The Friday Report: August 10, 2018

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Will Amazon Put 3PLs Out of Business?

Ratings agency Standard & Poors reacted to reports that Amazon is working to start its own in-house delivery function.  According to the industry expert, Amazon moving into the delivery lane is not anticipated to be a major threat to 3PLs, at least in the short term.  Should FedEx and UPS be worried?

According to a report in the Wall Street Journal, the e-commerce megastar is getting ready to launch a service they are calling “Shipping with Amazon”, also known as SWA.  The Shipping with Amazon service would pick up packages from businesses then ship them directly to consumers.  The rollout is anticipated to occur in Los Angeles.

Always looking forward, Amazon has seemed dissatisfied with having to rely on a small number of shipping carriers.  This has made it challenging for Amazon to negotiate favorable terms with the carriers while ensuring excellent performance and a solid customer experience.  Seeking to mitigate rising shipping costs through higher sales volumes, optimizing its fulfillment network and operating efficiencies, Amazon has also sought better terms with its suppliers to help keep costs under control. For Amazon, this would be an extension of its fleet to increase delivery capacity.  With its reportedly high case reserves, Amazon seems poised to gain control of its last mile delivery needs.

Get Ready for Grocery Delivery Wars

Targeting busy moms, workers with little time and consumers who are unable to visit the grocery store, Target, Walmart and Whole Foods/Amazon are getting ready to dash into the grocery delivery lane.  From Walmart’s internal personal shoppers who walk the aisles retrieving goods for online orders to Door Dash and Postmates, Walmart is poised to make sure that hungry consumers can get groceries home delivered quickly.  Walmart charges $9.95 for delivery and does not require payment of a membership or annual fee.  Service is currently limited to some markets.

Target announced its own offering using Shipt Delivery.  With a subscription of $100 annually, delivery from Target is free however small orders under $35 will require payment of a $7 delivery fee.  Target plans to offer delivery service in all stores by the 2018 holiday season.
For its part, an Amazon Prime membership now entitles members to free two-hour deliveries for orders above $35 from Whole Foods Market.  One-hour delivery will cost $8.  Home delivery services should be in place nationwide this year.


Trucking Shortage Hits Consumers’ Wallets

With its aging driver population, imposition of electronic logging devices and other challenges, the trucking industry has been showing increased pressure from the shortage of truck drivers.  Stressed by a shortage of “full truckload, over the road non-local drivers”, the industry has failed to attract millennials and Gen Z workers.  Add to that an annualized turnover rate of 94% and the problem becomes alarming.

With the high competition for qualified workers, trucking companies have been offering higher pay and signing bonuses.  According to the ATA, the median pay for truck drivers in this category is $59k and experienced truck drivers working for private fleets can earn as much as $86k annually.

For consumers, the problem is hitting home.  Shipping costs have risen 38% the first quarter of this year and profit margins have remained low, around 5% due to the extra money trucking companies are investing in recruiting new employees.

Consumers and trucking companies are hopeful that at least some of the pain can be relieved by new technologies including driver assistance systems and self-driving vehicles.

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