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.
Amazon.com. Inc. is moving quickly to revamp its delivery network to gain more control over its fulfillment
infrastructure while reining in spiraling transportation costs, according to a supply chain consultant with close
ties to the e-tailing giant.
James Tompkins, who runs Tompkins International, a Raleigh, N.C.-based consultancy, said Amazon has divided the
nation into three segments based on population size: The top 40 markets, which comprise about half of the U.S. population;
the next 60 largest population areas that account for about 17 percent, and the remaining areas, which account for about
one-third.
The top 40 markets will be served by a private fleet being built by Amazon to support an expansion of its online grocery
business, called "Amazon Fresh," according to Tompkins. The next 60 will be served by an array of regional parcel delivery
carriers, he said. The remainder will be served mostly by the U.S. Postal Service, he said.
UPS Inc., which today handles much of Seattle-based Amazon's current deliveries, will not play a prominent role in the network
realignment, Tompkins said. Nor will FedEx Corp., which manages a lesser portion of Amazon's delivery business. An Amazon
spokeswoman was unavailable to comment.
Orders will be routed through Amazon's 55 fulfillment centers, with deliveries made the same day, the next day or, at most,
in two days, Tompkins said. Inventory will be positioned to exclusively support local deliveries. A national delivery network as
operated by providers like FedEx and UPS will be rendered irrelevant because they will be considered too slow to suit the typical
Amazon customer, he said.
Tompkins said that Amazon has a timeline for its rollout, but that he is unaware of the details. "They are moving on this very
aggressively," he said.
Amazon two years ago seriously considered a bid for FedEx as a means of buying into an existing delivery operation, according
to Tompkins. However, Jeffrey P. Bezos, Amazon's founder and CEO, backed away after determining FedEx's network structure was too
national in scope to fit Amazon's strategy of local fulfillment and delivery, Tompkins said. A FedEx spokesman declined comment.
Tompkins has worked in the supply chain management field for decades and is considered one of the nation's leading authorities
on its role in e-commerce. His relationship with Amazon is not clearly defined, a status seemingly more by design than coincidence.
When asked to describe the nature of his involvement with Amazon, Tompkins replied that he was contractually obligated not to
comment.
A "FRESH" EXPANSION
Though Amazon Fresh has been operating for five years, it is today only available in Seattle, San Francisco, and Los Angeles.
However, Amazon plans to expand the grocery business to between 30 and 40 U.S. markets in 2014, according to Tompkins.
Tompkins said the private fleet network would commingle groceries with general merchandise, thus building the scale needed to
make ground shipping cost-effective and to offer a compelling value to customers, Tompkins said. It would also set in motion a
chain of events that would result in Amazon competing with FedEx and UPS.
The online grocery business, which is plagued with high fulfillment costs, is not considered a particularly attractive
enterprise on its own. However, Bezos has used Amazon Fresh as a proving ground to test a more ambitious delivery model rather
than as a way to build a national grocery footprint, according to Tompkins. By using his own vehicles to deliver groceries, Bezos
has been able to fine-tune his own delivery network and understand the pros and cons of leveraging his own infrastructure than
those of the incumbents, Tompkins said. Now Bezos is poised to apply that knowledge on a broader scale, Tompkins said.
Transportation costs remain a thorny issue for Amazon. Its shipping expenses in 2012, the most recent period that full-year
figures were publicly available as of this writing, rose to more than $5.1 billion, up from nearly $4 billion in 2011, according
to the company's 10-K filing with the Securities and Exchange Commission.
Shipping costs in 2012 exceeded shipping revenue by nearly $3 billion, according to the filing. Amazon generates much of its
shipping revenue from third-party merchants who sell products through the company's site and use its fulfillment services for
storing inventory, picking and packing, and shipping.
In the filing, Amazon said it expected its "net cost of shipping"—the ratio of shipping costs to revenue—to continue rising as
parcel rates increase and more customers take advantage of the company's delivery offerings such as "Prime," which charges a $79
annual fee for unlimited two-day deliveries. Amazon has said it is considering a $40 annual price hike for Prime subscriptions.
Not everyone believes Amazon will migrate from FedEx and UPS so quickly. Scott Devitt, Internet analyst for investment firm
Morgan Stanley & Co., said during a late February webcast that Amazon will continue to leverage the established delivery
infrastructure and will not become a disruptive force in the delivery market. Amazon will continue to use its enormous buying
power to extract favorable rates from its delivery partners and will see that as a more attractive alternative to building out its
own network, Devitt said.
Frederick W. Smith, FedEx's founder, chairman, and CEO, told analysts recently that only FedEx and UPS have the delivery
networks capable of efficiently handling the demands of Amazon and other e-commerce providers. Smith said his company, UPS,
and the U.S. Postal Service would remain at the forefront of e-commerce shipping for the foreseeable future.
Tompkins said that Amazon has been planning its strategy long before the well-publicized delivery problems that occurred during
the 2013 holiday season, when about five million of its shipments were not delivered in time for Christmas. Much of the fallout
was laid at the feet of UPS, though some have argued that Amazon erred by understating how many packages were coming UPS' way
toward Christmas day, thus overwhelming the Atlanta-based carrier's air network and triggering the backlog.
Amazon is still smarting from the fiasco, however. The company's fulfillment executives believe UPS and FedEx are not investing
enough in equipment, infrastructure, and other resources to keep up with Amazon's growth, according to a person familiar with the
matter.
These days, every move in the e-commerce space is significant because of its enormous potential. E-commerce has penetrated just
10 percent of the U.S. market, and between 6 and 7 percent of the global market, according to Morgan Stanley estimates. Based on
projected annualized growth rates of 15 percent, e-commerce could be a $1 trillion worldwide business by 2016, according to the
firm.
Economic activity in the logistics industry continued its expansion streak in October, growing for the 11th straight month and reaching its highest level in two years, according to the most recent Logistics Managers’ Index report (LMI), released this week.
The LMI registered 58.9, up from 58.6 in September, and continued a run of moderate growth that began late in 2023. The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
October’s reading showed the fastest rate of expansion in the overall index since September of 2022, when the index hit 61.4. The results show that the industry is continuing its steady recovery from the volatility and sluggish freight market conditions that plagued the sector just after the Covid-19 pandemic, according to the LMI researchers.
“The big takeaway is that we’re continuing the slow, steady recovery,” said LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. “I think, ultimately, it’s better to have the slow and steady recovery because it is more sustainable.”
All eight of the LMI’s indices grew during the month, with the Transportation Prices index showing the most growth, at nearly 6 points higher than September, reflecting increased activity across transportation markets. Transportation capacity expanded slightly during the month, remaining just above the 50-point threshold. Rogers said more capacity will enter the market if prices continue to rise, citing idle capacity across the market due to overbuilding during the pandemic years.
“Normally we don’t have this much slack in the market,” he said. “We overbuilt in 2021, so there’s more slack available to soak up this additional demand.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”