This Week in Logistics News (November 25 – December 1)

logistics newsBlack Friday and Cyber Monday are once again in the books. And not surprisingly, more and more shoppers are heading to the internet rather than the mall. Plenty of brick and mortar retailers offered deep in-store discounts to drive consumer traffic, but the web reigned supreme. According to the National Retail Federation (NRF), from Thanksgiving Day through Cyber Monday, more than 174 million Americans shopped in stores and online. The end numbers are staggering. While in store shopping was relatively flat, online sales for Cyber Monday alone topped $6.5 billion, with $2 billion coming from mobile sales. According to Adobe Insights, from November 1 through November 27, $50 billion has been spent online thus far; online sales are on track to reach $100 billion by the new year. It might be time to revisit how prepared UPS, FedEx, and the USPS are because it’s going to be a busy month. And now, on to this week’s logistics news.

Mercedes-Benz has been conducting what may be the biggest test of drone deliveries yet, and has shown an impressive success record. Just how successful? The company said it has completed 100 drop-offs of everyday items such as coffee and cellphones to strategically placed vans in Zurich with a perfect safety record. During the test, consumers placed orders through the Swiss online shopping platform Siroop, and at check-out, were able to select “airmail deals.” The drones dropped the parcels off at four fixed points within the city, dropping the items off on the roofs of specially designed Mercedes-Benz Vito vans. The flights covered up to 11 miles, and the vans then covered the final mile for home delivery.

When Amazon acquired Whole Foods, one of the biggest unknowns was what would happen to Instacart. One of the concerns was that Instacart had just inked a huge deal with Whole Foods, which the Amazon acquisition could put in jeopardy. While there are certain safeguards in place for Instacart, the company is not simply sitting back. Instead, Instacart is expanding, and has just partnered up with Albertsons, the second largest traditional grocer in the US. The partnership will bring same-day delivery to more than 1,800 stores across the US by the middle of 2018. Considering that Kroger, one of Albertsons biggest rivals, just started a pilot with Instacart in Southern California, things are looking up for Instacart.

On-time or get fined. It’s not just a catchy phrase; it’s the stark reality for many CPG companies. That is the tune of major grocers such as Walmart and Kroger when it comes to the food supply chain. These two grocers in particular are drawing a line in the sand. Starting in August, Kroger is fining suppliers $500 for every order that is more than two days late to one of its warehouses, and Walmart is charging suppliers a monthly fine of 3 percent for deliveries that don’t arrive exactly on time. While there are a number of factors that might contribute to late shipments, such as weather, technology glitches, or truck issues, these retailers are no longer willing to accept the excuses. The financial implications of lost sales due to missing inventory, exacerbated by the changing nature of consumer demands, simply do not allow it anymore. As a result, suppliers such as Proctor & Gamble, Heinz, Hershey, and a plethora of others, are investing in their supply chains to avoid the potential penalties. While it may seem like a harsh penalty from the retailers, the end result is a better market for consumers.

UPS has made a move that may leave many people scratching their heads. The company announced this week that it had acquired a manufacturing pharmacy license in Georgia. The move enables UPS to not only ship pharmaceuticals, but to relabel them. And that is the main reason for the acquisition. For years, UPS has been a carrier for major drug companies such as Merck, but with the license, UPS now has more flexibility in how it handles the product. Namely, if UPS wants to add an insert to a shipping package, the license ensures that standard operating procedures are in line to remain compliant with federal law. But, one has to wonder if this means that UPS may be looking at the big picture on how to expand its business footprint.

With the electronic logging device (ELD) mandate rapidly approaching, there has been an increase in the number of drivers that are falsifying logs. Over the last year, there has been an 11.5 percent increase in citations for falsifying driver logs and a 14.8 percent jump in the number of drivers put out of service for falsifying logs. These numbers show why federal regulators have been pushing for an ELD mandate. The latest roadside inspection reports indicated a modest 1 percent increase in driver roadside inspections and violations. However, the number of violations that merited an out-of-service order rose 4.5 percent, which is the highest in four years. Falsifying logbooks was the cause for 4.4 percent of the violations in roadside inspections, but false logs violations accounted for 16.2 percent of the out-of-service orders issued to truck drivers.

As demand for dairy soars in China, the country has significantly lowered tariffs on cheese imports. Over the next few years, China is on pace to become the world’s largest importer of cheese, and as a result, the import tariff has been lowered from 12 percent to 8 percent. This tariff decrease is the latest in a line of broader cuts on food and consumer goods that are coming in to China. This is all part of efforts to lower tariffs on Chinese imports of dairy products as consumer demand continues to increase.

And finally, with Black Friday and Cyber Monday in the books, more and more households are ready to look for the perfect Christmas tree. Unfortunately, finding that perfect tree is going to be harder this year than in years past. Why? Rewind to 2008, when the Great Recession hit, and Christmas tree sales slumped. As a result, growers did not cut down as many trees as normal to meet demand. The result is less room in tree groves to plant new trees. And now, fast forward to 2017, there are simply less trees than in years past. This means that the price of an average tree will be anywhere from 5 to 10 percent higher. This could be a driver for more families to head to farms themselves and cut down their own tree rather going to the local tree vendor.

That’s all for this week’s logistics news. Enjoy the weekend, and my annual song to get me in the holiday mood, the Trans Siberian Orchestra’s Christmas Eve / Sarajevo.

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