This Week in Logistics News (December 2-6, 2013)

There are huge piles of leaves in my backyard that I need to bag before Tuesday, the last day the city will pick them up, so let’s go straight to the news because I have a date with a rake this afternoon.

Last Sunday on the television program 60 Minutes, Amazon unveiled a new delivery system the company’s R&D team has been developing called Amazon Prime Air; the goal of the system is to get packages into customers’ hands in 30 minutes or less using unmanned aerial vehicles (aka “drones”). In the days that followed, reports came out that UPS and Google are also experimenting with drones.

My initial reaction was to think back to the posting I wrote back in February (Drones – The Birth of a New Transportation Mode), where I highlighted Matternet and its mission to create “the next paradigm for transportation” using a network of drones, ground stations, and an operating system. “We’re witnessing the birth of a new transportation mode, one that will take many years to develop and mature (but will probably happen sooner than we think),” is what I wrote back then, and Amazon’s demonstration this week– despite all the technical, regulatory, and legal issues associated with it — is another step, however small and trivial, toward the future of transportation.

Back to the present, GrandJunction, which provides a software-as-a-service (SaaS) platform for the local delivery industry, announced yesterday that it has managed more than 60 million deliveries to date, and is currently managing a local delivery every two seconds. GrandJunction is a new company, but the technology and people behind it have more than a decade experience in the local delivery industry. Rob Howard, GrandJunction’s CEO and founder, also founded Ensenda Inc. in 2000, a third-party logistics provider specializing in local delivery. GrandJunction’s technology was built and proven at Ensenda, and since quietly spinning off more than a year ago, GrandJunction has (according to the press release) “closed deals with a wide range of companies, including FORTUNE 500s, large technology companies rolling out local delivery programs using local carriers for the first time, and smaller businesses looking to offer scheduled delivery.”

Considering all of the buzz generated this year by Amazon, Google, eBay and others with their same-day delivery efforts — and all the press omni-channel fulfillment is getting — GrandJunction is coming out at the right time. In many ways, local delivery remains a “white space” in the TMS market. Local delivery is a very fragmented segment of the transportation market, with thousands of local carriers (couriers) that don’t have the technology to effectively manage their operations and provide customers with the information they need. Like other network-centric business processes, bringing all of the local delivery stakeholders (shippers, couriers, and drivers) onto a common cloud-based platform is the right strategy. How shippers will ultimately integrate local delivery with the rest of their transportation operations, and integrate their transportation solutions, remains to be seen.

Another software vendor benefiting from “last mile” logistics is Descartes, which announced record revenues for its Q3FY14 quarter ($38.8 million, up 19 percent from Q3FY13). In the financial analyst call, the company mentioned that omni-channel fulfillment and home deliveries are contributing to its growth, with retailers like Sears Holdings and Restoration Hardware adopting its home delivery solution.

Shifting from land to sea, what’s going on in ocean transportation? There was another development this week, with reports that Germany’s Hapag-Lloyd and Chile’s CSAV are in merger talks. Like I mentioned in my posting last month, ocean carriers are hurting financially (twenty-three out of the top thirty carriers were unprofitable last year), so ocean carriers will continue to explore new ways to save money or become more productive. The bottom line: if you’re an ocean shipper, you need to keep a close eye on what’s going on.

Finally, Steve Banker came across a very informative video series on NPR tracing the end-to-end supply chain of a t-shirt. Most of my friends and family do not know what “supply chain management” or “logistics” mean. These types of videos help educate the general public on what we do for a living, and sheds light on the role supply chain management plays in our daily lives, and why it’s a promising career choice for students and young professionals.

And with that, have a happy weekend!

Song of the Week: “That Was Yesterday” by Foreigner

Note: Descartes is a Logistics Viewpoints sponsor.

Comments

  1. Dec 9, ’13

    Regarding “what’s going on in ocean transportation”, 2014 might be the “day of reckoning” for a number of ocean carriers. Current capacity in the major trade lanes out strips demand and new capacity on the order books, out strips demand grouth.

    Back in 2009, with the global economic crises and ocean carrier bottom lines going from the black to the red, the thinking was that there would be a wave of consolidations / mergers if not out right bankruptcies and carriers closing their doors . . . I was in this group. However, as we all know, that did not happen. Carriers with deep financial issues; CMA, CSAV, Zim to name the major carriers; were able through various efforts, divest assets, find financial “white knights”, etc.; were able to put off the “day of reckoning”. The question was, were the financial problems permanently fixed or, as our lawmakers did back in October, just “kick the can down the road”. As losses continue to mount in the hundreds of millions of dollars, will the “day of reckoning” for some carriers take place in the coming year through consolidation / merger.

    Over the past two decades, other industries have gone through massive realignments in which the number of players has been decreased through consolidation / merger as well going out of business. This has happened in dozen of industries on global scales; i.e., Airlines, Auto Manufacturing, Banking / Financial Services, Chemical, Energy, Railroads, Retail, Trucking; to name a few. I count at least 17 carriers in the Trans-Pacific trade. As I consumer, I don’t have 17; domestic airlines to fly on, or oil companies to fuel my car’s gas tank from, auto companies to buy that car from, banks to put my hard earned money in, etc. The last major consolidation / merger in the shipping industry was almost eight years ago when Maersk purchased P&O.

    Shipping is a very capital intensive business; vessels, containers, terminals, etc. ; in terms of the initial investment in the asset followed by the maintenance costs. Over the past few years the carriers have taken one major step in reducing their financial burden by stopping to supply chassis in the U.S., it had been that way in the rest of the world since the start of containerization. What is next, stop providing containers. This is the path the railroads have taken with intermodal as well as with coal and grain where the BCO provides the car and the railroad provides the power, crew and right of way. With domestic intermodal, responsibility for the container or trailer has shifted to the door / door service providers; IMC or trucker. Can we see one day BCO’s, NVO’s or possibly a third party providing the container, including the financial and maintenance investment, while the ocean carriers provides just the vessel space on a port / port basis, just the railroads do for intermodal, car capacity moving ramp / ramp. Yes, I do see a lot of similarities between the ocean and rail industries.

    That scenario leads to other possibilities such as shifting the responsibility of the inland movement of international shipments from the ocean carrier back the shippers, IMC’s or other domestic transportation service providers . . . Between drayage / trucking and rail intermodal, ocean carriers are some of the largest buyers of domestic transportation services. However, that is a discussion for another time, let me get back to my initial point, consolidation of ocean carriers. For the long term financial health and viability of the industry, consolidation needs to occur. Viewing the landscape here on December 9 2013, if ocean carrier losses continue to be significant through the first half of next year, I can see consolidation / mergers taking place in the second half of next year, including the possibility of a major carrier or two becoming insolvent.

    As far as the type of consolidation, this needs to take place corporately, however, this also needs to take place with regard to VSA’s. I know for some, VSA our tools for carriers to control capacity and thus create shortages to push supply / demand in the favor of the carriers. I point to the losses carriers are suffering and the global over capacity of container space as to how well this has worked for the carriers. However, how well they have worked for shippers is that there are 17 carriers in the Trans-Pacific trade. VSA’s have allowed carriers to share the risk and capital investment in expanding their scope of service. Without VSA’s, I would suspect that the number of carriers in the Trans-Pacific trade would be seven or eight of which three or four would dominate with a market share exceeding 70%.

Leave a Reply

Your email address will not be published. Required fields are marked *