Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
By early June, the U.S. Postal Service (USPS) will have moved one of its core parcel products from regulatory protected status and opened it to the unpredictable winds of the free market. Only time will tell if the decision ends up being the right one for the financially struggling organization.
On April 6, the Postal Regulatory Commission, the body that approves changes to postal rates and services, blessed USPS's decision to shift its first-class mail parcel product from "market dominant" status to what's known as a "competitive product" classification. The change, which affects bulk shipments of parcels and not single pieces tendered at postal counters, is expected to take effect after a required three-week public notification process, according to David Lewin, a USPS spokesman.
The commission's action ends the USPS's historic monopoly on parcels weighing 13 ounces or less, a category that accounted for 44 percent of the post office's total parcel business in its 2010 fiscal year, which ended last Sept. 30. USPS officials say the change frees it to modify rates beyond annual adjustments pegged to the Consumer Price Index. It also enables the agency to offer bulk-shipping discounts to large users, though there are no immediate plans to change the product's pricing schemes, according to Lewin.
"This product serves a highly competitive marketplace, with many participants offering similar products," Gary Reblin, USPS's vice president, domestic products, said in a late February press release announcing the move. "By moving to a competitive product classification, we have greater flexibility to make this offering more attractive to commercial shippers."
However, the change would also give private carriers like FedEx Corp. and UPS Inc. an opportunity to compete for business previously not available to them.
Like other first-class mail, the USPS first-class parcel business is protected by the Private Express Statutes, a law passed in 1792 barring private companies from setting competitive rates with USPS on certain products. As a result, UPS and FedEx don't offer service for parcels weighing less than one pound. First-class mail parcels are mostly used by fulfillment houses and other businesses that ship lightweight merchandise.
Jerry Hempstead, a former top parcel executive and a close observer of USPS as president of his own consulting firm, said the post office may move too aggressively to hike prices on the parcel product in an effort to raise revenue any way it can to stem mounting losses. If it does, USPS risks losing significant share to private rivals, Hempstead said.
"The USPS, in their effort to right the ship, may do something stupid and take a big increase—because they can—and put some of these pieces into a [price] range that makes them attractive to UPS and FedEx," Hempstead said.
Kevin Smith, a former supply chain executive at CVS Caremark who now runs a supply chain sustainability firm, said USPS may box itself in by raising rates on first-class parcels while at the same time consummating its proposal to eliminate Saturday deliveries, which many online retailers have long relied on to reach their customers.
"In their effort to increase revenue and decrease costs, they could just about put themselves out of the parcel business," Smith said.
Hempstead echoed those remarks, saying a substantial price increase could turn the private carriers from users to competitors. In such a scenario, "one has to question if the USPS should be in the parcel business at all, since it's successfully and competitively handled by the private sector," he said.
UPS spokesman Norman Black said the company would evaluate the post office's move to see if it presents any opportunities for the Atlanta-based shipping giant. "But it's really too soon to say at this point," Black added. FedEx did not respond to a request for comment.
Lewin, the USPS spokesman, said the organization is aware of the competitive risks. "Any plans for future price increases have to be weighed against the potential for loss of business in the segment," he said. "It is a primary factor in our due diligence process with our pricing models."
Mounting losses
The untethering of the parcel segment comes as USPS announces a fiscal second-quarter net loss of $2.2 billion, which was $600 million larger than its net loss for the same period a year ago. It also warned that barring legislative measures to relieve it of such burdens as pre-funding $5.5 billion in future retiree health benefits in the current fiscal year, it will be forced to default on payments to the federal government by the end of its fiscal year.
Revenue from USPS's "mailing services" segment, which includes first-class and standard mail, fell 14 percent year over year. USPS's first class-mail business in particular continues to suffer market share erosion from the growing use of electronic mail formats.
Revenue and volume from "shipping services," which include Express and Priority Mail, rose 5 percent in the quarter to $2.2 billion, while volume increased 3.2 percent to 352 million pieces. To put the numbers in perspective, USPS handled 38.7 billion pieces of first-class and standard mail in the quarter with combined revenue of $12.2 billion.
As its fiscal situation deteriorates, the post office has stepped up its efforts to raise revenue and slash expenses. Its most visible cost-cutting proposal is to suspend Saturday deliveries for most products, a move the organization said would save about $3 billion a year. USPS would be free to drop Saturday deliveries unless Congress intervenes to disallow it.
Post offices would remain open on Saturdays for pickups and drop-offs, and next-day Express Mail deliveries would continue. Reblin said USPS is weighing the possibility of maintaining Saturday deliveries for its less-urgent Priority Mail product if demand warrants.
In recent months, USPS has rolled out two shipping products designed to attract high-volume shippers moving goods within relatively short distances, a fast-growing segment of domestic transportation but one where the Post Office has been a minor player.
The first, unveiled in January, is patterned after the Priority Mail product, where a flat rate is charged regardless of how much is stuffed in a package. That service is geared toward businesses shipping packages weighing between five and 15 pounds and moving within 700 miles for delivery within two to three days.
The second, introduced in mid-April, offers a regional ground service for high-volume business-to-consumer users.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!