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Like many parcel carriers, UPS has turned to radical means to mitigate the fallout of a stubbornly low parcel environment. Last week, the carrier announced significant layoffs at key sortation facilities on the East Coast, building on cuts already implemented in the Western U.S. While the cuts were expected as part of the carrier’s efforts to reduce its workforce by 12,000 personnel throughout the first half of 2024, they underscore the carrier’s urgent need to match capacity to shrinking demand.
But it’s not all bad news in the global supply chain: J.B. Hunt has announced that it will acquire retail giant Walmart’s intermodal assets as part of a new deal with the company, and the Biden administration is taking historic steps to bolster cybersecurity at U.S. ports. Here's what you need to know in an industry that’s always moving.
Following an announcement of plans to reduce their workforce by 12,000 employees over the course of 2024, UPS has announced further cuts at key sortation facilities, in addition to previously announced cuts at facilities in the Western U.S. In a February 20 report, Supply Chain Dive wrote that the carrier plans to cut shifts at sortation facilities in New York, Rhode Island, and Virginia. Per a Worker Adjustment and Retraining Notification, or WARN, notice, the cuts will impact roughly 130 workers.
“We often evaluate our operations and flex our network to meet volume demands,” UPS spokesman Jim Mayer said in a statement obtained by Supply Chain Dive. “This allows us to continue delivering industry-leading service while also maintaining competitive prices.”
On Feb. 22, transportation and logistics provider J.B. Hunt revealed that the transportation services provider would acquire retailer Walmart’s intermodal assets as part of a long-term intermodal deal. In addition to acquiring intermodal assets, the deal includes volume and capacity commitments to help support Walmart’s expanding operational needs.
“Today’s announcement is a testament to the mutual trust and shared vision our companies have developed over time, and innovative arrangements like this one demonstrate J.B. Hunt’s disciplined approach to strategically allocating capital to advance our mission of driving long-term value for our people, customers and shareholders,” Spencer Frazier, J.B. Hunt’s executive vice president of sales and marketing, said in a Feb. 22 report from FreightWaves.
To bolster cybersecurity at U.S. ports, President Biden plans to sign an executive order ensuring that port assets properly adhere to international and industry standards for safety. In addition, the executive order will see all maritime cyberattacks reported to the U.S. Coast Guard Cyber Command. Once received by the USCG, information regarding attacks will be relayed to the relevant government agencies. One asset targeted in the new regulations is ship-to-shore cranes manufactured by Shanghai Zhenhua Heavy Industries Co., which administration officials worry could be used for surveillance by the Chinese government.
“With over $5.4 trillion in economic activity and over 90% of overseas trade moved through our ports, a cyberattack could cause a cascading impact to both our domestic and global supply chains,” a senior Biden administration official said, according to reporting from CNBC.
Middle Eastern logistics companies have reportedly expressed interest in purchasing German logistics provider DB Schenker, a prominent player in global logistics. Potential buyers include logistics companies and private equity firms, including UAE-based DP World and ADQ. Additional potential buyers from outside the UAE include Saudi Arabian logistics provider Bahri, which owns considerable assets in the region.
“ [...] The German government has some reservations about selling Schenker to non-European companies, owing to security concerns,” reports The Loadstar. “But it is also after a large pile of hard cash, which may swing the deal in the end – and it is expected that an Arab investor may be able to offer the most money. “
Despite significant increases at the Ports of Los Angeles and Long Beach–both of which saw significant increases in YoY volumes in January–intermodal logistics provider J.B. Hunt says a similar increase has failed to materialize. Furthermore, the logistics provider says recent bids for its intermodal and asset-light services have been “very competitive.” While there is some uncertainty about how the bidding landscape will look in the coming months, a competitive bidding landscape indicates that service pricing remains under significant pressure.
“Pricing in the one-way parts of our business … are unsustainable. The market has to give,” J.B. Hunt President Shelley Simpson said at the Barclays investor conference on Wednesday, according to reporting from FreightWaves. “Our cost and the inflation around our cost in the lowering price environment just does not bode well from a market perspective.”
DHL, a major transportation and logistics provider, has moved its Virginia operational base in Norfolk to a larger facility. The new facility, roughly twice the size of DHL’s prior facility in the region, represents a $7.3M investment in DHL’s operations on the U.S. East Coast. With the new facility, DHL hopes to provide faster processing times, allowing for later cutoffs for shippers in Virginia.
“Through this new facility, DHL is thrilled to expand and improve its capabilities for international shippers within one of the nation’s largest export markets and continue to help customers — both large and small — capitalize on business growth opportunities beyond our borders,” said Nemer Abohasen, vice president and general manager of DHL Express, according to reporting from FreightWaves.
Retail giant Walmart has seen success in its efforts to lower the cost of store-to-home delivery. In a Feb. 20 earnings call, Walmart EVP and CFO John David Ramey announced that recent measures saw costs for last-mile deliveries fall by 20%, up from 15% in November. During the earnings call, Ramey attributed the success to improving delivery density in the last mile, with providers making more deliveries along assigned routes.
“We've lowered last mile store-to-home delivery cost by about 20% in the last year, even as we've shortened delivery times to same day from around 90% of stores,” Ramey said. “Combining the fulfillment efficiencies with the improved product margins of e-commerce, we far exceeded the 200 basis point goal we outlined at our investor community meeting and lowered e-commerce losses by more than 40% versus last year's level.”
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