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.
UPS Inc., hit by slowing domestic freight volumes and persistent weakness in Asian and European markets, has
scaled back second-half growth projections for its business and for the macro economy in which it plays such a huge role.
In releasing its second quarter results yesterday, the Atlanta-based shipping and logistics giant reduced its
earnings-per-share guidance for the rest of 2012. UPS cited the growing U.S. economic slowdown and weakness in key
world markets as the reason for the revision in its numbers.
"As we look toward the second half of the year, customers are more concerned as greater uncertainty exists.
Additionally, economic growth expectations have come down," said Kurt Kuehn, UPS' CFO.
UPS, whose forecasts often err on the side of caution, predicted U.S. Gross Domestic Product growth of just 1 percent
in the second half of the year, a slower pace of expansion than many have projected. Given that UPS ships the equivalent
of 6 percent of U.S. GDP and about 2 percent of the world's output, its macro forecasts are not taken lightly.
MIXED RESULTS
Kuehn labeled the second quarter performance as "mixed." Decent results in the domestic package market
and supply chain and freight segments were offset by declines in intercontinental and European intra-country markets.
The weakness that hit in the second quarter is likely to persist into the third quarter before cost-reduction steps
taken by UPS bring fourth-quarter results into favorable stead with the same period in 2011, according to Benjamin
Hartford, analyst for Robert W. Baird & Co.
In the second quarter, domestic revenue rose 4.1 percent over the prior-year period, which included by a
3.5-percent gain in package volume. Ground volumes grew by 3 percent, and next-day and deferred air traffic
rose 5 percent and 8.6 percent, respectively.
The domestic numbers were skewed by double-digit gains in low-weighted e-commerce shipments that don't generate
the same level of revenues and operating margins as UPS' heavier shipments. Not surprisingly, the average revenue per
package rose just 0.6 percent, as the company's higher base rates were neutralized by the growing prevalence of
e-commerce transactions.
UPS, like other providers, continues to struggle with weakness out of Asia, with year-over-year double-digit volume
declines leading the company to taker another 10 percent of export capacity off the market. Asian export capacity is nearing
the capacity reductions taken during the 2009 recession.
The company said it still seeing growth in its intra-regional businesses on the major continents.
UPS Freight, the company's less-than-truckload arm, reported a 2.9-percent year-over-year drop in shipment volumes
but a 2.8-percent gain in yields. This indicates that the company is hauling more profitable freight and will not take
on business just to gain share or fill trucks.
Analysts didn't find much in the report to be optimistic about in the near term. William Greene, lead transport analyst
for Morgan Stanley & Co., said in a research note that "it is tough to be constructive" on parcel trends for the rest of the
year. "Given UPS's economic bellwether status, investors will be hard-pressed to ignore UPS's commentary about domestic demand
and concerns that trends may get more challenging before improving," Greene wrote.
David G. Ross, analyst for Stifel, Nicolaus & Co., said that the deceleration in business-to-business parcel traffic has
been offset by the strength in the business-to-consumer segment, but even that category is starting to experience a slowdown.
"This lack of freight growth is consistent with what we have heard from the railroads and other truckers, and the carriers
appear to be focused more on pricing and operational improvements as a result," Ross wrote.
Separately, UPS and TNT Express have delayed the completion of UPS' planned $6.3 billion buyout of the Dutch express firm
pending a more detailed European Commission review of the transaction's competitive impact. Because a review can take up to
six months to complete, UPS said the deal will likely close during the fourth quarter rather than during the third.
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.