This Week in Logistics News (February 9 – 15)

logistics newsAccording to the National Retail Federation’s (NRF) annual Valentine’s Day survey with Prosper Insights & Analytics, Americans were expected to spend a record amount on Valentine’s Day this year despite a years-long decrease in the percentage of people celebrating the holiday. Those celebrating planned to spend $3.9 billion on jewelry (given by 18 percent), $3.5 billion on an evening out (34 percent), $2.1 billion on clothing (18 percent), $1.9 billion on flowers (35 percent), $1.8 billion on candy (52 percent), $1.3 billion on gift cards (15 percent), and $933 million on greeting cards (44 percent). When I think of Valentine’s Day, I immediately think of candy hearts with messages printed on them. Unfortunately, New England Confectionery Company (NECCO) went out of business last year, so for the first time in over a century, conversation hearts are not available. When it was announced that NECCO would cease operations, many candy stores bought as much of the candy hearts that they could hold. Now, those stockpiles are dwindling, and the black market for NECCO hearts is soaring. While it breaks my heart to think of a future without the not-so-good tasting but iconic heart candies on Valentine’s Day, I’ll have to move on. And now, let’s move on to this week’s logistics news.

As Brexit nears, there is still no transition plan in place. The missing plan has the potential to cause serious headaches for delivery companies such as FedEx, as packages could take significantly longer to get through their delivery network. A no deal would mean that UK trade with EU would need to fulfill the same requirements for other non-union countries, which includes increased taxes and duties. Getting items through customs, and regulatory issues around driver licenses could lead to driver swaps at borders, which significantly slows down the movement of goods. This could lead to FedEx suspending its on-time guarantees for some cross-border deliveries. FedEx says it may use alternative entry and exit points within the UK and the EU, among other measures, to mitigate the effects of any Brexit scenario.

DHL is also preparing for Brexit. The company has hired hundreds of workers to deal with the new customs procedures that will take place if no deal is struck. Without a deal in place, no one is certain how trade will look between the UK and the EU. DHL is trying to get ahead of the situation, hiring 50+ new workers each month for the last 3 months. John Pearson, chief executive of the DHL Express subsidiary, has said that “we have recognized that if, in a no-deal scenario, customs will be the be all and end all, then we don’t want to be caught short. These are people on the ground in the hubs. They are coming onto our payroll sitting in a hub facility probably processing customs paperwork to make sure that the goods are cleared quickly.”

At the beginning of the year, I wrote that laundry detergent brands Tide and Seventh generation were reducing their packaging to make shipping their products cheaper for e-commerce companies like Amazon. Well, Amazon is now pushing other CPG brands to reduce their packaging or face its wrath. In recent months, many CPG brands have been summoned by Amazon overhaul their product packaging to be greener, sturdier and cheaper to ship. Starting in August, companies that are not compliant with Amazon’s new packaging requirements will face a $1.99 surcharge on all items shipped. However, brands that upgrade their packaging ahead of the August deadline will receive a $1.00 credit per item shipped. Talk about incentive.

When one thinks of Blue Cross Blue Shield (BCBS), the first thing to come to mind is clearly health insurance. The company has now partnered with Health Care Service Corp. to launch a food delivery service in areas that lack access to affordable and fresh foods. The service, foodQ, will start delivery service during a 6-month pilot program in 25 Chicago zip codes and 15 Dallas zip codes. The foodQ delivery service aims to improve health outcomes, especially for people with diet-related chronic conditions, through improving hospital admission and emergency room visit use. The service is available to anyone, regardless of insurance status or plan. By subscribing to the service for $10 a month, customers can get free delivery and a buy-one-get-one option for each meal. Otherwise, each meal costs $10 plus $6 for delivery.

As recreational marijuana becomes legal in more states, navigating the supply chain becomes tricky. For the state of Oregon, dealing with a glut of marijuana supply is driving down prices to unsustainable levels. When the state initially issued licenses, it expected somewhere between 800 and 1200 businesses to apply. Instead, more than 1800 licenses were granted. Unlike other states where the majority of marijuana crops are grown indoors, Oregon has the perfect climate for outdoor grow operations. However, a rainstorm right before the harvest resulted in the loss of a lot of plants in the first year. This severely impacted the supply, but not the demand. As a result, hundreds more farms received licenses for the second year, and favorable growing conditions resulted in a larger than expected crop. As a result, some dispensaries in the Portland area are selling marijuana for $4 a gram, or less than half the cost of a bargain-basement batch in other US cities where marijuana is legal. The growing trade of legal marijuana will be an interesting topic to watch.

Ocado, the UK-based online supermarket retailer that specializes in autonomous warehouses, has unveiled a plan to launch a one-hour delivery service starting next month. The company’s new “Zoom” service              will undergo a pilot program in West London starting next month and will offer customers on-demand “small batch delivery” and will target the sub £60 section of the market. According to Ocado chief executive Tim Steiner, this is not in response to Amazon’s attempts at making inroads in the UK grocery delivery market. Instead, this is all driven by customer demand for faster service. Unlike the majority of programs that offer one-hour delivery, Ocado said the range of items would be full, instead of just a few thousand normally available in a local supermarket shop.

Three weeks ago, I wrote that Walmart had announced three new partnerships to enhance its grocery delivery service. This week, the company is moving in the opposite direction – Walmart and Deliv have pulled the plug on their same-day delivery program. Deliv served Walmart with a 90-day termination notice and the two companies stopped working together in late January. According to people familiar with the partnership, Deliv drivers were frustrated with an ongoing conflict where drivers had to regularly wait 40+ minutes to collect grocery orders as Walmart gave priority to in-store customers over delivery drivers. Given Walmart’s physical presence, it is certainly a slippery slope to navigate.

That’s all for this week. Enjoy the weekend and the song of the week, Ho Hey by the Lumineers.