This Week in Logistics News (June 30 – July 4, 2014)

Due to the July 4th holiday on Friday, we postponed publishing our weekly news roundup until today. Not surprising, it was a very quiet week for news, but here are the few items that caught my attention:

Re/code published a very insightful article on Google’s Shopping Express service, which allows consumers to shop local stores online and get the items delivered same day. I encourage you to read the full article for all the details, but here are some interesting excerpts (emphasis mine):

A source familiar with the company’s plans says senior Google execs have set aside as much as $500 million to expand the service nationwide…“You can very much expect that we are putting a lot of money into this and we’re excited and willing to sustain that investment over time as this gets going,” said Tom Fallows, head of Google Shopping Express.

Once an order is placed, Google sends a contracted courier to pick up the goods from a partner store, where either a Google employee or a retailer’s employee has grabbed the merchandise off of a shelf…The order is then whisked to a warehouse operated by Google where multiple orders are packed into a vehicle, and sent out the same day. In some instances, Google packs orders and hands them off to shipping partners for delivery the following day.

Google takes a cut of each transaction, usually in the single digit percentages, according to a person familiar with the deals. Fallows called that commission “the core of the business model.” Google also charges shoppers a $4.99 fee for each store a courier has to visit to complete an order.

For the past year, I’ve been arguing that logistics — and same-day fulfillment, in particular — is becoming a strategic weapon for companies. You know it’s happening when you see CEOs and CFOs getting directly involved in these initiatives, as this example from the article illustrates:

Big retailers, however, are clearly taking these partnerships seriously. Instead of sending mid-level business development executives to strike deals with Google, some are negotiating at the top. Costco’s CEO, for instance, flew out to Google’s Mountain View, California campus to meet with Google CEO Larry Page before agreeing to participate in the Google Shopping Express program. Costco CFO Richard Galanti also met with execs at Google on a separate trip.

For related commentary on this topic, read these Talking Logistics posts:

Moving on to other news, UPS announced the addition of a Full Container Load (FCL) rail solution to its China-to-Europe transportation lineup. According to the press release:

UPS now offers the rail service from Chengdu, China, to Lodz, Poland, and from Zhengzhou, China, to Hamburg, Germany. Combining the rail movement with a truck network, UPS can provide service to customers throughout China and Europe. The new rail service is up to 50 percent faster than ocean freight and up to 70 percent less costly than air freight. (Transit times and costs vary based on origin, destination, and commodity and are not guaranteed).

The press release also references a Seabury survey where “71 percent of [the shippers and freight forwarders surveyed] expect a moderate to strong shift to lower cost modes [specifically, from air to ocean] in the next 1-3 years.” Mode shift is one of the key trends related to international transportation, a topic I will discuss next week on Talking Logistics with Ross Romine, VP of Global Transportation Services at LEGACY Supply Chain Services. So, mark your calendars and tune in!

Finally, on the regulatory front, the American Trucking Associations called on the Federal Motor Carrier Safety Administration “to swiftly issue a mandate for commercial truck drivers to use electronic logging devices to monitor their compliance with hours-of-service requirements” and “to provide incentives to encourage adoption of the technology in advance of the mandate.”

Interested in learning more about what’s happening with electronic logging devices and other transportation-related regulations in the works? Tune in to Talking Logistics this Thursday, July 10 at 12:00 ET where Jason Craig, Manager of Government Affairs at C.H. Robinson, will discuss The Latest on Transportation Funding and Regulations.

And with that, have a great week!

Song of the Week: “Control” by Broken Bells

Note: C.H. Robinson and LEGACY Supply Chain Services are Talking Logistics sponsors.