This Week in Logistics News (December 14-18, 2015)

It’s warm outside. There’s no snow on the ground, and there’s none in the forecast. My kids (well, the boys) are still wearing shorts to school. And yet, here I am, sneezing and coughing, reaching for another box of tissues, feeling a bit under the weather.

On the bright side, it’s Friday, and I am here.

In this week’s supply chain and logistics news…

It seems like Amazon was in the news every day this year with some kind of supply chain or logistics development. Last week, for example, the news was about Amazon investing in its own truck trailers. This week, as reported in The Seattle Times, Amazon is negotiating to lease 20 Boeing 767 jets for its own air-delivery service. Here are some details from the article:

Leasing 20 jets would be a significant expansion of an Amazon trial operation out of Wilmington, Ohio, operated by ATSG on Amazon’s behalf, sources said. A cargo-industry source said Amazon expects to make a decision to go beyond the trial run and pull the trigger on a larger air-cargo operation by the end of January.

“I believe they are serious about looking at this,” said the leasing executive, who asked not to be named because he may later do business with Amazon. “They are not going to hang about.”

[Robert W. Baird & Co. analyst Colin Sebastian] believes Amazon will eventually ship air-cargo packages for other companies as well, putting it in direct competition with UPS, FedEx and others.

Conceptually, other retailers could store goods in Amazon’s warehouses, then have Amazon manage the entire delivery operation. That would help Amazon keep the cargo planes loaded even after the holiday crush ends.

I’ll just repeat what I said last week: I believe Amazon is taking these steps to gain more control over its fulfillment infrastructure, adding weight to the hypothesis I put forward last year in Keeping Control: What 3PLs Must Convince Their Customers: that as manufacturers and retailers start to view logistics as a core strategic function, their desire to take more control will increase, and so their desire to outsource will diminish.

Well, the ink is barely dry on the Final Rule for electronic logging devices (ELDs) and already a lawsuit has been filed. The Owner-Operator Independent Drivers Association (OOIDA) filed a lawsuit over the new regulation, with Jim Johnston, OOIDA President and CEO, saying “This rule has the potential to have the single largest, most negative impact on the industry than anything else done by FMCSA. We intend to fight it with everything we have available.”

Others would argue that the Hours of Service rules, especially the 34-hour restart provision, is a bigger issue for the trucking industry, which is why the American Trucking Associations and others are happy that the spending bill working its way through Congress includes language maintaining the suspension of the 34-hour restart rule. “We’re pleased that in the omnibus spending compromise released today, Congress has seen fit to demand that FMCSA ‘show its work,’ before imposing unnecessary and onerous restrictions on the use of the 34-hour restart by commercial drivers,” said ATA President and CEO Bill Graves in a press release.

The spending bill, however, does not approve increasing the length of tandem trailers. As reported in

It’s been more than 30 years since the federal government last changed the limit on trailer length. Eighteen states allow so-called double 33s, or twin 33s, on their portions of the Interstate highway system. Major less-than-truckload motor carriers such as FedEx Freight have long pushed for larger trailer sizes.

It’s the “biggest thing the federal government can do,” to increase productivity, conserve fuel and reduce carbon emissions without damaging U.S. roads and highways, FedEx CEO Fred Smith told investors during the company’s fiscal 2015 third quarter earning call on March 18.

But the twin 33s have face stiff opposition from U.S. railroads and highway safety advocates that have argued larger trailers will mean greater damage to U.S. surface transportation infrastructure, more congestion and a significant environmental impact.

In short, the trucking industry faces more of the same in 2016: more regulations, lawsuits, mergers and acquisitions, and cost pressures (increases in driver pay and benefits balanced by lower oil and diesel prices).

Finally, FedEx reported a 4 percent increase in profit for the quarter ended Nov. 30, driven by significant growth in e-commerce. As reported in the Wall Street Journal, “Some e-commerce shippers are doing better than others this holiday season, said Chief Executive Fred Smith. Some retailers hadn’t done a good job of forecasting demand.”

But here’s the quote by Mr. Smith that really caught my attention:

“The people that have the real problem in the e-commerce business by and large are those that view the transportation companies as some sort of utility or a vendor and they make some really, really bad decisions,” Mr. Smith said. He didn’t elaborate.

Allow me to elaborate for him by pointing you to my post from earlier this year, Procuring Logistics Services is Not the Same as Buying Paper Clips.

And with that, have a happy weekend!

Song of the Week: “Heaven or Las Vegas” by Cocteau Twins