Supply Chains Beware: FedEx Cuts, Labor Disputes, China's Peru Power Play, and More

Get ready for a trip through this week’s supply chain shakeups. We'll zip from FedEx slashing European jobs in the face of tough conditions to customs cracking down on low-value imports - leaving shippers like Seko scrambling. Then it's off to Peru, where a massive Chinese port promises booming trade, but at what cost to locals? Back in the U.S., California is pushing for zero-emission trains by 2035, igniting a fiery debate over derailing economics versus sustainability. The East Coast ports are frozen in tense labor talks as automation looms, while one staggering $47 million court ruling against Schneider National has the entire trucking industry rethinking driver training. We'll wrap up in Michigan, where a Supreme Court ruling exposed the risks of inflexible blanket supply contracts when markets shift. From job cuts and compliance chaos to game-changing infrastructure and legal landmines, let’s begin this week’s prime-time drama.

FedEx's Job Cuts in Europe: A Strategic Response to Industry Challenges

In response to the slowdown in global shipping and the challenging conditions, FedEx announced plans to cut between 1,700 and 2,000 jobs in Europe. Is this as big of a deal as it sounds and tell a piece of a larger story?

Streamlining for Efficiency

The market’s an unforgiving place these days. Naturally, FedEx is on a mission to cut operational costs, including closing some stations and offices, reorganizing its Ground and Express services, and slashing its global workforce. The latest job cuts will affect mainly the European back-office and commercial teams and focus on consolidating operations in locations that align well with FedEx's strategic needs and real estate holdings.  

The Cost and Future Savings

Even though this restructuring effort could cost FedEx between $250 million and $375 million through 2026, the company expects to save between $125 million and $175 million annually starting in 2027. With over half a million global employees, calling these cuts material is an understatement. As FedEx readies to release its fourth-quarter results on June 25, stakeholders and industry observers await bated breath.  

​​Tighter Controls on Low-Value Imports: What This Means for Shippers

The U.S. Customs and Border Protection (CBP) has tightened its grip on low-cost imports, and the international logistics world feels the shockwaves. Don’t believe that the CBP takes this seriously? Recently, big players like Seko Logistics found themselves sidelined from a vital import program because of it.

The Impact of Stricter Enforcement

CBP is eyeing the Entry Type 86 program, which allows quick entry for goods under the $800 de minimis tax and duty-free value. Historically, this has been a boon for e-commerce shippers, with over 60% of de minimis shipments processed under this program last year. But now, CBP is looking for discrepancies and risks, leading to suspensions for some brokers, including Seko Logistics, which moves over 14 million parcels monthly.  

What This Means for Shippers

For shippers, the message is clear: accurate logistics matter more than ever. With CBP pulling the filing deadline forward—to the point of shipment arrival—every detail counts. It's no longer just about getting goods across the border quickly; it’s about ensuring every i is dotted and every t is crossed. If your broker gets flagged, your shipments could get stuck or worse. Staying informed about your broker's compliance and being proactive with your shipping documentation will help keep your goods moving smoothly and prevent unexpected disturbances.

​Chancay Port: China's New Gateway in South America

China's $3.5 billion investment in Chancay, Peru, could create a new trade hub connecting South America with Asia. Yet, per usual, with much excitement comes much controversy and questions.

Big Ships, Big Changes

Huge ships, previously only seen in larger global ports, will now dock along the quiet shores of Chancay, making it the first South American port on the Pacific coast capable of handling such giants. For Peru and its neighbors, especially Brazil, the port could slash shipping times dramatically and open up faster and more efficient trade routes to Asia. For local businesses, like those farming avocados and blueberries, this means getting their goods to massive markets like China quicker and fresher than ever.

The Local Pulse: Excitement Meets Concern

While visions of trade and economic prosperity paint a positive picture, the actual situation for Chancay's residents is mixed. The construction has literally shaken their homes and disrupted the peaceful life they once knew. Many fishermen have seen their catches dwindle due to the construction's impact on marine life. On the other hand, some people have benefited. For instance, the port provides many farmers with access to thriving Asian markets, offering a potential boon for their crops.

​​California's Locomotive Regulation: A Crossroads for Rail and Road

California's new zero-emission locomotive mandate requires all trains entering California after 2035 to be zero-emission. With such a quick, sweeping change, there are more questions than answers. Will it lead the charge towards a greener future, or will it inadvertently shift the bulk of its freight traffic from rail to its already congested roads?    

The Impact on Railroads and Freight Costs

Freight railroads are sounding the alarm: the California Air Resources Board's (CARB) stringent new rule could not only oust older locomotives but inflate the cost of rail transport. The financial implications are vast, with nearly 70% of Class I locomotives rolling through California annually. Ian Jefferies from the Association of American Railroads highlighted on Capitol Hill that these costs will likely trickle down to consumers, driving up prices and adding undue pressure on public infrastructure. More trucks on the road could mean more congestion, accidents, and higher maintenance taxes—outcomes that could stretch far beyond California's borders.

The Debate Over Feasibility and Environmental Goals

While rail operators predict disruption and skyrocketing costs, environmental advocates see a step towards cleaner air and innovation in transport technology. Alan Abbs of the Bay Area Air Quality Management District argues that zero-emission rail isn't just feasible; it's already a reality in various parts of the world. Electrified rails, a technology over a century old, could be a blueprint for modernizing America's freight trains. Despite the industry's concerns about the feasibility of such a rapid transition and potential economic fallout, California has a decent track record of tightening environmental regulations and adapting.  

Stalemate at the Ports: Automation Sparks Labor Tensions

The conversation at major East and Gulf Coast ports has reached a standstill, with the International Longshoremen’s Association (ILA) pausing talks over a growing concern: automation. In other words, it's time to talk about the shipping industry's elephant in the room—how technological advances impact human jobs.

Job Security vs. Technological Progress

Automated truck gates are the main sticking point. APM Terminals and Maersk Line have implemented this technology at the Port of Mobile, Alabama, leading to a significant clash with the ILA. The union argues that these automated systems threaten jobs and violate existing agreements, prompting ILA President Harold Daggett to freeze negotiations. This standoff is not just about one piece of technology; it reflects a larger debate on how ports balance efficiency driven by automation with the livelihoods of their workers. The ILA is clear: talks can only continue once a solution protects jobs.

Potential Impacts on Shipping

With a critical contract deadline looming on September 30 and talks on ice, the shipping industry is bracing for possible disruptions. Unlike the smooth negotiations of previous years, 2022 is shaping to be fraught with uncertainty. Shippers are on edge, with some preemptively rerouting their cargo to West Coast ports to dodge potential headaches. These moves are not just logistical adjustments; they signal a deep concern across the industry about how unresolved labor issues could ripple out, affecting the ports and the entire supply chain.

​​Schneider National Hit with $47 Million Verdict: A Trucking Industry Red Alert

The trucking industry is in shock, and Schneider National faces the consequences. After a devastating accident highlighted the dangers of insufficient driver training and safety supervision, the courts held Schneider entirely responsible and slapped a $47 million judgment against them.

The Crash That Cost Millions

It was a normal morning in August 2017 until a devastating accident on Interstate 285 in Georgia claimed the life of 35-year-old Jarvis Nance. Darryl Joachim, a novice Schneider driver with only two months on the job, swerved across traffic lanes, setting off a deadly chain reaction. The jury's decision was straightforward and clear, pinning the blame entirely on Schneider and Joachim and awarding a staggering $47 million to Nance's family for their loss.  

A Wake-Up Call for the Trucking Industry

Schneider National's case is just the beginning. It should be a warning to the entire trucking industry. Companies must strengthen their training programs and properly prepare drivers to avoid similar issues. At the same time, this case also highlights the importance of technology in safety. The court questioned Schneider about their use of predictive analytics, emphasizing the need for practical application of such tools to prevent future tragedies in the real world.

​​Michigan Ruling Shakes Up Supply Chain Contracts: A Closer Look at Blanket Orders

To close this out, we’ll look at the Michigan Supreme Court's recent decision on the case between MSSC, Inc. and AirBoss Flexible Products Co. and how it highlights the complexities and risks associated with "blanket orders" in long-term supply contracts.

The Double-Edged Sword of Blanket Purchase Orders

Blanket Purchase Orders (BPOs) are common in supply chain management because they make ongoing transactions smoother and more efficient. They allow companies to negotiate terms once, place orders as needed without renegotiating the basics, cut administrative costs, and speed up the purchasing process. However, the Michigan Supreme Court's decision points out a critical flaw: if the contract lacks specific quantities, it can become a source of conflict if costs fluctuate or market dynamics change, as they did for AirBoss.

Adaptability and Fairness in Long-Term Contracts

The MSSC vs. AirBoss case shows how quickly business conditions can change and make existing contracts unfair or unworkable. Initially, both companies benefited from their agreement, adjusting terms as needed. However, the terms became unsustainable as AirBoss began losing $1 million annually by 2015. So what's the alternative? Contracts like relational contracts that are both stable and flexible enough to adapt to new realities. With built-in options for adjusting terms as conditions change, it begs the question: If AirBoss had used a relational contract, could they have avoided the losses and legal battles altogether?

Intelligent Audit: How to Survive the Brewing Storms

With all the events we covered this week, shippers must brace for an increasingly volatile environment. Rising costs, disruptive regulations, and rapidly advancing technology only scratch the surface. So with things changing faster than you can count to 5, working with top freight audit companies like Intelligent Audit and its solutions can be your' lifeline:

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