With labor unions across the logistics industry gearing up for difficult battles and profit margins narrower than ever, logistics providers are forced back to the drawing board. From Amazon's implementation of a never-before-seen fee structure on peak season shipments to the pharmaceutical industry's forced adaptation to new legislation, this was a week of significant shifts within the logistics industry and beyond.
As temperatures across the country soar, UPS drivers are getting fed up with the lack of air conditioning in vehicles and warehouses. As People Magazine reported, "A UPS driver was pronounced dead after being found unconscious in his truck during a delivery in Southern California in July, when temperatures in the area reached the upper 90s." With the current contract–which covers nearly 350,000 workers, and constitutes the largest labor contract in the country–set to expire in a year, UPS is searching for solutions to help their workers beat the heat before heading into negotiations in 2023.
Like many last-mile service providers throughout the logistics industry, FedEx ground suffers the consequences of high inflation. Ongoing high fuel costs and shrinking margins have left the last-mile delivery solutions provider in a difficult position. As Spencer Patton of Route Consultant said to Fox Business, "We've seen our fuel prices double in a year. We've seen our wage rates up, our vehicle costs up…and I'm sounding the alarm that the risk of network interruption in FedEx Ground is as high as I've ever seen it." Logistics experts warn that if the issues surrounding delivery at FedEx aren't resolved soon, they could have significant effects on the holiday shipping rush.
In a break from form, Amazon has announced the implementation of a peak season fee for third-party sellers. The fee, which will extend from Oct. 15 to Jan. 14, will consist of an average charge of $0.35 for each item sold through fulfillment by Amazon (FBA) in the U.S. and Canadian markets. With the implementation of a peak season and holiday shipping surcharge, Amazon joins UPS and FedEx in addressing rising operational costs through surcharges and fees on specific peak season shipments. However, as SupplyChainDive reports, "Amazon told sellers that despite the added peak season charge, its fulfillment fees will remain 70% less expensive on average than comparable two-day shipping alternatives."
In a welcome sign for shippers, the benchmark diesel price has fallen by 90 cents after its 8th straight drop, despite strong diesel futures predicting otherwise. The Department of Energy's Energy Information Administration, which serves as the basis for most fuel surcharges within the logistics industry and beyond, was down by 8.2 cents early in the week to $4.91 per gallon. This price–the culmination of 8 consecutive drops–represents the most affordable diesel rates since March. FreightWaves reports, "The sharp declines are going on almost independent of what is happening in rising diesel futures and wholesale markets, as retail prices move toward levels more in line with historical levels relative to wholesale prices."
In a party-line vote, the U.S. Congress voted to grant Medicare the ability to negotiate with pharmaceutical manufacturers to lower the cost of prescription drugs as part of President Biden's Inflation Reduction Act. This decision, which came as a blow to the powerful pharmaceutical lobbyists that have stymied attempts at legislation for years, now leaves the pharmaceutical industry scrambling to minimize the bill's effect. However, though the fight in Congress may be over, HealthCareDive reports, "The pharma industry spent heavily to lobby against the bill and, after decades of forestalling action to curtail the industry's pricing power in the U.S., its main lobbying group signaled the fight would continue."
As food prices continue to rise across the globe, the U.S. food distribution system finds itself in a difficult position. According to reporting from FreightWaves, "Demand for food has increased as lockdown measures have waned because consumers feel less pressure to stretch out whatever food they might have in the fridge or pantry. But at the same time, inflation has caused the U.S. food price index to rise more than 14% higher than its average between 2014 and 2016." This leaves food distributors in a difficult position, stocking more food to meet higher demand while still working within the tight budgetary restraints created by ongoing inflation. Without ubiquitous, complete supply-chain visibility insights, the food distribution industry will likely continue to struggle with allocation issues.
With significant shifts set to rattle an already shaky supply chain, your business needs data you can trust. With freight auditing and recovery, contract optimization, full-suite analytics, and on-hand advisory services, Intelligent Audit can help your business weather the worst a volatile logistics industry has to offer. Start a conversation with Intelligent Audit today, and see over 20 years of experience in freight audit & payment, backed by business intelligence & analytics to provide shippers with the information they need to make the best decisions for their shipping.
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