Happy New Year and welcome back to Logistics Viewpoints! It’s good to be back, refreshed and rested, and ready to bring you all the logistics news you’ve been missing. After a bitterly cold stretch here in the Boston area to end 2017 and start 2018, we finally got a reprieve from the cold yesterday. And by reprieve, I mean the temperatures finally escaped the single digits and crept up towards freezing. The bad news, however, was the cyclone bomb (or bombogenesis) that resulted in near blizzard conditions and over a foot of snow. On top of that, the temperature is about to drop back down to historic lows, with a low temperature on Saturday of 11 below zero (and that’s Fahrenheit, not Celsius). The good news is that I can enjoy the warmth of my couch while watching the first round of the NFL playoffs, knowing that the Patriots are staying warm off the field as well. And now, on to the logistics news.
- UPS, FedEx handle record holiday surge
- National Returns Day set to hit new record
- Peloton holds 1,000-mile platooning demo in Florida
- UberEats is outgrowing Uber in some cities
- Britain exploring membership of the TPP to boost trade after Brexit
- Amazon, Alibaba, and Walmart are investing heavily in Mexico
- Spot Van, Refrigerated Rates Rise, End 2017 at Highs for the Year
After some early struggles this holiday season, UPS and FedEx delivered a record number of packages, mostly on-time, for the 2017 holiday season. With the e-commerce boom, which included a nearly 17 percent increase in year-over-year Cyber-Monday sales alone, to a staggering $6.6 billion, both companies were able to achieve over 98 percent on-time delivery for ground shipments for the week ending December 23. For UPS, to meet the demand, hundreds of office employees were called upon to deliver packages, sometimes using their personal vehicles to ensure on-time delivery. Additionally, UPS and FedEx had on-time delivery rates in the high 90’s for air shipments. Between the two services, more than 1.1 billion packages were delivered between Thanksgiving and New Year’s Eve. Given that volume, those on-time rates are impressive.
Speaking of holiday shipping, companies spent the early part of this week getting ready for National Returns Day. The unofficial “holiday”, which generally occurs on January 3, is a headache for UPS, FedEx, and retailers everywhere. UPS estimated that 1.4 million returns are to be expected on National Returns Day alone, which is an 8 percent increase over last year. This would be the fifth consecutive year that the record has fallen. This is not a surprising stat however, as the shift continues to online shopping rather than in-store, which historically has a lower return rate. To accommodate the increase in returns, many retailers keep seasonal employees on-board early into the new year. The biggest concern is the financial impact of returns, especially given the high volume this time of year. As I wrote a few months ago, based on survey data, only 42 percent of respondents can measure the full financial impact of returns. Of the remaining 58 percent of respondents, 31 percent have a general idea of the financial impact, 17 percent are guessing at the financial impact, and 10 percent cannot measure the financial impact at all.
Peloton Technology has completed a 1,000 mile platooning demonstration in Florida. The demonstration was part of the State of Florida’s Driver-Assistive Truck Platooning Pilot Project on the Florida Turnpike, using two Peloton-equipped Volvo VNL670 Class 8 trucks. The test used advanced driver-assistance systems provided by Peloton Technology, including linked collision avoidance capability. The two trucks traveled at a separation distance of approximately 65 feet, with professional drivers remaining fully in command of each truck at all times. According to Peloton, the drivers benefited from advanced safety systems and achieved high levels of fuel savings.
Uber has faced a series of regulatory hurdles in its expansion to new cities and countries. Due to that, and an influx of competition, initial growth has slowed. One area that is proving to be a growth driver, however, is the food delivery business. The crowd-sourced food delivery market, especially from restaurants, has seen steady growth. While Uber was a major disruptive force when it launched its crowd-sourced taxi app, it was late to the party in terms of food delivery. However, with a brand presence and deep pockets to back the venture, it has quickly grown. In fact, in 19 European cities, including Milan, Madrid, and Grenoble, UberEats is bigger than Uber’s transportation app. Only three years old, UberEats is poised to generate $3 billion in sales by the end of 2018.
While Brexit has left Britain trying to figure out trade plans in the future, the country is entering talks to join the Trans Pacific Partnership (TPP) once it officially leaves the EU. The driver for Britain is to stimulate exports after Brexit next March. Since the US dropped out of the TPP, the remaining nations have been re-grouping to develop a new agreement. If the proposals go ahead, Britain would be the first member of the trade agreement which does not have borders on the Pacific Ocean or the South China Sea. The difficult part for Britain, however, is the fact that it is not allowed to make any trade deals until it formally leaves the EU. The remaining members of the TPP make up less than 8 percent of the UK’s export market, a fact that leaves many criticizing the plan.
Online shopping in Mexico is lagging behind the US, but it is poised to grow significantly in the next few years. Some estimates put the total of online sales as high as $18 billion over the next three years. As a result, the world’s largest e-commerce players are investing heavily in Mexico. Amazon is building a 1 million square foot warehouse near Mexico City, which will triple its distribution space. Walmart has poured $1.3 billion into distribution centers in Mexico, mostly to be used for e-commerce fulfillment. Alibaba and the Mexican government announced an agreement to help Mexican small and medium-sized businesses expand into China and other international markets, using the company’s B2B trading platform. With these initial investments, these three e-commerce giants are getting ready to battle it out south of the border.
And finally, according to DAT Solutions, national average spot van and refrigerated truckload rates ended 2017 at their highest point of the year as capacity tightened during the week ending December 30. The number of available loads fell 22 percent while the number of available trucks decreased 36%. Load-to-truck ratios increased sharply for vans (12.3, up 22 percent), flatbeds (52.3, up 26 percent), and reefer (23.7, up 33 percent).
That’s all for this week. Enjoy the weekend, the beginning of the NFL playoffs, and the song of the week, Winter by the Rolling Stones.