This Week in Logistics News (September 27 – October 3)

Happy October, the month of Octoberfest, Halloween, and Columbus Day. On October 12, 1492, Christopher Columbus’ expedition from Spain reached what is believed to be the Bahamas. This day was the inspiration for a holiday due to the belief that his expedition was the first from Europe to reach the Americas. But we now know that the Vikings were likely the first European sailors to reach the Americas. I suggest that we start a movement to create a “Bjarni Herjólfsson” day. Yes, according to Wikipedia, Bjarni saw North America in 985 AD, but did not actually set foot on the land. Roughly fifteen years later, Leif Erikson did set foot on North America. Still 400+ years before Mr. Columbus. I just decided, L’Anse aux Meadows is my next vacation destination.

• Now on to this week’s news:
  Kewill Acquires the IBM Sterling Transportation Management System (TMS)
  Fulfillment Centers Dominate Industrial Market
  Home Depot opens second fulfillment center dedicated to e-commerce
  China gives 4 shipping lines $293 mln to upgrade fleets
  AAR Reports Increased Traffic for September and for the Week
  Amazon Warehouse Workers Want to Be Paid for Waiting in Line

Kewill announced the acquisition of IBM’s Sterling TMS earlier this week. The solution will become part of the Kewill MOVE transportation platform. This acquisition will increase Kewill’s transportation capabilities and complement the company’s parcel shipping and global trade management footprint. The acquisition will also enhance Kewill’s presence in the North American market and key industries such as retail and food & beverage. The IBM Sterling TMS provides additional synergies to Kewill’s current offering, as it offers strength in planning and execution functionality for shippers, whereas Kewill’s existing TMS is more heavily focused on fleet management requirements.

This article on fulfillment centers in National Real Estate Investor caught my eye. The article discusses the effect of the booming e-commerce channel on warehousing, and subsequently, the real estate market. This has led to increased demand for industrial property, and lower levels of vacancies. The article references the omni-channel paradigm and retailers’ movement to blunt Amazon’s competitive momentum. Here are a couple of interesting quotes from the article:

“Two or three years ago, the other major retail companies were making their business case internally, going to their finance teams and requesting dollars,” he says. “They made these decisions in 2012, and now we’re just starting to see what their platform is going to be.” According to Scott Marshall, executive managing director for industrial services for CBRE. “You could try to achieve same-day, but then your transportation costs would triple, and you’ve lost in the long run,” Marshall says. “Companies will win if they strike the perfect balance, service level vs. cost, with the perfect operating model bringing the most profit to the shareholders.”

As an example of expanding fulfillment centers, the Journal of Commerce reported that Home Deport recently opened the second of three previously announced fulfillment center projects to enable fast shipping of orders to customers. This California DC is almost 900,000 square feet of space focused on e-commerce fulfillment. This follows the opening of a 1 million square foot DC in Georgia in February. The third DC will be opened in Ohio. The article notes that e-commerce still represents only about 4 percent of the company’s sales, but it is growing at 35-40% annually. As an aside, this is inline with Wal-Mart’s e-commerce growth rate and Amazon’s corporate growth rate. The article references a Seeking Alpha transcript of a presentation by the CEO that states the following:

…if you followed Home Depot over the last several years you know that our transformation in supply chain has been one of the great drivers of value in our business. As we moved from the bulk of our products going direct to store to the bulk of our products going through our rapid deployment centers…

The Journal of Commerce article further states, “Home Depot will spend $300 million this year on the fulfillment centers, mobile technology used by employees in stores to help customers, facility enhancements and a warehouse management system.”

What company doesn’t love subsidies? Reuters reports that the Chinese government has given four shipping lines 1.8 billion yuan ($293 million) in subsidies to encourage vessel upgrades. China Cosco received 1.3 billion yuan and a sister company received 183 million yuan. Surprisingly (sense the sarcasm), the companies expect the subsidies to have “a positive impact on their full-year results.”

The American Association of Railroads reported increased rail traffic for the month of September, with both intermodal and carload volumes increasing year-over-year. September marks the seventh strait month of year-over-year carload increases. What I found most interesting (from the chart that is linked to press release), petroleum and petroleum products are up 25% from September of 2013. Year to date it is up almost 13%, when compared to last year.

Lastly, BusinessWeek reports that Amazon warehouse workers are looking to be compensated for their time, almost 30 minutes, waiting in security lines. The article states that the Supreme Court will soon hear arguments about whether that time counts as work. I’m guessing that the workers will win this case. Why do I think the workers will win? Is it knowledge of employment law? No. Is it a strong moral compass? No. It is because, I’ll bet that in the past, workers asked management, “why do we have to wait in this ridiculous line?” and management responded, “Because it’s part of your job.” That response sealed the deal, right there.

Have a great weekend!