With peak season 2022 finally finished, shippers are beginning to look back at a challenging year. Declining volumes forced difficult decisions, and persistent capacity issues left shippers unable to meet high customer expectations. With old solutions quickly becoming obsolete, big-time transportation industry players like FedEx, USPS, and Amazon are eyeing new strategies to stay competitive in a difficult time for global logistics.
But that's not all: congressional intervention has logistics professionals breathing a sigh of relief, and a lettuce crunch is sandwiching quick-service restaurants between a rock and a hard place. In the industry that's always moving, here are the topics and trendings making headlines.
On Dec. 3, FedEx Freight began furloughing an undetermined number of drivers, according to reporting from FreightWaves. FedEx Freight, the largest LTL carrier currently operating in the U.S., has offered drivers $300, paid each week, to volunteer for furlough. While workers will not receive compensation until they return to FedEx, "Impacted workers will continue to receive health benefits and be allowed to file for unemployment benefits in their respective states of residence."
The furloughs signal ongoing trouble at FedEx Freight as the carrier continues to navigate the fallout from declining freight demand.
On Dec. 2, USPS revealed its latest delivery performance metrics for the eighth week of the first quarter of the fiscal year 2023. The average time to deliver a mailpiece or package across the postal network "was 2.5 days for the fifth consecutive week," according to its press release.
Performance scores varied across USPS services covering Oct. 1 through Nov. 25:
With new hiring and allocation strategies to optimize operations as part of its Delivering for America, a 10-year plan to achieve financial sustainability and service excellence, the postal service aims to "meet or exceed 95% on-time service performance for all mail and shipping products."
Peak-season shippers facing an inventory backlash are beginning to question just-in-time strategies that prioritize efficiency over all other transportation metrics. "While some believe that just-in-time has no place in the supply chains of the future, others say a modified version of the strategy will still be necessary to maintain resilience while keeping costs down," Supply Chain Dive noted in late November.
However, as geopolitical conflicts, falling volumes, and volatile fuel costs continue to threaten global supply chains, it remains unclear whether shippers will continue to embrace 'just-in-time' strategies or abandon the approach.
To attract customers amid falling freight volumes, megacarrier FedEx is introducing a space-and- pace pricing program for select customers. The pilot program will allow customers to quickly access quotes based solely on the size and shipping speed required for their package.
"With the simplicity of space and pace pricing, we aim to build confidence with our customers by ensuring they receive accurate pricing on the frontend in order to reduce the frequency of price adjustments and disputes on the backend," said Mike Lyons, Vice President of LTL Revenue Quality for FedEx, in a press release. However, after significant rate increases, it remains to be seen whether the pilot program will help FedEx hold on to customers weary of inflated shipping costs.
In its continued efforts toward complete independence from UPS and FedEx, e-commerce giant Amazon is working to increase air cargo capabilities. According to an article posted by Wired, the company owns 11 planes and leases about 100 others, flown by seven air carriers that make more than 200 flights daily out of 71 airports. "Nearly three-quarters of Americans in the continental U.S. live within 100 miles of an Amazon airport ... The story of Amazon Air demonstrates the lengths the company will go to keep its promise to customers and maintain its retail dominance."
In late November, House lawmakers took the bold step of forcing four hold-out unions, including the BMWED, BRS, IBB, and SMART-TD, to accept the September tentative agreement they had thus far refused to ratify. The deal, crafted and endorsed by the Biden administration, included wage increases and expanded health care. To appease the four reluctant unions, Congress amended the agreement to have seven days of sick leave, a central demand of union members in preceding negotiations.
According to reporting from Supply Chain Dive, the House's decision to force an agreement comes only two days after President Biden urged Congress to intervene, warning that "a rail shutdown would devastate our economy."
Last-mile delivery provider LaserShip/OnTrac has announced plans to increase ground rates by 6.9% in 2023. The rate increase will take place on Jan. 1, 2023, on the same day residential delivery fees will increase from $4.85 to $5.25. Andrew Townsend, chairman of the board at LaserShip/OnTrac, defended the rate hike: "Compared to FedEx and UPS, our express, e-commerce, and ground rates are very favorable" to critical weights and zones with those carriers."
As inflationary pressures increase on shippers faced with falling volumes, announcements of rate hikes are likely to continue throughout the new year.
Since the early days of the global supply chain, produce shippers have struggled to maintain freshness while getting products to supermarket shelves. PerfoTec, a Dutch packaging company, suggests shippers embrace laser micro-perforation technology to ensure freshness throughout transportation.
As Annette Hardeman, Financial Director of PerfoTec, said in an interview with Fresh Plaza, "Removing that moisture and CO2 improves the packaged product's quality and extends its shelf life. And that's a huge saving for the whole chain. Less food is wasted, which means less land is needed to grow the same quantity for retail. You also need fewer transportation boxes and less labor."
In another sign of inflation's pressure on food production, quick-service restaurants are struggling for ingredients. Chicken restaurant Chic-Fil-A has warned customers that "some items may be unavailable or prepared differently," and sandwich maker Subway has announced plans to temporarily use less lettuce in their sandwiches.
Dole's Chief Operations Officer Johan Linden, speaking during a Q3 earnings call, blames the shortage on large-scale crop failures, which have seen up to 40% of iceberg lettuce production decimated due to extreme heat.
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As more carriers continue to evaluate their last-mile delivery costs and customer experience for areas of improvement, UPS put "their money where their mouth was" by purchasing leading software-as-a-service technology Delivery Solutions.