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This Week in Logistics News (January 27 – February 2)

By February 2, 2024Uncategorized

Today is Groundhog Day, a day that lets us know if we will endure six more weeks of winter or enjoy an early spring. In some sort or another, Punxsutawney Phil has been predicting the weather since 1890, and let’s just say that his record is iffy at best. During the “ceremony,” which begins well before the winter sunrise, Punxsutawney Phil emerges from his temporary home on Gobbler’s Knob, and according to the tradition, if Phil sees his shadow and returns to his hole, he has predicted six more weeks of winter-like weather. If Phil does not see his shadow, he has predicted an “early spring.” I assume that Phil tries to ignore the pomp and circumstance of how his shadow would determine the upcoming weather pattern, and just wants more sleep (like the rest of us on a cold winter’s day). But as of today, Punxsutawney Phil is calling for an early spring. While I like his optimism, I’ll believe it when I see it.  And now on to this week’s logistics news.

UPS to cut 12,000 jobs, bring workers in five days a week
Amazon aims to increase shipping speed after record-breaking 2023
Intermodal freight infrastructure set to receive millions from feds
Teradyne pulled $1 billion worth of manufacturing from China
Retail return fraud is rising
US carriers see cargo revenues slide in 2023

UPS plans to cut 12,000 jobs and explore the sale of its Coyote truck brokerage business in moves Chief Executive Officer Carol Tomé is taking to offset soft demand and higher union labor costs. The jobs reduction will save $1 billion this year, Tomé said on an earnings conference call with analysts on Tuesday. She also said the company planned to ask workers to return to the office five days a week in 2024. The shares fell as much as 7.6 percent in early U.S. trading. After registering a 9.3 percent drop in annual sales, UPS forecast a 2024 upswing of as little as 1.1 per cent. Soft demand in Europe and the US led to an overall decline of 7.5 per cent in fourth-quarter delivery volumes. Higher labor costs and lower package demand resulted in fourth-quarter sales and 2024 guidance that missed analysts expectations. UPS is seeking alternative strategies for its truck brokerage business, which has seen sales plummet amid a freight recession marked by declining rates and over capacity.

Amazon achieved its fastest-ever global shipping times last year but isn’t resting on its laurels. The online giant made deliveries in the shortest amount of time in its history on average during 2023 by focusing on initiative such as focusing on stocking inventory in regional fulfillment centers near last-mile delivery stations, shipping nearly 600 million more items from in-region fulfillment centers year-over-year in the fourth quarter of 2023. Amazon also expanded its same-day delivery service, adding nine new dedicated sites and serving 18 additional U.S. cities over the course of the year, bringing the total number to 110. The retailer plans to double the number of sites in the coming years and currently operates more than 55 dedicated same-day sites across the U.S. These smaller sites are hybrid—part fulfillment center, part delivery station.

More than $728 million is on the way to communities around the nation to bolster intermodal freight infrastructure. The money is coming through the U.S. Department of Transportation, which has selected 37 projects to be given funds made available by the Bipartisan Infrastructure Law’s (BIL) Mega Program and the Infrastructure for Rebuilding America (INFRA) Grant Program. Multiple members of the Intermodal Association of North America (IANA) were the recipients of the funds. The Mega Program, also known as the National Infrastructure Project Assistance program, funds large, complex projects that are difficult to fund by other means and likely to generate national or regional economic, mobility or safety benefits. Congress established the program in 2021 through the BIL and dedicated $5 billion to the program over a five-year period. The most recent awards were the second round of funding, worth roughly $2 billion.

Teradyne, a supplier of semiconductor testing equipment, pulled manufacturing worth about $1 billion out of China last year, a Teradyne spokesperson said on Monday, after U.S. export regulations led to supply chain disruptions. A factory in Suzhou was the company’s main manufacturing site for its semiconductor test equipment, which it subcontracted to Flextronics. Massachusetts-based Teradyne moved its production out after U.S. rules issued in October 2022 restricted exports to semiconductor manufacturing facilities there as part of an effort to keep U.S. technology from helping China’s military. Teradyne, which reports earnings on Tuesday, warned investors in its 2022 annual report about the potential impact of the October regulations, and in October 2023 said the restrictions hit both Teradyne’s sales to certain companies in China and its manufacturing and development operations.

As more consumers shop online and send back more of those orders, retailers have moved to crack down on fraud. In some cases, shoppers can send back different items than the ones they bought, return stolen items or claim a purchase never got delivered when it really did. Retailers estimate 13.7 percent of returns, or $101 billion worth, were fraudulent last year, according to a survey by Appriss Retail and the National Retail Federation. The share of returns expected to be fraudulent during the peak holiday season was even higher at 16.5 percent, or $24.5 billion worth, the survey found.

The big three US airlines saw their cargo revenues decline last year as rates and volumes came under pressure. United Airlines – the largest of the three in terms of cargo volumes – registered a 31.1 percent year-on-year decline in cargo revenues in 2023 to $1.5bn. At American Airlines there was a 34.1 percent fall for the year to $812m and at Delta Air Lines the decline was 31% to $713m. The fall came as airfreight rates were under pressure last year due to flat demand and increasing capacity as networks were re-established following the Covid pandemic. However, cargo revenue performance across all three airlines improved as the year progressed. In the fourth quarter, United saw its revenues decline by the lesser amount of 14.8 percent, at American there was a 24.2% fall and at Delta the Q4 decline was 24 percent. Meanwhile, volumes for the year at American were also down. The Dallas Forth Worth-headquartered airline registered a 6.7 percent year-on-year decline in cargo ton miles to 1.8bn, although this metric increased by 9.5 percent in the final quarter of the year.

That’s all for this week. Enjoy the weekend and the song of the week, Groundhog Day by Em Beihold.

The post This Week in Logistics News (January 27 – February 2) appeared first on Logistics Viewpoints.

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