This Week in Logistics News (March 21-25, 2016)

With today being a holiday for many, let’s go straight to the supply chain and logistics news that caught my attention this week:

One of my predictions for 2016 was that cross-border e-commerce would become the next frontier for shipping and logistics growth. FedEx agrees, announcing this week the re-launch of Bongo International as FedEx® CrossBorder. As highlighted in the press release:

FedEx CrossBorder, a subsidiary of FedEx Trade Networks, offers e-commerce technology solutions that enable e-tailers to navigate common cross-border selling challenges —such as regulatory compliance, secure payment processing, multi-currency pricing, or credit card fraud protection— and offers access to e-commerce shoppers around the globe.

Although it may sound simple, enabling a consumer in one country to buy from an online retailer in another country is incredibly complex. In addition to language and currency considerations, there are many other factors that come into play, including cost factors (duties, taxes, brokerage fees), customs compliance requirements (product classification, restricted party screening, import/export documentation), and complying with the address formats of destination countries to prevent delays and other issues with last-mile delivery.

FedEx is not alone in pursuing opportunities in cross-border e-commerce. Last May, for example, Pitney Bowes acquired Borderfree for $381 million. Borderfree provides “cross-border ecommerce solutions through a proprietary technology and services platform.” In today’s Wall Street Journal, Brian Baskin highlights how Pitney Bowes is shifting away from selling postage meters and other mailing equipment and services and moving aggressively toward selling international e-commerce software and services instead. From the article:

Pitney Bowes is betting on cross-border e-commerce, where consumers in one country buy products online from retailers in another…Through Borderfree, Pitney Bowes handles transactions for dozens of retailers, including translation, calculating customs duties, currency conversions and finding the cheapest local delivery service.

Pitney Bowes is past the halfway point in a planned five-year turnaround begun in mid-2013. The share of revenue from the unit that sells and leases postage machines is still just over 50% of the total, though that’s down from nearly 60% in 2012. E-commerce sales rose 29% in 2015 to $362 million, about 10% of total revenue.

“While omnichannel retailing is in the spotlight these days, lurking in the shadows is another big challenge and opportunity many retailers (and manufacturers looking to sell direct to consumers) have been struggling with for years: cross-border e-commerce.” I wrote those words back in October 2014, and almost a year and a half later, cross-border e-commerce is no longer lurking in the shadows — it’s in the spotlight today, and the race is on between solution providers to establish themselves as the market leaders. For related commentary, see The Messy Reality of Cross-Border E-commerce.

Speaking of cross-border trade, “all five major transportation modes – truck, rail, pipeline, vessel and air – carried less U.S. freight by value with North American Free Trade Agreement (NAFTA) partners Canada and Mexico in January 2016 than in January 2015,” according to U.S. Department of Transportation’s Bureau of Transportation Statistics. Here are some details from the press release:

  • The total value of cross-border freight carried on all modes fell 7.7 percent from 2015 to $82.4 billion in current dollars.
  • A drop in the price of crude oil in 2015 played a key role in the large declines in the dollar value of goods shipped by vessel and pipeline.
  • Trucks carried 60.5 percent of the value of the freight to and from Canada but the total was down 4.0 percent from January 2015 primarily because of a 9.3 percent decline in the value of U.S. exports to Canada by truck.
  • Trucks carried 72.6 percent of the value of freight to and from Mexico. The total was up because the 4.0 percent growth in U.S. imports by truck outweighed the decline in exports.

Meanwhile, the American Trucking Associations (ATA) reported that its advanced seasonally adjusted For-Hire Truck Tonnage Index jumped 7.2 percent in February, following a revised 0.3 percent reduction during January. ATA Chief Economist Bob Costello, however, expressed some caution:

“While it is nice to see a strong February, I caution everyone not read too much into it.The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February…I’m still concerned about the elevated inventories throughout the supply chain. Last week, the Census Bureau reported that relative to sales, inventories rose again in January, which is troubling. We need those inventories reduced before trucking can count on more consistent, better freight volumes.”

So, what is the current state of the transportation market? How should you respond? Check out my recent conversation with Matthew Menner from Transplace for some insights and advice, and see my recent post, Time to Squeeze Carriers for Better Rates?

Finally, another of my predictions for this year was that we would see increased innovation to simplify and expedite trading partner (B2B) connectivity, with APIs and Web Services replacing EDI as the preferred approach moving forward. In the transportation management realm, project44 has been on the forefront of this trend and the company announced this week the launch of a new, free LTL Transit Time API to its portfolio of Freight API products. According to the press release:

With the Transit Time API enabled, LTL carriers are able to revise their transit time data on their own schedule, managing transit times in their own database and then transmitting that information via project44 directly to potential customers…As carriers supply more transit times that reflect live conditions, shipper and 3PL users will have increased visibility and confidence in the carrier selection process.

There are plenty of three-letter acronyms in the supply chain and logistics industry, and right now, API is getting the most love and attention. Why is that and why should you care? A topic for a future post.

And with that, have a happy weekend!

Song of the Week: “Magnets” by Disclosure feat. Lorde