The kids are all excited because we’re going to the circus tonight. But when you have four young kids running around the house, it’s a circus every night for me and my wife, with animals and clowns included.
In the news this week…
- Wal-Mart Delivery Service Says to Amazon: ‘Bring It’ (Wall Street Journal)
- FedEx to Park Old Trucks, Planes in Revamp (Wall Street Journal)
- Freight Shipments Fell 0.6% in August from July
- Retail Container Imports To Increase 9.9 Percent In October As Stores Stock Up For Holiday Season
- Con-way Truckload Increases Mileage Pay Rate, Changes Wait-Time Compensation for Drivers
- Ryder Launches Blog for Transportation and Logistics Industry Professionals
- FedEx Trade Networks Completes ACE Migration
- INTTRA Releases New Shipping Application Delivery Platform and INTTRA Booking Application
- Infor Business Cloud Expanded to IBM SmartCloud Platform
- FMCSA Continues to Evaluate and Strengthen CSA
- Facebook tests new feature for retailers (Financial Times)
Back in July, I wrote about Amazon’s quest for same-day delivery. Well, Walmart is embarking on that same quest too, introducing a new same-day delivery service called Walmart To Go in in five cities (Philadelphia, northern Virginia, Minneapolis, and later this month, San Jose and San Francisco). The service costs $10 regardless of order size, but only about 5,000 products are available for same-day delivery. Customers have to place their orders by noon and choose a four-hour window for evening delivery. The orders will be fulfilled from the stores, not distribution centers, with UPS doing the pickups and deliveries.
The comments I made back in July still apply here: providing same-day delivery is a perfect example of how setting a constraint can spark innovation in business models and processes; it’s also an example of how companies can leverage logistics to drive top-line growth, increase market share, and create a competitive advantage.
Can Amazon and Walmart provide same-day delivery profitably? The companies have different cost structures and models (e.g., fulfilling orders from stores vs. distribution centers), so their formulas for success will differ. But I believe that a critical success factor for both is to approach same-day delivery not as a loss-leader or a break-even exercise, but as its own profit center, which is what John Lewis Partnership is doing with home delivery in the UK (more about that in a future posting).
FedEx again scaled back its forecast for global economic growth, “highlighting the challenge of weak business volume and clients moving to cheaper options such as ocean freight [emphasis mine],” as reported in the WSJ. The company “will retire thousands of its iconic delivery trucks and retool its domestic U.S. network as part of a restructuring plan that aims to boost profits by $1.7 billion over the next three years.”
My main takeaway is that shippers are changing their mode strategies and distribution networks in response to global economic factors — and also to enable new services and fulfillment models (such as same-day delivery and omni-channel retailing) — which in turn is forcing FedEx and other transportation providers to realign their networks and service offerings.
The Freight TSI index dropped 0.6 percent in August from July. Here’s the analysis from the Bureau of Transportation Statistics: “The Freight TSI in August 2012 continued a pattern of little change since January. This appears to reflect the rate of growth in the general economy. Gross Domestic Product (GDP) growth slowed to a revised 1.7 percent in the second quarter and a revised 2.0 percent in first quarter of 2012 from 3.0 percent in fourth quarter of 2011, according to the Bureau of Economic Analysis (BEA).”
As the economy goes, so goes the level of freight activity. Or is it the other way around?
Hiring and retaining drivers, especially safe and experienced ones, is an ongoing challenge for trucking companies. Increasing driver pay and benefits is one approach, which is what Con-way Truckload is doing. According to the press release:
Effective Nov. 25, the company is instituting a $.01-per-mile increase in mileage pay, applicable to both company drivers and owner-operators. The company also is changing the standard for unpaid wait time when drivers are detained at customer loading docks. This “wait time” before detention pay is earned has been reduced from three hours to two.
I wouldn’t be surprised if other trucking companies take similar action, if they haven’t already. Will carriers pass on the increased costs to shippers, absorb them, or balance them with cost cuts elsewhere?
On the technology front, INTTRA announced the release of its Shipping Application Delivery Platform “for rapidly integrating and deploying individual INTTRA applications from within existing logistics, transportation management or ERP systems.” The company also announced the availability of INTTRA Booking through this new architecture, which enables members of the INTTRA network to initiate, amend, cancel and track ocean bookings.
Finally, social media sites like Facebook and Pinterest are becoming online sales channels for manufacturers and retailers (and another source of demand information). As reported in the Financial Times:
“Facebook is testing a new “Want” button for online retailers, similar to the social network’s widely used “Like”, which consumers can use to add product images to an online wishlist, in a style similar to the fast-growing photo-sharing site Pinterest. The pilot, which will make it easier for people to buy the items shared by their friends, is the latest in a series of site improvements released by Facebook in recent weeks as it attempts to find new revenue streams and recapture investors’ interest.”
And with that, I’m off to find my clown shoes. Have a great weekend!
Song of the Week: “Circles Around the Sun” by Dispatch.
(Note: Con-way, Infor, and Ryder are ARC clients and/or Logistics Viewpoints sponsors)