This Week in Logistics News (November 3-7, 2014)

I’m off to a CSCMP New England Roundtable Executive Breakfast to discuss (what else!) transportation capacity, with Jason Seidl, Managing Director at Cowen and Company, leading the conversation. I’ll share my learnings in a future post, but in the meantime, here’s the news that caught my attention this week.

Delivery used to be a cost of doing business. Today, it’s a competitive weapon — a means to drive top-line growth, enhance customer loyalty, and boost market share. Free shipping? That’s so old school. The focus now is on same-day delivery. UPS, FedEx, and USPS? They’ve got growing competition from the likes of Uber, Google, local couriers, and even customers like Amazon that are investing in their own delivery fleets. In short, there’s a lot of experimenting going on in the world of delivery these days. Most efforts will fail, either because of prohibitive costs or lack of demand, but one thing is clear: the delivery landscape will be different tomorrow than today.

Starbucks is the latest company to get in the delivery game. During the company’s earnings call last week, CEO Howard Schultz said, “Imagine the ability to create a standing order of Starbucks delivered hot to your desk daily. That’s our version of e-commerce on steroids.” Here are some excerpts from the CNBC article:

The delivery service will be available to Starbucks loyalty program members as part of its new mobile order and pay app that will launch in Portland next month and nationwide next year.

 

When asked about delivery, Starbucks Global Chief Strategy Officer Matthew Ryan said it is still “early days” and the chain isn’t ready to tip its hand with more details but that it’s “moving full speed ahead.”

It’s hard to imagine a model where delivering a cup of coffee (even a high-priced one) can be profitable for Starbucks. But if there is a magic formula for success, it will probably be mobile payments + loyalty program + delivery — where losses in delivery could be negated with gains in other areas, with maybe a subscription fee like Amazon Prime built in. The Starbucks app is already the most successful mobile payment system in the U.S., with an average of over 6 million transactions per week. Delivery as a standalone offering probably won’t work, but linking it with mobile payments and the loyalty program might give it a chance to succeed.

In related news, the Wall Street Journal reported that Amazon recently “tested package delivery by licensed cab in San Francisco and Los Angeles using taxi-hailing mobile app Flywheel.” Here are more details from the article:

For its recent test, the people familiar with the matter said, Amazon joined with Flywheel Software Inc., whose cab-hailing mobile app competes with Uber Technologies Inc. and Lyft Inc. Amazon summoned cabs through the Flywheel app to mini-distribution centers before loading them with as many as 10 packages bound for a single ZIP Code, paying about $5 a package for delivery within one hour, according to the people.

 

The Flywheel deliveries were typically done in the early morning when the cabs had fewer fares and were less likely to be noticed by customers and competitors, said the people familiar with the matter.

As I said a couple of months ago, Amazon is placing bets on multiple models, including building out its own delivery fleet, experimenting with drones, and partnering with the United States Postal Service (USPS) to deliver groceries. At the end of the day, there won’t be a one-size-fits-all model for same-day local delivery — drones, private fleet, couriers, and other methods will be the “right” solution depending on order frequency and density, geographic region, and other factors, including how much consumers are willing to pay for the service.

Moving on to 3PL news, Transplace announced this week that it has acquired Logistics Management Solutions (LMS), “a non-asset-based third party logistics provider with particular strength in the chemical and industrial manufacturing sectors.” According to the press release, “LMS delivers freight management solutions and transportation savings to a diverse customer base that includes Monsanto and several other Fortune 500 companies.” Here’s what Transplace CEO Tom Sanderson had to say about the deal:

“Acquiring LMS further supports our commitment and strategic plan to grow Transplace and build a competitive advantage for our company and our customers. We are pleased to add LMS’s knowledgeable, experienced employees to our workforce. Bringing the LMS team on board allows Transplace to offer more services to its existing customers and to serve an entirely new set of customers, as well as continue to expand our presence in key verticals, such as the chemical industry.”

Like Transplace, LMS also offers its own proprietary transportation management system called TOTAL, which I assume will ultimately get phased out in favor of Transplace’s TMS.

There continues to be a lot of M&A activity in the 3PL space, driven in large part by the growing presence of private equity players in the market. Is the 3PL industry following the same path as the software industry, where financial rollups have been occurring for several years? If so, what does this mean for the industry — and customers? Some food for thought for another day.

Moving on to technology, UltraShipTMS introduced UltraYMS this week, “a new yard management system (YMS) module that helps supply chain managers keep track of tractors and trailers (and the freight they may contain) entering, dwelling, and exiting their freight yards, warehouses and distribution centers.” Here are some details from the press release:

The new YMS tool effectively eliminates gaps in supply chain visibility that exist between the TMS solutions shippers use to plan and monitor in- and outbound shipments, and the WMS (warehouse management systems) used to track freight inside warehouses and DCs…YMS is also vital to freight yard security and resource management. UltraYMS delivers intelligent gate management, enabling security to log all vehicles entering and exiting the yard using any mobile device. It permits gate security personnel to log photos of product and equipment condition upon yard entry and/or exit. Yard jockeys, the drivers tasked with situating trailers at docks for loading and unloading, are provided efficient, automated instructions for equipment placement correlated to shipping and receiving appointments generated by the TMS.

 

UltraYMS integrates with the UltraShipTMS suite of cloud-based logistics tools and can also be engaged as standalone software for shippers using other TMS solutions.

As I’ve said before, yard management solutions have been misunderstood in the marketplace (is it a TMS, WMS, or standalone application?), and as a result, many companies have a limited perspective of its role and value proposition, and so they’re missing out on bigger opportunities. I believe companies need to view YMS not as a standalone application or process, but as part of the broader end-to-end order fulfillment and distribution process. By understanding how the yard impacts both upstream and downstream processes, the more opportunities companies can find to enhance visibility and drive efficiencies.

Finally, the situation at the West Coast ports seems to be getting worse. According to CNBC:

Ship lines and other terminal operators, represented by the Pacific Maritime Association, in a statement issued Monday accused the dock workers union of initiating “orchestrated slowdowns at the Pacific Northwest ports of Seattle and Tacoma, severely impacting many of the largest terminals during the peak holiday shipping season.”

The cat-and-mouse game continues.

And with that, have a happy weekend.

Song of the Week: Karma Police by Radiohead

Note: enVista, Transplace, and UltraShipTMS are Talking Logistics sponsors

 

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