This Week in Logistics News (May 3 – 9)

This week I had the pleasure of attending the Manhattan Associates Momentum user conference in Hollywood, FL. The main theme for Momentum was to get “commerce ready.” What “commerce ready” means may vary a little based on company, industry, segment, and target market, but the key point was clear. Organizations need to be ready to sell, and more importantly, ready to fulfill the order through any channel and means necessary. The changing nature of business and the proliferation of omni-channel operations make this last piece a bit more difficult. Manhattan Associates, and their customers, stressed the need for flexible fulfillment options and processes to control inventory across channels. Retailers in particular need to differentiate between inventory visibility and availability. Making inventory available across channels is at the core of the omni-channel experience. We’ll have more details from the conference next week.

And now on to the rest of this week’s news:

Wal-Mart is deploying its latest grocery format with a pick-up center in Bentonville, AR. The stand-alone center allows customers to shop for their groceries online, arrange a time to pick up their order, and retrieve their orders from a drive-through like environment, without ever leaving their vehicle. The new format is just entering its testing phase in the United States, but lessons have been learned from the nearly 100 drive-through pick-up locations in the U.K. Wal-Mart has said that the concept centers are designed to provide convenience and in no way are meant to replace traditional stock-up trips that its supercenters provide. Those trips are valued annually at $585 billion and remain about 60% of the total grocery spend.

Google is upping its efforts to compete with Amazon. Last year, the company launched Google Shopping Express in San Francisco. The service lets people order online and pay for packaged foods and other items from physical stores operated by retailers. The items are then delivered to the consumer by small vans. Now Google is expanding its same-day delivery service to Manhattan and West Los Angeles. The fundamental difference between Google and Amazon in their race for same day delivery is how they fulfill orders.

“Amazon and Google approach this differently. Amazon uses its existing network of fulfillment centers to deliver products quickly. Google picks up products from retail stores. That gives Amazon more control over the delivery process and the products stored in its warehouses. But Google saves the cost of building warehouses, by working with existing stores.”

For web shoppers, Amazon and Google private delivery fleets may be a more enticing option now that FedEx has announced plans to change the way it charges for bulky packages. Instead of charging by weight alone, all ground packages will now be priced according to size. In effect, that will mean a price increase on more than a third of its U.S. ground shipments. This could mean hundred or millions of dollars in extra shipping charges. The question now is whether, and how much, of that increase will be passed on directly to the consumer from the retailer.

Zulily’s stock price tumbled more than 30% in the wake of its Q1 loss. While sales rose 87% and customer numbers doubled, Zulily faces a major logistical challenge in getting products to their customers. Why? Zulily doesn’t buy items in advance. Instead, it orders the items from vendors after the sales end and has these items shipped in bulk to its warehouses. At this point, the orders are sorted and shipped back out.

“Chief Executive Darrell Cavens said a surge of orders near the end of the quarter created a backlog of merchandise at the company’s fulfillment centers, where it receives items in bulk from vendors and sorts them into individual packages to be shipped out to customers. To handle the surge, Zulily had to bring on additional workers and pay more in overtime wages. The company also took longer to ship products to customers. The average time for customers’ orders to be shipped from Zulily’s warehouses increased to 13.2 days from 11.3 days a year ago, Mr. Cavens said.”

Finally, the Cass Freight Index released its trends report for April. Freight volumes have continued to gain momentum in 2014. Shipments are up 5.5% year-over-year, and 1.5% month-to-month. Expenditures are up 10% year-over-year, and 2.8% month-to-month. Cass expects the fast-paced freight expansion from the first quarter to settle into moderate growth in the second quarter.

That’s it for the news this week. Enjoy the weekend and the song of the week, The Beastie Boys Sabotage.

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