This Week in Logistics News (December 15-19, 2014)

By Adrian Gonzalez

Being the son of Cuban immigrants, people have been asking me what I think about the move by President Obama to normalize relations with Cuba. I really don’t know what to think. My brain tells me one thing, my gut another. Which do I trust?

Backseat view, on the way to Camaguey (photo by author)

When I visited Cuba with my father in 2004, we drove several hours from Cienfuegos to Camaguey to visit my aunt Z and her family. We had lunch at her house, and after we ate, I found myself alone in the kitchen with my cousin’s wife R, helping her clear the dishes. My cousin O, in his late twenties at the time, suffered from kidney failure, and he and R would get up at dawn multiple times a week and hitchhike to the dialysis clinic several towns away (despite what you might read elsewhere, the healthcare system in Cuba is miserable). While O underwent dialysis, R would stand outside the clinic and sell pasteles or whatever else she managed to cook the night before with whatever meager ingredients she could find. Then they would hitchhike back home, the sun setting on their backs, exhausted. We cleared the plates in silence, but I could tell she wanted to say something to me, and then she did, turning around to face me: “I hope you thank God every day that you were born where you are.” Time stopped for a moment and we just looked at each other, long enough for me to see the sadness in her eyes, or maybe it was hurt or disappointment, and long enough for her to see the truth in mine, and then she walked away before I could say anything, and what could I say anyway? We didn’t speak again that day, or ever again.

My cousin O died a few years ago, on a summer afternoon while sitting in the dialysis chair at the clinic. “I feel cold,” he told his his mother, and by the time she came running back with the doctor, he was gone. Not long after, my uncle died from prostate cancer, although everyone says it was really from a broken heart. And last year my aunt Z died after a short battle with breast cancer. On that side of my family, only R remains in Cuba, along with my cousin Zu and her son.

It doesn’t matter what I think about this change in U.S.-Cuba relations. For ten years now, I’ve been going back to that kitchen with R and what she said to me. It’s the voice in my gut. May R and all Cubans get to the point where they can thank God every day that they were born where they are.

Moving on, here’s the supply chain and logistics news that caught my attention this week, with 3PLs dominating the headlines:

I won’t go as far to say that delivering packages is becoming a commodity, but it’s clearly not enough to fuel future growth and customer value, especially in the e-commerce realm, which is why I believe FedEx decided to significantly strengthen and expand its logistics capabilities by acquiring GENCO. Here are some excerpts from the press release:

Processing more than 600 million returned items annually from many of the world’s leading brands, GENCO is considered a pioneer and market leader in reverse logistics, providing triage, test and repair, remarketing and product liquidation solutions. With $1.6 billion in annual revenue and more than 11,000 teammates at over 130 operations, GENCO offers a complete range of product lifecycle logistics® services to customers in the technology, consumer, industrial, retail, and healthcare markets.

“The acquisition of GENCO will transform our global portfolio through the addition of new best in class supply chain management services,” said Frederick W. Smith, Chairman and CEO of FedEx Corp. “As e-commerce continues to grow, customers of both companies will reap the benefits from the broadened capabilities and powerful new services.”

This move will allow FedEx to more effectively compete with UPS and DHL, which have well-established reverse logistics and test and repair services, and it also gives the company some differentiating capabilities, namely GENCO’s product liquidation and asset recovery service. A potential challenge I see is the impact this deal might have on GENCO’s transportation management service — that is, will customers question the objectivity of GENCO’s recommendations because of FedEx’s transportation assets and services? Many years ago, critics of FedEx’s logistics services would joke that all of its optimized solutions involved filling FedEx trucks and airplanes. You can bet the competition will try to revive that perception again.

In other 3PL news, C.H. Robinson validated/underscored one of my predictions for 2015: that 3PLs (and software vendors) will focus more on serving the needs of companies in the Energy and Process industries, especially Oil and Gas and Chemicals. As the company announced this week, “To capitalize on the rapid demand in the oil and gas industry, C.H. Robinson has created Oil and Gas Solutions as a way to change how the industry views the global supply chain.” Chris O’Brien, senior vice president at C.H. Robinson, goes on to say, “Oil and gas companies are experts in their business, but as demand for their products has increased, we are seeing the limitations that can occur with their fragmented supply chains. The opportunities in the oil and gas industry focus on supply chain management and logistics needs now, more than ever.”

As I said in my post, companies in the Energy and Process Industries are, generally speaking, lower on the supply chain maturity curve than companies in Automotive and High Tech, but they face significant supply chain challenges and opportunities nonetheless — and more importantly, they are now motivated to move up the maturity curve (that is, invest in technology and pursue outsourcing relationships) as cost pressures, competitive forces, regulatory requirements, and customer expectations intensify. As C.H. Robinson’s announcement illustrates, the race is on among 3PLs to establish a leadership position in this vertical.

Finally, some news about Google this week that relates to my prediction that the company will acquire a 3PL and/or logistics software vendor next year. According to the Wall Street Journal, “Google plans to push deeper into online commerce by enhancing its Google Shopping service with features that more directly challenge Amazon.com. Google has approached retailers about creating a ‘buy’ button for its online shopping site that would be similar to Amazon’s popular ‘one-click ordering’ feature, according to people familiar with the discussions.”

How does this relate to my prediction? Watch the short clip below where I share my thoughts in more detail. But in a nutshell, the worlds of e-commerce, social networking, and search are converging, and this will ultimately lead Google (as well as Facebook and Twitter) to move beyond the “buy” button and focus more on logistics too.

And with that, have a happy weekend!

Song of the Week: “Thunderstruck” by 2CELLOS (an awesome and unique AC/DC cover)