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.
In early 2010, Werner Co., a Greenville, Pa.-based manufacturer and distributor of ladders, accessories, and climbing equipment, informed its main parcel carrier, UPS Inc., that it had engaged a third-party consultant, AFMS Inc., to renegotiate a transportation contract between Werner and UPS.
Big Brown struck back. Hard.
In a March 2010 letter to Werner's transportation group, Atlanta-based UPS told its customer that its decision to work with a third party like AFMS would trigger a provision allowing UPS to cancel its contract with Werner after a 30-day notice period. The termination of the current contract, in effect since 2006, would result in the loss of discounts to Werner and require it to pay more for UPS's shipping services.
The letter also put Werner on notice that other benefits obtained through the UPS relationship would go by the boards as well. UPS wrote that it has provided Werner with "many special operating plans" for a number of the shipper's locations across the United States. "If the goal of breaking your current agreement is to realize additional economic benefits, some of the unique value-added services that you have come to rely upon over the years may now be subject to renegotiation as well," the letter stated.
In the letter, UPS expressed surprise that a 25-year customer like Werner had sought out AFMS, particularly since the current agreement with UPS had saved Werner $92,000 in 2009. The UPS letter added that Werner's savings went directly to its bottom line and that the company didn't have to share the gains with any outside sources.
In the end, Werner decided not to pursue a relationship with AFMS. A Werner spokesperson did not return a request for comment.
Legal challenge continues
That wasn't the end of the matter, however. A copy of the UPS letter was included in an amended complaint filed June 24 by attorneys for AFMS, which has sued UPS and FedEx under federal antitrust laws on grounds they leveraged their position as the market's two dominant players to deliberately and illegally freeze out third-party consultants in an effort to keep more of the profits foregone when consultants negotiate discounts for their clients.
Attorneys for the carriers argue that their policy of working directly with customers instead of third parties is nothing more than a competitive and legal business practice. The practices cited in AFMS's complaints "are wholly consistent with lawful independent behavior" by FedEx and UPS as each company, faced with the same market developments and challenges, acted in a parallel fashion that was as expected as it is legal, according to a response filed last November, three months after AFMS filed its initial complaint.
The carriers also contend their policies don't explicitly state they are terminating their relationships with third-party consultants, but that they would continue dealing with the third parties "at the discretion of the individual company's management."
The reply adds that AFMS has no legal standing to bring charges of antitrust violations, noting that federal antitrust laws are applicable only to companies "whose alleged injuries flow from harm" in a restrained market. The law does not apply to consultants who, in the case of AFMS, do not purchase shipping services from either of the parcel giants, according to the carrier reply.
Growing hostilities
Parcel consultants, many of whom are former FedEx, UPS, and DHL Express executives, have built a cottage industry using their knowledge to guide shipper customers through the often-byzantine world of parcel contract negotiations. For years, FedEx, UPS, and, when it had a U.S. presence, DHL, co-existed with consultants in a reasonably amicable manner. However, the carriers began chafing at the consultants' growing role in negotiating lower rates on their customers' behalf that would impact the carriers' bottom lines.
At an industry conference in late 2009, UPS and FedEx executives went public with their intent to minimize their dealings with consultants. In separate internal policy memos the following spring, they codified that intent, essentially forcing shippers to negotiate directly with them or risk having their contracts canceled and all the pricing benefits associated with the contract eliminated.
Brett A. Febus, founder and president of Insource Spend Management Group, a Hilliard, Ohio-based third-party consultant, said he's been told by a number of customers that they have been afraid to use his company's services even though they acknowledge the benefits they have accrued from doing so.
"They tell me, 'We know you can save us $8, $9, $10 million a year, but I need to move three trailer loads tonight. I can't afford to anger them,'" he said.
The effect has been felt on Insource's top line, according to Febus, who worked at UPS in sales before leaving to start Insource in 1999. Revenue jumped to $5.6 million in 2009 from $1 million in 2007, and in 2010, the company came in 531st on Inc. magazine's list of the 5,000 fastest-growing companies.
However, the company's 2010 revenue was essentially flat over 2009, and Febus forecasts that 2011 revenue will remain essentially unchanged over 2010. He doesn't attribute the static results to soft economic conditions, contending that his company's services are usually in more demand during slow periods.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
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.