As an industry newsletter, The Roundup avoids politics unless geopolitical events affect the supply chain, logistics, or the overall movement of goods. Sometimes, we post about giving opportunities following natural disasters, like those that recently befell Morocco and Libya. But evil is evil, empathy is part of our humanity, and this week, The Roundup stands firmly in sympathy and solidarity with the people of Israel, the victims of the recent massacre there, and the over 120 hostages, including babies, senior citizens, women, and innocent civilians, from dozens of countries being held in Gaza. The Magen David Adom is the Israel equivalent of the Red Cross. Here is a link to their donations page.
Unfortunately, events in Israel are affecting the supply chain. Oil prices are surging. The latest wild card in the diesel-up, gasoline-down fuel supply pricing is the Hamas surprise attack from Gaza that has left hundreds dead in Israel. While Israel is not a major oil producer, Iran is. The Wall Street Journal reported Iran was involved in directly planning the attacks, which raises the prospect that the U.S. could add to the enforcement of sanctions on its exports. According to Goldman Sachs, prior to the Israeli attacks, Iran had raised its oil production by around 500,000 barrels a day. Goldman Sachs estimated for every 100,000 barrels a day decline in Iran’s production next year, Brent crude oil prices would rise by about $1 per barrel.
The war is also having a huge impact on the electronics supply chain. There are now 500 multinationals operating in Israel, mainly research and development centers, after buying Israeli start-ups – from Intel to IBM, Apple, Sony, Microsoft, Google, and Facebook. In 2015, Israel spent 4.3 percent of its gross domestic product (GDP) on civil research and development, the highest ratio in the world. Israel is also home to many electronics and semiconductor companies and facilities. As the country is now under the terrorist attacks of Hamas and has declared a state of war, many workers, and even top-level executives, are currently serving as reservists in the Israel Defense Forces (IDF). Israel has already said it would call up an unprecedented 300,000 reservists, many of which could come from U.S.-based tech operations. Mobilizing reservists from tech companies, including Intel, affects their regular operations and production.
When hostilities began, both UPS and FedEx followed most airlines and suspended flights into Israel. FedEx quickly reinstated service, UPS is still on hold. Germany’s DHL Group has no plans to withdraw from Israel, where it has almost 1,000 employees, despite the recent violence, Chief Executive Tobias Meyer said on Tuesday evening. If the war expands beyond Israel’s borders, it poses risks to two key shipping choke points: the Suez Canal, a key waterway for all types of commercial vessels, including container ships, and the Strait of Hormuz, which is pivotal to oil and gas shipping. Stay tuned to The Roundup and SPL Group for updates as events develop.
The Latest In Freight News
FedEx is building a new state-of-the-art logistics facility in Dublin, Ireland, further investing in its European operations. Operations are beginning to take shape at the new UPS distribution center on Bayonne’s waterfront, more than two years after the shipping giant announced plans to expand in Hudson County. UPS is using automated technologies in select U.S. facilities to improve package flow and efficiency. The improvements target facility processes that are repetitive and physically demanding for employees, such as unloading trailers, sorting small packages, and moving irregularly sized shipments. UPS is reducing service in rural areas scattered across the country in a push for increased efficiency. Through the initiative, UPS shipments in certain ZIP codes will spend an additional day in transit, the company said in a statement. Delivery date guarantees still apply, and critical healthcare deliveries through UPS Premier are not affected..
Following the approval of the regulatory authorities, DHL Group completed the acquisition of MNG Kargo on October 5. DHL Global Forwarding has also taken complete control of freight forwarder Danzas AEI Emirates. Disappointing news for employees and customers of DHL with the announcement that a facility in Groveport, Ohio, will be closing in two weeks’ time.
A UK startup has an ambitious plan to slash the cost of air freight by shipping goods in a massive autonomous cargo plane. Canadian railway CN is prepared to handle low temperatures and heavy snowfall this winter, but it warns that new regulations could test its ability to meet customer demand and keep the supply chain flowing. The rehabilitation and upgrade of the St. Lawrence and Atlantic Railroad (SLR), which carries freight across Maine, New Hampshire, and Vermont, has neared completion with the award of $9.6 million from the Federal Railroad Administration to be matched by the three states and the railroad.
One car of a freight train derailed Wednesday afternoon, hitting a building in northwest suburban Elk Grove Village near Chicago. Flexport is implementing a 20% workforce reduction, hinted at a week ago. Employees whose jobs have been eliminated as the freight forwarder moves to plug financial losses and become more nimble were notified recently, according to reports. Kansas will now require freight trains operating within the state to have at least two train crew members in the lead locomotive cab. The sale of failed trucker Yellow’s real estate is turning into a battle for a competitive edge in a corner of the trucking industry that forms a crucial part of the U.S. economy. The AB5 saga in California continues to play out in the courts.
There are positive signs for the future, but shippers feel the freight industry is still in limbo as excess inventory has been shed, but no immediate need to restock is forthcoming. A Tennessee court extended a temporary restraining order blocking Forward Air’s planned merger with freight forwarder Omni Logistics. In the next 15 days, the court will decide if injunctive relief is warranted, which could set the stage for a hearing to determine if shareholders have the right to vote on the transaction. Plano, Texas, is licensing 40 eScooters, which is expected to help transportation and last-mile delivery in the city.
Delivery management platform Bringg has debuted a tool to streamline last-mile delivery. The company’s ROAD offering is designed to help companies “mitigate the risk of change management within the last mile of delivery by dividing the process into three tiers. Australia is debuting a program where commuters make last-mile deliveries on their way home to earn extra cash. Last-mile carriers posted an on-time delivery rate of 85.1% in August, the best performance the industry has seen since the COVID-19 pandemic tanked rates in 2020. The United States Postal Service announced this year’s holiday shipping deadlines, and for the first time since it began in 2020, there will be no temporary holiday price increase this year. For a card, letter, or package to arrive by Dec. 25, the USPS says the deadline for mailing by its new parcel shipping program USPS Ground Advantage is Dec. 16. First-Class Mail, which includes greeting cards, also has a deadline of Dec. 16. The Priority Mail deadline is Dec. 18 (Dec. 16 in Hawaii) and Priority Mail Express is Dec. 20. International deadlines depend on the destination. More information is available on the USPS website.
Low water levels on the Mississippi River affect the shipping of agricultural products like soybeans. Back-to-back years of drought are clogging the critical shipping artery and pushing some farmers to new modes of transportation. The Port of Miami saw cargo volume drop 9% in August. Daily market prices to move cargo from Asia to the U.S. and Europe in September were down as much as 90% from early 2022.
Cargo shipping companies will from next year no longer enjoy a decades-long exemption from EU rules against anti-competitive agreements because this derogation does not boost competition anymore, EU antitrust regulators said last week. The head of German shipping firm Hapag Lloyd, Rolf Habben Jansen, expects the next three years to be difficult because demand for shipping services is growing more slowly than available shipping capacity.
Logistics, Supply Chain, Warehouse, And Related News
For the fourth consecutive month, Mexico was the No. 1 trading partner of the U.S., totaling $70.8 billion in August. Laredo, Texas, retained the No. 1 spot among the nation’s 450 international gateways for trade in August with $28.6 billion. Ongoing disruptions from the United Auto Workers continue to pose risks for automotive supply chain managers. Microsoft will shut down its Supply Chain Center product’s preview period on Oct. 31, less than a year after its launch, according to a notice on its website.
Softbank, known for its big AI investments, has quietly made substantial gains with its partnership in Symbotic, a company providing AI-powered “warehouse as a service” to major retailers like Walmart and Target. Through their joint venture called GreenBox Systems, Softbank and Symbotic aim to tap into a potential $500 billion market, offering AI-driven logistics and warehousing to smaller companies and democratizing access to advanced warehouse management systems. Tacoma, Washington, community members held a rally outside of city hall last week over concerns about a proposed mega-warehouse to be built in south Tacoma.
Miami-based freight transportation and logistics services provider Ryder System Inc. announced earlier this month that it is taking steps to expand its Chicagoland multi-client warehouse network. The gig economy is starting to reach into the warehouse. Logistics companies competing for workers are offering more flexibility in areas such as scheduling and choices on shifts as they vie for labor with companies like Uber Technologies and Instacart, where workers make their own hours.
Bolloré Logistics USA has opened a new distribution center in Ontario, California, that will support the company’s growth goals in the luxury and beauty industries. The 111,000 sq ft site is located near California’s Ontario International Airport and is 50 miles away from the ports of Los Angeles and Long Beach. Prologis has expanded its Phoenix footprint with the acquisition of Airpark Logistics Center, a 2.7 million-square-foot industrial park in Goodyear, Ariz. A partnership between Creation and CrossHarbor Capital Partners sold the asset for $184 million, reportedly setting the record for Arizona’s largest multi-building industrial park sale. ODW Logistics, a third-party (3PL) specializing in integrated logistics solutions, announced its Central Ohio warehouse space has expanded to over 4 million square feet by adding another 540,000 square feet facility in Columbus, Ohio.
In a recent report, real estate company JLL predicts that the United States will soon join Asia in “building up instead of out” to add more logistics space to crowded cities such as Chicago, New York, and Miami. Amazon’s next big thing might be lurking in the expensive supply chain apparatus that’s helped transform its e-commerce business into a juggernaut. The company’s expansion into so-called logistics services, shipping, and distribution could eventually be worth more than $100 billion in revenue.
Amazon’s fulfillment services are a major piece in the antitrust against the company, with the suit brought forth by the Federal Trade Commission and 17 state attorneys general alleging anticompetitive practices are hurting sellers and consumers alike. The complaint, filed last week in the U.S. District Court for the Western District of Washington, says sellers have weathered rising fulfillment fees and are cornered into using Amazon’s fulfillment services, squeezing out alternative providers. Amazon drivers picketed an Amazon warehouse in Riverside as the company ships orders from its busy Prime Day promotion. The picket at the DJT6 warehouse is just the latest in a three-month strike by drivers from the company’s DAX8 delivery station in Palmdale, Calif., over the company’s unfair labor practices.
Google and Yahoo announced this month new email-sending policies that could impact eCommerce and omnichannel marketers. The policies require email authentication, single-click unsubscribes, and low complaint rates. The new rules take effect in February 2024 for Gmail and “in the first quarter of 2024” for Yahoo and AOL email clients. Messages from non-complying senders will likely be automatically marked as spam, damaging deliverability and, for marketing emails, reducing clicks and conversions.
In Other News
- Higher yields on treasury bonds might mean the Fed does not need another rate hike
- IMF concerned about inflation and slow growth
- Wholesale inventories fell 0.1% in August
- Consumer prices rose again for second straight month
- Ford claims to have hit the limit in its offer to the UAW
- IMF is concerned about certain banks’ exposure to higher interest rates
