The chip shortage has been one of the hottest topics in 2022. I read an article earlier this week that broke it down pretty succinctly. At the beginning of the year, the global chip shortage had become so dire that large industrial companies were taking scarce chips out of washing machines to plug them into industrial modules. Since then, the worst of the global chip shortage has likely passed but the recovery is trudging along slowly and unevenly. This is because chipmakers are facing a slump in demand due to the worsening state of the global economy. This is leading to an inventory pile-up of processors and memory chips used in PCs. As a result, shortages are alleviating across the board, and supply constraints caused by record demand for chips during the pandemic are less widespread. This means relief for buyers that have dealt with a period of long lead times and inflated pricing. But, while chip demand is receding, it is not enough to spell the end of the shortage as supply challenges will likely remain in place into 2023. And now on to this week’s logistics news:
- McDonald’s is testing a new drive-thru concept
- Some retailers are learning to love bulked-up inventories
- Walgreens takes its delivery service round the clock
- CVS tries out remote system to help fill prescriptions
- Amazon has a new drone for 30-minute urban deliveries
- Railroads focus on stabilizing workforce after strike is averted
- Senate proposes $755 million for truck parking
- Uber, Aurora to expand self-driving truck ops in Texas to meet holiday rush
- DoorDash Canada moves to tiered commission system
We’ve seen lots of stories over the last few years of retail stores shifting to smaller format stores to focus on e-commerce fulfillment. McDonald’s also jumping on the bandwagon. The company is testing a small-format restaurant in Fort Worth, TX, where the centerpiece is a conveyor system that delivers food to a mobile-order lane. The restaurant features what the company calls an Order Ahead Lane, which serves mobile-order customers their food through a conveyor system. There are other options, too, including a pick-up shelf in the restaurant for customers who want to come in and get their takeout orders; designated spaces in and out of the restaurant for delivery drivers and self-order kiosks that accept both cash and credit. There is also a typical drive-thru lane, of course. Drive-thru grew to more than 70 percent of orders even before the pandemic, and now with the rise in mobile ordering and delivery, takeout represents somewhere around 90 percent of a typical McDonald’s location’s sales.
While many retailers are discounting, canceling orders, and otherwise scrambling to get rid of a glut of goods filling their stores and warehouses, some are embracing their higher inventory levels. Merchants including Dick’s Sporting Goods, Lowe’s, and Walmart say the rising stocks signal a recovery from last year’s shortages driven by supply-chain disruptions and put them in a strong position to take advantage of consumer demand this holiday shopping period. The companies building their inventories are looking to ensure they have items on hand at the right moment. The tactic appears to have paid off for the Black Friday shopping holiday. Real-estate services firm CBRE Group Inc. said its survey of 13 malls and outdoor shopping centers it manages across the U.S. found no problems with shortages of goods during Black Friday this year.
In a move that will make more than 27,000 of its product offerings available in as little as one hour regardless of the time of day, Walgreens is extending its same-day delivery service for customers across the country. The 24-Hour Same Day Delivery offering will be available at nearly 400 Walgreens locations that currently operate around the clock, and includes products like groceries, over-the-counter medications, personal care items, household essentials and more. Customers can place orders for round-the-clock delivery through the Walgreens app or website. While prescriptions are not eligible for the retailer’s one-hour delivery service, they may be eligible for delivery through Walgreens Express. Same-day delivery is not currently available in Alaska, Colorado, Iowa, Maine, North Dakota, South Dakota, Utah, Vermont, West Virginia and Wyoming, and delivery of orders containing alcohol is currently limited to select stores in Illinois and Florida.
Speaking of prescriptions, CVS is testing a system that allows pharmacists to process prescriptions in part remotely, a move it said could improve store working conditions and the experience for customers as the company grapples with a shortage of pharmacists. CVS has equipped roughly 8,000 of its more than 9,000 U.S. drugstores with technology that allows pharmacists to review and enter prescription information remotely while still meeting patient-privacy requirements. About 400 of CVS’s 30,000 pharmacists are currently helping prepare prescriptions either at central locations, from their homes or in stores other than where medications will be dispensed, the company said. The plan doesn’t involve changes to how people pick up their prescribed medications from CVS pharmacies.
As Amazon prepares to debut its long-delayed Prime Air drone delivery service, it’s also showing off a smaller, quieter drone that will be ready in 2024 and could be making regular deliveries in major cities by the end of the decade. Amazon showed off its next-generation drone at a recent event near Boston to highlight the future of delivery. The 80-pound hexagon-shaped aircraft, about 5½ feet in diameter, is nimble enough to make deliveries in highly populated areas such as Boston, Atlanta and Seattle. It’ll be more capable and less intrusive than the model Amazon is using in its Prime Air service, which will begin in two markets — Lockeford, California, and College Station, Texas — in the coming weeks. By the end of the decade, the company’s goal is to deliver 500 million packages a year by drone in cities, Amazon Prime Air vice president David Carbon told reporters.
President Biden signed a bill Friday restricting rail workers from striking, but the industry is still struggling with a big problem: having enough staff to handle customer demand. The largest U.S. freight railroads have reported strong profits in recent years, helped by higher prices and steady business in transporting everything from automobiles to fertilizer. Export demand for coal and grain, stemming from disruptions in supply chains in Europe after Russia invaded Ukraine, bolstered freight volumes this year, railroads said. At the same time, railroads continue to face disruptions tied to having a shortage of workers. This year, Union Pacific Corp. and BNSF Railway have issued more embargoes—restrictions placed on the amount of cargo that can be transported—than in previous years. Railroads issue embargoes as a way to control traffic movements when service is disrupted due to a disaster or to ease congestion.
Everyone has had issues with finding a parking spot. But for truck drivers, it can be a much bigger issue. Senate lawmakers introduced legislation on Thursday that would set aside $755 million in competitive grants over four years to expand much-needed truck parking across the country. The bipartisan Truck Parking Safety Improvement Act, co-sponsored by Sens. Cynthia Lummis, R-Wyo., and Mark Kelly, D-Ariz., will serve as companion legislation to a House version introduced last year and approved by the House Transportation and Infrastructure Committee in July. The Senate bill allows for public-private projects that create new parking areas or expand parking existing facilities, and projects that allow for commercial parking at existing weigh stations, rest areas, and park-and-ride facilities. The bill would also allow for truck parking expansion at commercial truck stops and travel plazas. The American Trucking Associations and the Owner-Operator Independent Drivers Association championed that legislation in a joint letter to Transportation Secretary Pete Buttigieg in February. Both had similar praise for the bill introduced on Thursday.
Uber Technologies and self-driving technology company Aurora Innovation will expand their driverless pilot program in Texas to meet increased delivery demand during the holidays. The program will be expanded to the recently launched 600-mile commercial lane between Fort Worth and El Paso in Texas to support customers of logistics business Uber Freight as it ships goods this holiday season, Aurora said on Friday. The companies launched their pilot program about a year ago to autonomously transport goods between Dallas and Houston. Autonomous goods hauling has been seen as the future of logistics as it could increase truck utilization and boost transportation frequency between terminals. Aurora Innovation, which also counts FedEx and Toyota as partners, looks to launch the Aurora Driver self-driving platform at the end of 2024.
DoorDash is changing the way it charges commission to Canadian restaurants with a new, tiered model. The San Francisco-based food delivery service announced the switch Tuesday, saying it will offer restaurants more “flexibility” and help them take advantage of digital growth opportunities. The model resembles one launched in the U.S. last year and has three tiers starting with the basic plan, which charges a 20 per cent commission on deliveries and 10 per cent on orders picked up by diners and comes with the smallest delivery radius. Beyond that, restaurants can choose plans with additional features. One step above the basic plan is DoorDash Plus, which involves a 25 per cent commission on deliveries and eight per cent on pickups. This plan also gives access to members of Dash Pass, a paid monthly subscription service offering no delivery fees, but at a heftier 27 per cent commission. The service also offers courier services to a larger delivery area (DoorDash would not say what the specific radius is). The final tier is DoorDash premium. It comes with a 29 per cent delivery commission and eight per cent for pickups. The delivery area for these users is the largest, they get a $50 rebate for spending $100 or more on marketing every month and access to Dash Pass customers but at no difference in commission.
Want to learn more building resiliency without losing the benefits of just-in-time inventory? Join this GEP-ARC Advisory Group webinar — How to Build Resilience Without Losing the Benefits of Just-In-Time Inventory — to learn more about the innovative tools and capabilities GEP and the tech firm employed to manage supply chain disturbances effectively. Speakers include Joanna Kostecka, Vice President, Global Operations Planning and Materials Management at HPE; David Doran, Vice President, Consulting Services at GEP; Binayak Shrestha, Global Head of Services Delivery at GEP; and Steve Banker, Vice President, Supply Chain Management at ARC Advisory Group.
That’s all for this week. Enjoy the weekend and the song of the week, Weird Al’s It’s All About the Pentiums. Unfortunately, Weird Al doesn’t allow this song to be played on other sites, so you’ll need to follow the link.