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This Week in Logistics News (August 13 – 19)

By August 19, 2022Uncategorized

Some spices are meant to be grown and used year-round. Personally, I’m a fan of a few that I grow in my garden, such as mint, basil, and chives. Then there are the store-bought standbys, such as oregano, onion granules, garlic granules, and the basis of almost all recipes (along with salt), pepper. Using salt and pepper alone is the true test of chef, at least in my humble opinion. However, there are seasonal spices that some people love, and apparently, we are already in one of the most controversial seasons: pumpkin spice season. Nineteen years ago, Starbucks introduced Pumpkin Spice Latte to the world and the flavor has since pushed the start of fall into early August. And this year is no different. 7-Eleven was first out of the gate, bringing back its Pumpkin Spice Latte and Pumpkin Spice Coffee on August 5th for the “unofficial” start of fall. Krispy Kreme, Dunkin’, and just about every breakfast brand is jumping on the bandwagon to bring pumpkin spice to the forefront. Sadly, I even saw an ad for “Pumpkin Spice” Jordan’s this week. Personally, I can’t touch pumpkin spice until at least October, if at all. Instead, I prefer the basics, like regular coffee and the simple pleasure of salt and pepper. And now on to this week’s logistics news.

USPS is raising rates on packages during the holiday season
Amazon is raising seller fees for the holidays
Walmart’s supply chain woes
Uber Eats teams up with Office Depot for on-demand school supplies
Facing supplier constraints, Aurora delays autonomous truck launch
Kinaxis acquires MPO
Grocery trade group prepares for 2023 launch of stricter food tracing regulations
Cost of trucking grows to record high

Last week I wrote that FedEx is implementing peak season surcharges earlier this year than previous years. Using the Postal Service will be more expensive during the holiday season as well. The USPS announced this week that it is raising rates for commercial and retail parcels from early October through late January. Postal officials said the surcharge was necessary to keep rates competitive. The Postal Service generally does not receive taxpayer funding, but Congress restructured its finances this year to relieve $107 billion in past-due and future obligations. The agency relies on the sale of postage products to fund its operations, but Postmaster General Louis DeJoy said that the agency was facing a $60 billion to $70 billion shortfall over the next decade without substantial revisions and price hikes. Retail customers will see increases ranging from 30 cents to more than $6, depending on the weight of the package and the distance it must travel.

As inflation continues to raise operating costs, Amazon is looking at ways to recoup some of these costs. The company announced that it is planning to raise fulfillment fees during the holiday season, passing off some of its increased costs to the millions of merchants who rely on the site to sell their products. Starting October 15, and running through January 14, third-party sellers who use Fulfillment by Amazon (FBA), will have to pay 35 cents per item sold in the US or Canada. For merchants using FBA, Amazon handles the process of picking, packing, and shipping items. The holiday fee comes on top of existing charges that sellers pay for using FBA services. Those costs vary depending on an item’s size, category, and weight. This is the first time Amazon has hiked seller fees for the holidays.

Walmart is facing some serious supply chain issues. On Monday, Walmart had a call with financial analysts to discuss their second quarter earnings. Walmart has about $1.5 billion in inventory that “if we could just wave a magic wand, we’d make it go away today,” said chief financial officer John David Rainey. Walmart estimates that inventory is still 15 percent above optimal levels. Clearing the inventory will still take a couple of quarters. Categories with excess inventory include apparel, electronics, and home and sporting goods. To cut the inventory, the company has slashed prices on overstocked items. Clearing the stale inventory has helped the world’s largest retailer relieve pressure on their stores and through their supply chain.

“We’ve also cancelled billions of dollars in orders to help align inventory levels with expected demand.”

Uber Eats want to deliver a lot more than food these days. The company is teaming up with Office Depot to bring on-demand office and school supplies to the Uber Eats platform. It’s the latest effort by the ride-hailing company to diversify its delivery options beyond takeout and groceries. Starting this week, Uber Eats customers can place orders from 900 Office Depot and OfficeMax locations across the country. In addition, members of Uber’s monthly subscription service, Uber One, will receive special benefits, like free delivery and a 5 percent discount on all orders with a $15 minimum purchase. Uber has been pushing into new delivery categories for several years as it seeks to broaden its selections as a way to better compete with rivals like DoorDash, Grubhub, and Instacart as well as the new crop of ultra-fast grocery startups. To help fuel its grocery delivery expansion, Uber has acquired a number of smaller startups in recent months, including Postmates, Cornershop, and Drizly.

The race for autonomous trucking is on, but for one company, the race just slowed down. Aurora Innovation, one of the startups pushing for autonomous truck commercialization, postponed the launch of its self-driving vehicle by a year due to delays in securing tier 1 suppliers for truck hardware. The company was aiming for a 2023 rollout, but CEO and co-founder Chris Urmson said that “supply chain constraints” have hindered the company’s ability to scale production. The delays caused Aurora to revise its expectations for producing road-ready trucks until the first half of 2024. Aurora and its partner Paccar worked to secure key supplier contracts during the first half of this year, which Urmson said would be a “major point of schedule risk reduction” going forward.

Kinaxis, a supply chain management software company focused on sales and operations planning, capacity planning, demand planning, inventory planning, and supply planning, has agreed to acquire MPO, a European headquartered company that offers a unified global cloud-based SaaS platform for multi-party orchestration of orders, inventory and transport. The deal will bring together the power of MPO’s supply chain execution with Kinaxis’ supply chain planning. In the deal, which closed on August 15, Kinaxis acquired all the shares of MPO for approximately $45 million, consisting of approximately 75 percent cash and 25 percent equity consideration. MPO will continue to operate as a standalone company. Sampford Advisors acted as exclusive financial advisors to Kinaxis for this acquisition. Finch Corporate Strategy Services acted as exclusive advisors to MPO.

Food retailers and their freight carrier partners will face new technical, financial, and operational requirements that will be phased in starting in 2023 when safety regulators formalize a list of 16 sensitive food types that must be kept in precise temperature ranges during transportation. Known as Section 204, the new list from the U.S. Food and Drug Administration (FDA) will add to current mandates under the Food Safety Modernization Act (FSMA) that require shippers and carriers to ensure that certain foods stay cool during transit. The change will happen in January 2023, 60 days after the final rule is published this November, but the FDA will give companies a period of two years to comply. The FDA compiled its list by comparing the risk factors for a wide range of food types, based on their frequency of outbreaks, severity of illnesses, likelihood of contamination, and other factors. The resulting list of 16 “high risk foods” incudes certain cheeses, vegetables, fish, crustaceans, and ready-to-eat deli salads.

According to The American Transportation Research Institute’s (ATRI) 2022 update, the total marginal cost of trucking grew by 12.7 percent in 2021 to $1.855 per mile, the highest on record. Leading contributors to this increase were fuel (35.4 percent higher than in 2020), repair and maintenance (18.2 percent higher than in 2020), and driver wages (10.8 percent higher than in 2020). On a cost-per-hour basis, costs increased to $74.65. The trucking industry experienced many new, atypical market conditions in 2021 and their effects can clearly be seen in the Ops Costs data, according to ATRI officials. Overall, fleets with 100 or fewer trucks spent 4.9 cents more per mile than fleets with more than 100 trucks – closing the 2020 gap with larger fleets by 70 percent. While larger fleets spent less than smaller fleets on insurance premiums per mile, the advantage was offset by higher out-of-pocket incident costs per mile for large fleets.

That’s all for this week. Enjoy the weekend and the song of the week, Pepper by the Butthole Surfers.

The post This Week in Logistics News (August 13 – 19) appeared first on Logistics Viewpoints.

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