After a harsh winter for the transportation industry, supply chain professionals hope for a less volatile spring. However, forecasters have other things in mind. Predictions for the next quarter remain uncertain for a volatile air cargo industry, and USPS is shifting its strategy to focus on ground. Across the transportation industry, shippers are preparing to weather a stormy season in the transportation industry. Here's what you need to know in an industry that’s always moving.
To siphon volume from smaller carriers, UPS and FedEx have begun offering significant discounts to shippers willing to part ways with their regional carriers. While the competition between mega-carriers and regional companies has long been a feature of the industry, the extent of the price cuts makes recent competition stand out, according to reporting from FreightWaves.
Shopify’s CEO says his company’s partnership with Deliverr, a U.S.-based e-commerce fulfillment company, will be key to further differentiating Shopify’s services from Amazon, its primary competitor in the e-commerce space. “Some of the technology we got from Deliverr allows us to do this in a distributed way, and then tackle some things which Amazon and others have in terms of problems we don’t have,” Jeff Hoffmeister said during Morgan Stanley’s Technology, Media, and Telecom conference.
As the USPS adapts to falling volumes, the company is moving away from air cargo instead of investing in ground transport capabilities. “For the fiscal year ended Sept. 30, total transportation expenses increased 6.5% YoY — driven by a 12.8% jump in highway transportation costs,” Supply Chain Dive reported, citing the agency’s Form 10-K.
Postmaster General Louis DeJoy has recently expressed concern with the amount of investment the company has put into its air cargo capabilities, and hopes to move cargo from cost-intensive air cargo to more affordable ground transportation.
As FedEx continues to attempt to bolster revenues as volume falls, one strategy has paid off for the parcel giant. Last year, FedEx instituted a dynamic pricing model to draw more from peak season home delivery surcharges. The initiative, designed by FedEx’s Dataworks unit, helped generate an additional $150M in revenue, according to Supply Chain Dive.
After a significant restructuring of Air and Express operations, FedEx is seeing benefits on the bottom line, which has come in better than expected as Q3 2023 results were reported to investors. FedEx’s total revenue came in at $22.1B, just 6% below the same period last year, despite significant drops in volume. Despite this, FedEx’s CFO assured investors that all options are being considered to cut costs further. “Every dollar is under scrutiny,” said FedEx CFO Mike Lentz, according to reporting from FreightWaves.
California-based drone logistics company Zipline announced on March 15 plans to launch “Platform 2,” a drone delivery system that pairs recent advancements in drone technology with droids to provide streamlined delivery. According to a press release from Zipline, “Unlike other drone delivery services, Zipline’s drones (Zips) fly more than 300 feet above the ground and are nearly inaudible. When the Zip arrives at its destination, it hovers safely and quietly at that altitude. At the same time, its fully autonomous delivery droid maneuvers down a tether, steers to the correct location, and gently drops off its package to areas as small as a patio table or the front steps of a home.”
As falling volumes continue to trouble the air cargo market, spring 2023 offers a slight glimmer of hope for an ailing air cargo industry. Rising exports and a supply chain slowly recovering from the slowdowns surrounding Lunar New Year are helping demand—and rates—start a slow comeback.
Despite signs pointing toward recovery, however, the future remains uncertain. From FreightWaves: “[...] the outlook remains murky, with green shoots pointing to a second-half recovery against a backdrop of difficult economic conditions. If import/export activity grows, the likely beneficiary will be container shipping lines — not airlines. Plus, an influx of capacity from restarted international passenger services, combined with weak demand, is weighing on rates.”
Tyson Foods announced on March 13 plans to close poultry processing, broiler, and hatching facilities in Virginia and Arkansas. These closures will result in the loss of an estimated 1,700 jobs, according to Supply Chain Dive.
In attributing the closures to difficult economic realities, a spokesperson told The Wall Street Journal, “The current scale and inability to economically improve operations has led to the difficult decision to close the facilities.”
Retail prices have fallen for the sixth consecutive week. The Department of Energy/Energy Information Administration's price fell by 3.5 cents per gallon, contributing to a fall of 21.2 cents per gallon over six weeks. According to FreightWaves, the further decline points to a growing trend, rather than an exception: “Longer term, the price has been down 16 of the past 20 weeks, coming off a price of $5.341 a gallon on Oct. 24. That is a $1.094-a-gallon decline during that time.”
Despite shippers' hopes for a pleasant spring, the coming months seem to offer more of the same: volatile rates, unpredictable volumes, and a competitive transportation environment. With Intelligent Audit, shippers can access a vital toolkit of resources to navigate a high-stakes season in the transportation industry.
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