The Friday Report: October 25th, 2019

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

Big Box Giant Best Buy Announces Free Next-Day Delivery

Armed with new ammunition in the peak season retail wars, Best Buy revealed it will be offering free next-day delivery for total purchases exceeding $35 with the exception of My Best Buy Elite and Elite Plus members.  The new offer is applicable for small to medium-sized products that are easy to ship.  Larger products including big-screen televisions, major appliances, etc. are excluded.

In areas where next-day shipping is unavailable, Best Buy customers will receive free standard shipping, regardless of the amount of purchase.  Consumers will be able to shop and buy online and pick up their purchases in retail store locations as well.

In studying the issue of next-day delivery, the retailer determined that 70 percent of American consumers live within 10 miles of a Best Buy location.  Currently, 40 percent of orders that are placed online are picked up in stores (buy online pick up in store is commonly known in the industry as BOPIS).  Using these two facts, Best Buy hopes to leverage its brick and mortar footprint to compete more effectively with Amazon, similar to the tactics now employed by Walmart and Target.

70% of American Electronics Manufacturers Suffered Lower Profit Margins Due to Tariffs

With the U.S.-China trade war in full swing, tariffs are having a demonstrable impact on U.S. electronics manufacturers.  Of the U.S. manufacturers that responded to a study by IPC, a trade association which connects the electronics industries:

  • 86% are concerned about increased tariffs and “face a steep financial burden from the tariffs that have been put in place”.
  • 21% report that they are investing less in the U.S. and hiring fewer workers due to the higher tariffs
  • 13% stated that they are paring down on hiring and/or reducing their current headcount
  • 55% indicated that they are encountering higher prices due to import tariffs, however more than 33% cannot increase their pricing to cover the cost of the import tariffs
  • 65% of companies are raising prices or passing along higher tariff costs to customers
  • 25% report that it would take more than 6 months to raise prices, making it impossible to change pricing in the short term to cover increased tariffs
  • 69% report lower profit margins due to increased tariffs
  • 80% of those reporting reduced investment in the United States also reported lower margins
  • 51% of respondents are sourcing from countries outside of China due to tariffs on Chinese imports
  • 19% are moving manufacturing and potentially other business interests to countries other than China

Data from American Trucking Associations Shows More Drivers Needed in 2018 to Meet Demand

A review of data through the end of 2018 revealed that the entire freight sector was short nearly 61,000 drivers to meet the existing demand.  Typically during the past 15 years, the shortage of truck drivers has risen and fallen along with economic trends.  Last year, the shortage was more acute, reaching the highest level seen to date.

Factors including the shortage of qualified truck drivers and a surging freight economy seem to have taken their toll.  The demand for freight services is anticipated to continue to grow as more truck drivers retire due to age and other factors.  Replacement drivers are not easy to find. 

Industry experts project that the industry may be short 160,000 truck drivers by 2028.

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