Above the Fold: Supply Chain Logistics News (January 27, 2023)

By Adrian Gonzalez

And just like that, it’s been 10 years.

Talking Logistics launched a decade ago on January 29th, 2013.

The crazy idea for launching an online video talk show about supply chain and logistics popped into my head while cross-country skiing a few weeks earlier. The very first episode was just me sharing my supply chain and logistics predictions for 2013. I called it a “pre-season” episode because it was recorded in late December 2012 before we actually launched the program. It was my way of testing out the video platform (Spreecast, a startup that eventually went under) and testing myself out as a talk show host and commentator.

Trivia question: Who was my first guest on Talking Logistics? Take a guess, then jump to the end of this post for the answer.

When we launched 10 years ago, we were among the very few video programs focused on supply chain and logistics (certainly the only one regularly scheduled and produced as a talk show). Today, there are too many to count. In some ways, I’m the aging Johnny Carson of the industry.

We’ve produced almost 370 episodes over the past 10 years, talking with industry leaders about a wide variety of supply chain and logistics topics. Every conversation, I learn something new. It’s what keeps me motivated and excited after all these years.

Without sponsors taking a leap of faith and trusting me, Talking Logistics would not exist, so I am very grateful for their support. I am also grateful to all of you, our listeners and followers, for watching our episodes, listening to our podcasts, and spreading the word.

Let’s keep Talking Logistics.

And with that, here’s the supply chain and logistics news that caught my attention this week:

Expanding Parcel Carrier Base Beyond FedEx and UPS

Speaking of Talking Logistics, there is a topic we have discussed a lot the past few years, especially in the aftermath of the Covid pandemic: the need for shippers to diversify beyond UPS and FedEx for parcel shipping.

In a December 2020 episode (“The Evolving Complexity In The Parcel Environment”), Todd Benge from Transportation Insight, in response to the rate and capacity challenges shippers faced at the time, recommended that shippers create operational plans that include regional carriers, couriers and the Post Office to achieve greater diversity in rates and capacity. “Being able to understand how you can use these carriers and the Post Office and coordinate all of that will be key,” said Todd. “Understanding your supply chain and which variables drive cost, what carrier levers you can pull, and all of the associated analytics will be critical for success.”

In a February 2021 episode (“When Parcel Demand Exceeds Capacity: What Should Shippers Do?”), JP Wiggins from 3Gtms and I discussed how the surging growth of e-commerce at the time, driven in large part by the pandemic, had created a capacity crunch in the market. One way to get around the capacity crunch is to add more carriers to your network, in particular, local and regional carriers. Here’s what JP said at the time:

There are 50+ really good regional carriers in North America alone that are good alternatives in their regions to the big three carriers and their prices will be significantly lower most of the time. But onboarding these carriers means you need to integrate with them electronically to set up rates. You need label compliance. You have to integrate them with your ERP and warehouse systems so shipping with them works just like it does when dealing with FedEx or UPS.

That integration effort is why a lot of companies have traditionally worked with a single carrier and their free shipping system. But during this e-commerce capacity crunch, you’re going to see big rate and surcharge increases. As these huge shipping cost increases are hitting CFOs’ desks, they’re saying we have to do something new.

We addressed this topic again in an August 2022 episode (“How To Max Out Your Peak Season Parcel Performance”) with Ken Flemming from e2open. Here’s how Ken characterized the market last summer:

High levels of demand are combining with labor shortage and high fuel costs to create the perfect storm of challenges for shippers and carriers. Unlike before the pandemic, parcel carriers have capacity constraints and are limiting the volume they can take on. During peak season we’ve seen capacity sold out between all major carriers leaving shippers to scramble for other options.

Where in the past shippers would shop for and negotiate the best rates, that’s all changed. Now they are trying to hold on to what they have and seek to augment capacity well in advance of peak season. Planning for capacity is what companies must do now. Finding carriers to handle local delivery, same-day, or even 1-hour deliveries are initiatives being driven by e-commerce. Add on the ‘Amazon effect’ and you have the perfect storm for parcel delivery.

Ken added that “Gone are the days when you have a single strategic carrier who handles all of your parcel shipments. You have to have plans in place with other carriers to handle excess capacity when your primary partner can’t. For example, with USPS. They’ll always be there.”

All of this adds context to an article by Esther Fung in the Wall Street Journal this week (“Small Package-Delivery Companies Grow as Businesses Seek Alternatives to UPS, FedEx”). Here’s an excerpt:

Smaller parcel carriers made big gains during the pandemic handling packages that the larger players couldn’t deliver. Some want to get bigger.

Regional shipping companies across the U.S. are expanding their operations to pick up business from bigger rivals, seeking to capitalize on labor uncertainty at United Parcel Service Inc., higher rates charged by UPS and FedEx Corp. and growing reluctance among merchants to rely on a single carrier.

Simply put, if you’re a parcel shipper and you haven’t diversified your carrier base beyond FedEx and UPS, you will continue to face capacity and cost challenges. And don’t wait until August to get started. The time to establish new carrier relationships is now.

And with that, have a happy weekend!

Trivia question answer: My very first guest on Talking Logistics was Yossi Sheffi from MIT. We had a great conversation about logistics clusters, which he had just written a book about. Unfortunately, a few days after we did the episode, Spreecast inadvertently deleted all of the videos on its platform, so the episode only exists in my memory (and I hope in Yossi’s too).

Song of the Week: “Weird Goodbyes” by The National (feat. Bon Iver)