This Week in Logistics News (January 3 – 9)

big showHappy New Year. It’s hard to believe our little break is over and we are a week back into work. With so much to look back on, I prefer to look ahead. But just to next week. Clint Reiser and I will be off to the National Retail Federation’s (NRF) Big Show on Monday in New York. This will be my seventh straight year attending the show. And much like every other year, I am expecting a whirlwind. There are meetings to attend, new technologies to see, and hopefully, some sessions to witness. In the past, NRF’s Big Show has highlighted many cutting edge technologies that focus on the user experience – mobility, touchscreens, wearables, etc. I am hoping to see some interesting supply chain technologies that can truly usher in the omni-channel era. Clint and I will be reporting back on our trip, so look for some NRF notes soon.

And with that, let’s get to this week’s news.

Bengaluru-based Flipkart is evaluating how it can get products to its customer’s doors in just three hours. There are a few key components to figure out, including pricing and technology. In the era of “free shipping”, many consumers are actually willing to pay a premium to get their goods as soon as possible. Just look at the number of people willing to shell out $99 to Amazon annually for the promise of free two-day shipping. At the core is figuring out which products and which cities this is even a viable option for. With same day delivery already available in big cities, and offered by not just Flipkart, but Amazon India and Snapdeal already, this new time table could be a game changer. And it could certainly force their competitors to up their service levels as well.

Photo by Mike Koozmin - sf.Pier80For months we’ve been covering the port congestion issues plaguing Southern California. Well for one port, the congestion may finally be the boon it needs. The California car culture could soon boost cargo traffic in San Francisco. Pier 80 in the Port of San Francisco was once one of the busiest cargo hubs on the West Coast.  But a decade of dropping cargo traffic has left it operating at limited capacity. But now, with ports in Southern California at capacity, Port 80 in San Francisco is ready to rise again. It is in line to become the newest hub for the import and export of automobiles — including cars built at factories in Mexico as well as locally produced Tesla electric cars shipped to emerging markets in Asia.

LalamoveCrowd-sourced services have been growing by leaps and bounds across a number of industries. Uber is giving traditional taxi’s a run for their money. Airbnb is an alternative to traditional hotels. Deliv is another option for home delivery. Lalamove is now making a name for itself in the logistics business. The company, which began life in Hong Kong in December 2013, and has expanded to Bangkok, offers smartphone apps that allow customers to move items across a city using its network of drivers. Anyone with a valid license and car can sign up to be a driver. The company recently raised $10 million in funding. According to Executive Blake Larson, “the money will be used to strengthen its position in its existing markets: Hong Kong, Singapore, Bangkok, Taipei and — as of last week — Guangzhou and Shenzhen. The capital will also be used to ‘further penetrate’ China and enter more parts in Southeast Asia.”

UPS and FedEx rate increases are now in effect. At the same time, fuel prices are at nearly six year lows. So what gives? According to the large carriers, fuel prices are only one consideration when it comes to setting prices. Trucks are no longer idle; the shipping industry is booming. At the same time, there is a trucker shortage which means that there is more demand to fill the pallets that are actually going on trucks. With less truckers, capacity is down, making things even more complicated. And now, enter the age of e-commerce, and most notably, the Amazon effect. Online sales, with the promise of free shipping, have jammed trucks full of small items, wrapped in loads of bubble wrap and crammed into boxes. While these boxes take up room on a truck, the truck may be carrying around mostly air. So the days of charging simply by weight are over. We’ll closely monitor the impact of new shipping rates.

Nic CanalFor 100 years, the Panama Canal has been the only shipping route through the land mass of the Americas. The canal allows ships to navigate between Pacific and Atlantic oceans without having to sail all the way to the tip of South America, through the infamous Magellan Strait, making it one of the world’s most important economic arteries. Nicaragua has plans to enter history (after nearly 200 years of discussions). On December 22, work began on the Interoceanic Grand Canal of Nicaragua. The new canal will take five years to build over some 278 miles, at an expected cost of $50 billion. The project resulted from the Nicaraguan national assembly agreeing a 50-year concession with the Chinese company Hong Kong Nicaragua Development. The canal will allow the passage of the world’s largest ships, some of which will be too big for the Panama Canal even after its current expansion project has completed. Even though work has officially begun on the canal, there is plenty of speculation that the project will never be completed.

And finally, the amount of freight moved between the U.S. and its North American Free Trade Agreement partners of Canada and Mexico increased in October compared to the same time a year ago. This increase made it the highest level on record. Truck freight led the way, with a 7.2% increase, followed by air at 4.9%. Trucks account for 60% of US-NAFTA freight, while rail is the second largest mode at 15%. Vessel, even with a 7.6% decline in shipments, is still the third largest mode at 7.7%

That’s all for this week. Enjoy the weekend and the song of the week, Sweet Child O’ Mine, by Guns N’ Roses.

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