In an effort to maintain service standards and commitments, UPS took extraordinary measures deploying additional equipment and people. For example, the company utilized 85,000 temporary employees, 30,000 more than planned. Also, weather events in December weighed on results.


On December 23, UPS delivered more than 31 million packages, the most ever and 13% over the prior-year peak day. This year’s highest delivery day occurred six days later than expected and was 7.5% greater than planned.

One thing is certain: UPS, FedEx, USPS, and retailers will have to make some changes in how they plan for this year’s holiday season. And it starts, in my opinion, with setting realistic expectations with online shoppers about how late they can order and how quickly they can receive a package.

In other news, online freight marketplace uShip announced that 16 asset-based LTL carriers have committed to uShip’s LTL (less-than-truckload) spot rate marketplace. Here are some additional details from the press release:

The new service lets carriers publish real-time, dynamically-priced rates to – and work directly with – small to midsize shippers posting freight to the uShip freight marketplace, ultimately helping LTL carriers optimize their highest yield profit segment.


When shippers post palletized LTL freight on, LTL carriers’ dynamically-priced offers are shown, driven from their pricing engines. LTL freight shippers then evaluate those instant upfront rates and decide whether to book one or post to uShip’s open marketplace for more quotes. In order for rates to match the reality of the shipment, carriers set pre-defined parameters, including specific lanes, freight type, restrictions, pickup/drop conditions (dock, forklift, etc.), and seasonal pricing.

The service is aimed at small and midsize shippers, but many large shippers can benefit from it too. Searching for spot capacity is a daily reality for shippers of all sizes.

And with that, have a happy weekend!

Song of the Week: “Love Don’t Die” by the Fray