This Week in Logistics News (July 4-8, 2016)

By Adrian Gonzalez

It was a relatively quiet week for supply chain and logistics news, with robots and weak freight demand dominating the headlines.

More data points this week confirming what we already know: demand for freight transportation is weak, which is leading carriers to cut back on capacity. As reported by Loretta Chao in the Wall Street Journal:

Orders for new heavy-duty trucks hit a nearly six-year low in June, indicating that trucking companies expect little relief from a weak freight market and sluggish economic growth.

Trucking companies ordered 13,100 Class 8 trucks, which are used for long-haul routes, the fewest orders since the third quarter of 2010 and a more-than 30% drop from last year, according to preliminary numbers from ACT Research released Wednesday.

A similar situation exists in the air cargo market, as reported by Reuters:

Following a sharp fall in freight prices air cargo companies are set to trim their fleets and jobs further to battle overcapacity while looking for new partnerships and products to carry, industry executives and analysts say.

Global trade volumes fell for the first time since 2009 by 1.7 percent between the final quarter of 2015 and the first quarter of 2016 and the International Air Transport Association has lowered its growth forecast for air freight demand in 2016 to 2.1 percent from 3 percent.

When will the pendulum start swinging in the other direction? When the economy picks up, inventory levels drop below a certain threshold, and/or capacity is realigned with demand — whichever occurs first, which by most estimates won’t happen until late this year or early 2017. But the honest answer is that with so much uncertainty in the market, nobody really knows.

Last Friday, Honeywell announced that it was acquiring Intelligrated, a privately held warehouse automation solution provider for $1.5 billion. According to the press release:

[Intelligrated] has grown at a compound annual growth rate (CAGR) of approximately 13 percent over the past three years, faster than the industry overall. Intelligrated has a large and growing customer base of more than $5 billion, including leading Fortune 500 retailers, manufacturers and logistics providers worldwide, top consumer products companies, 30 of the top 50 U.S. retailers, and half of the top 100 Internet retailers.

“E-commerce continues to grow at an unprecedented rate and customer demands for faster delivery times have created a need for warehouse, logistics and fulfillment solutions that can increase productivity and lower costs for our customers,” said Alex Ismail, president and CEO of Honeywell Automation and Control Solutions. “This acquisition fits with our vision for a connected industrial company and a connected worker.”

This is the second large acquisition in the warehouse automation space in less than a month. A couple of weeks ago, German forklift truck and robotics maker Kion announced it was buying Dematic for about $2.1 billion, with the company also citing e-commerce growth as a motivating factor.

Slowly but surely, automation (in the form of robots) is also making inroads into warehouse functions that are still done predominantly by humans today, such as item picking. This year’s winner of Amazon’s robot picking challenge, The Netherlands’ TU Delft, was over three times faster at picking objects than last year’s champion (100 per hour versus 30). Check out the videos below to see the robot in action:

Meanwhile, Starship Technologies will be testing its delivery robots in London and three other European cities this month. According to an article in Quartz:

The robots, from Starship Technologies, will be deployed this month to make deliveries for food-ordering services Just Eat and Pronto, and carry packages for courier service Hermes and supermarket Metro Group.

The Starship delivery bots will be stationed at kitchens, delivery hubs, and supermarkets in London, Düsseldorf, Bern, and Hamburg. When an order comes in, the bots will drive themselves to collect their cargo, store it in their holds (which can take about two shopping bags’ worth of stuff), then trundle on to their destinations. When the robot arrives, the recipient unlocks it by punching in a security code on a mobile app.

What will happen when one of these Starship Technologies robots crosses paths with a group of fraternity brothers or mischievous teenagers? Maybe things are different in Brooklyn today than when I grew up there, but those bots wouldn’t last a day in my old neighborhood.

Finally, in software-related news, the Wall Street Journal reports that Nordstrom Inc. has acquired a minority stake in DS Co., a solution provider that facilitates the drop-shipping process between manufacturers and retailers. According to the article:

DS Co., which sells its platform under the name Dsco, acts like a middle man between the software systems that retailers and their suppliers use to track inventory and orders. They pull data from both sides and communicate any surges in orders or depleted inventory. In doing so they aim to solve a common problem in retail, where companies use different methods to track inventory data, making it difficult to share the data and ensure that products are in stock and can be shipped out in time.

The investment from Nordstrom will be used to expand the software company’s technology team and develop more data analysis capabilities, such as using historical inventory levels to predict the likelihood of shortages, [Jeremy Hanks, Dsco’s founder] said. Other Dsco users include Sharper Image Corp., Woolworths Ltd. and Modell’s Sporting Goods.

Dsco is actually another great example of a Supply Chain Operating Network (SCON) and how the model is ideal for facilitating communication and collaboration with many extended trading partners. It’s also another example of the convergence of commerce, logistics, and technology — an accelerating trend in the industry today. Considering all of the recent mergers and acquisitions in the SCON market, I wouldn’t be surprised if Dsco is acquired outright in the near future by another network-based solution provider, such as E2open, Elemica, or Descartes. Stay tuned.

And with that, have a happy weekend!

Song of the Week: “Silly Me” by Yeasayer