This Week in Logistics News (February 9-13, 2015)

By Adrian Gonzalez

With six feet of it on the ground, it’s hard not to talk about snow around here. Unless you’re talking about ice dams, of course, and how water is dripping into your house, which is what I’m dealing with at the moment. So you can understand my Michael Scott reaction when I heard that we’re getting hit with another blizzard and foot of snow this weekend:

Moving on to other news…

The situation at the West Coast ports took a turn for the worse this week, with the Pacific Maritime Association announcing yesterday that the ports will stop loading and unloading vessels from Thursday morning through next Monday unless a contract settlement is reached with the International Longshore and Warehouse Union (work will still continue in the dockyards, rail yards and terminal gates). With more than 30 cargo ships anchored offshore, countless supply chains scrambling, and the prospect of a $2 billion per day hit on the U.S. economy, is it time for President Obama to intervene?

As I mentioned last week, although the focus is currently on the labor dispute, there are bigger, longer-term risks associated with the ports ecosystem, including truck and rail capacity constraints, that supply chain executives need to start planning for today. One example, as highlighted in a WSJ article this week, is the strain larger container ships will put on the ports:

Their increasing size already is straining the unloading resources at some port facilities and—along with labor troubles—has contributed to major traffic snarls at the nation’s West Coast ports.

Today, the newest and biggest container ships can carry around 18,000 twenty-foot-equivalent units—the industry’s capacity benchmark—but Dr. Hacegaba [acting deputy director of the Port of Long Beach] said in a study last year that industry watchers expect ships as large as 22,000 TEU to come into service by 2018, and that 24,000-TEU vessels are on the drawing board.

The larger ships will further test the capacity of ports and canals and the skill of their captains and crews. “There is a world-wide shortage of qualified seamen to command these vessels,” said Andrew Kinsey, senior marine risk consultant at insurer Allianz SE’s Allianz Global Corporate & Specialty unit and a retired ship’s captain. Capt. Kinsey added that human error is a factor in most shipping accidents.

I’m not sure what all the options are to mitigate these risks, but the sooner you start thinking (and modeling and simulating) through the various scenarios and options, the more prepared you’ll be when the situation at the ports goes from bad to worse.

Moving on to 3PL news: Last week in my comments about GrubHub’s two acquisitions, I said that we were going to see a lot more activity in the same-day/local delivery space in the weeks and months ahead. Well, it only took a few days for another deal to occur. XPO Logistics announced this week that it has acquired UX Specialized Logistics (“UX”), “a North American provider of last mile logistics services for major retail chains and e-commerce companies.”. Here are some details from the press release:

The purchase price was $59 million, excluding any working capital adjustments, with no assumption of debt. UX had revenue and adjusted EBITDA of $113.2 million and $8.2 million, respectively, for the full year 2014. For the five years prior to acquisition, UX increased revenue at a compound annual growth rate of 19%.

Founded in 1978, UX is a non-asset, last mile logistics provider that specializes in logistics for the home delivery and installation of heavy goods, including e-commerce delivery, and same-day delivery services. UX has approximately 700 employees and contracted capacity of over 1,600 independent carriers and installers. XPO will integrate the acquisition into its XPO Last Mile division.

This is not the first investment XPO has made related to local delivery. Back in July 2013, the company acquired 3PD (now XPO Last Mile) for about $365 million. Is “local delivery brokerage” becoming a hot niche for 3PLs? Seems like XPO is betting on it, and buying itself marketshare.

In other news, TMC (a division of C.H. Robinson) announced that it has expanded its operations to São Paulo, Brazil. According to the press release, “TMC’s newest Global Control Tower® location complements the Chicago-based division’s other worldwide hubs in Amsterdam, Mumbai, Shanghai, and Wroclaw. The location of the São Paulo control tower is beneficial as many of TMC’s current and prospective customers are large multinational shippers that have a presence in South America and are looking to achieve global supply chain visibility and control.”

TMC was one of the early examples of how technology, managed services, and consulting are converging together. This model, which first gained traction in the United States, is now spreading to other regions, and TMC has played a big part in this expansion. According to the press release, “TMC employs more than 380 people worldwide who manage more than 4 million shipments totaling approximately $2.7 billion of freight under management.” Who knows, maybe we’ll see TMC open a Control Tower in Cuba in the not too distant future, in which case I’ll promptly invite myself over for a tour.

Finally, on the technology front, Roadnet announced the launch of its Roadnet Anywhere® Tracking application, “a web-based workforce tracking application [that] offers fleet managers an ‘always-on’ level of visibility into their drivers’ work day and real-time location through GPS positioning.” Here are some more details from the press release:

Roadnet Anywhere Tracking enables fleets to track their workforce to see how drivers are performing out on the road. Having an instant and clear view of location and performance data allows managers to quickly identify undesirable behaviors such as speeding, accruing extra miles, or making unplanned stops—and provide an opportunity for coaching to remedy it.

In addition to the workforce visibility, Roadnet Anywhere Tracking also includes several exceptions which can be uniquely configured to the fleet’s business model to define exception thresholds including max speed exceeded, GPS gap, late GPS, road speed exceeded, drivers out of contact, or stationary too long.

Roadnet also announced the launch of Roadnet® Insight, a business intelligence tool “that delivers accurate, reliable, and context related information across the entire enterprise including planning, dispatching, asset and vehicle tracking, proof-of-delivery and telematics.”

Simply put, as the local and same-day delivery market heats up, so do the opportunities for solution providers like Roadnet, Descartes, and Paragon, but only if they continuously and rapidly innovate.

And with that, have a happy weekend, with or without snow.

Song of the Week: “Electrolite” by R.E.M