Week of October 14th 2024 Industry Insights

1.   UPS prepares 5.9% rate increase starting at peak season’s end

UPS will increase shipping rates by 5.9% on December 23, 2024, aligning with FedEx’s rate hike but earlier in the peak holiday season. The increase supports service enhancements, and the actual impact will depend on package characteristics like weight and distance. Additional surcharges will apply to certain ZIP codes starting October 21. UPS will also adjust surcharge calculations on January 27, 2025, for large packages and handling fees. Continued discounts may soften the impact for some shippers.

2.   UPS getting more elbow room at Gary/Chicago airport

UPS is expanding its cargo capacity at Gary/Chicago International Airport, with a $26 million project that includes a new apron, jet fuel pipeline, and deicing facility. The upgrades aim to support future growth and attract other cargo airlines, though UPS is currently the primary tenant. The first phase of construction will be completed by October 2025, funded by federal and state sources. This expansion provides UPS with more room for freighters and improves efficiency, positioning the airport as a potential logistics hub.

3.   Amazon airline sells excess cargo capacity to third-party shippers

Amazon Air is selling excess cargo capacity to third-party shippers through its new Amazon Air Cargo website. This move allows freight forwarders and other businesses to book air cargo space on Amazon's fleet, marking a shift toward competing with FedEx and UPS for domestic airfreight. The service is available across North America, Europe, and India, offering shippers flexible options, including reserving space or chartering entire aircraft. Amazon aims to capitalize on its logistics network and expand beyond its core e-commerce business.

4.   Inside UPS’ push to double its healthcare logistics business

UPS is aggressively expanding its healthcare logistics business, aiming to double revenue to $20 billion by 2026. This growth combines in-house expansion and acquisitions of companies specializing in temperature-controlled logistics, such as Bomi Group and MNX Global Logistics. UPS is focusing on both organic growth, particularly in Europe, and inorganic growth to rapidly scale operations. Healthcare offers UPS more consistent and profitable revenue than e-commerce, with stable demand and high-margin services. The UPS Premier service enhances visibility and control for sensitive healthcare shipments.

5.   Lawmakers urge FDA to consider broad exemptions from DSCSA to minimize supply chain disruptions

Lawmakers are urging the FDA to grant broad exemptions from drug shortage reporting requirements, specifically for products with limited production or minimal market impact. The proposal aims to reduce regulatory burdens while ensuring that essential drug shortages are still properly managed. These recommendations come amid ongoing concerns about drug availability and supply chain challenges.

6.   Trucking contract rates rise ahead of peak season

The trucking industry's contract rates are increasingly aligning with spot rates, as carriers replace expiring high-cost contracts with more favorable agreements amid falling demand. This shift is providing relief to shippers and helping carriers maintain profitability. The trend reflects the broader market conditions where spot rates have dropped, creating opportunities for companies to renegotiate contracts at lower prices. The transition is expected to continue, with a positive impact on shipping costs in the coming months.

7.   Post-US port strike, fashion reckons with supply chain vulnerabilities

The recent East and Gulf Coast port strike ended on October 3 after three days of disruption. However, the incident highlights ongoing vulnerabilities in fashion's global supply chains. These challenges remain a concern for the industry, even after labor disputes are resolved, as they underscore the fragility of logistics in fashion.

8.   Strike surcharges disappear as spot rates for US West, East coasts near parity

Spot rates for shipments to the U.S. West and East coasts are nearing parity as strike-related surcharges have been removed. The disappearance of these surcharges reflects stabilization in the supply chain and shipping rates. The shift comes after labor issues impacted port operations, but rates are now normalizing across both coasts, offering relief to shippers affected by previous disruptions.

9.   Porch Pirates Are Stealing AT&T iPhones Delivered by FedEx

Porch pirates have been targeting FedEx packages containing AT&T iPhones, stealing them shortly after delivery. Investigators believe thieves are using tracking numbers to time their thefts, with the lack of signature requirement on AT&T deliveries making these packages particularly vulnerable. The swift and coordinated nature of these crimes has raised concerns about the security of high-value shipments.

10. Pharmacy deserts are appearing across U.S. as Rite Aid, Walgreens, CVS drug store closures spread

Drugstore closures are creating "pharmacy deserts" across the U.S., particularly impacting rural and low-income urban areas. Major chains like CVS and Walgreens are closing stores due to financial pressures and evolving retail strategies, leading to concerns over reduced access to medications and healthcare services. These closures disproportionately affect vulnerable communities, worsening healthcare inequities. The shift in the retail pharmacy landscape highlights challenges in maintaining local access to essential healthcare services.

11. Another rough year for department stores

Macy’s, Kohl’s, and Nordstrom are focusing on turnaround strategies that include store closures to manage costs and boost profitability. These department stores are adapting to changing retail environments by closing underperforming locations, refining store formats, and enhancing digital efforts. The goal is to address shifts in consumer behavior, which have impacted foot traffic and sales. This restructuring aims to create a more efficient, profitable business model moving forward.

12. Maersk Alexandra starts shipping giant’s long voyage to zero emissions

Maersk launched its fifth dual-fuel methanol vessel, the Maersk Alexandra, marking a step toward zero-emission shipping. Despite the vessel’s capability to run on methanol, its use is limited due to the fuel's scarcity and high cost. Maersk is urging international bodies to reduce the price gap between conventional and green fuels. The ship’s christening signals Maersk's ambition to introduce 170 eco-friendly vessels, though broader industry adoption will require more affordable and accessible green fuel options.

13. Pitney Bowes launches e-commerce shipping platform

Pitney Bowes has introduced ShipAccel, a new service aimed at enhancing e-commerce delivery speeds by improving efficiency in sorting and transportation. ShipAccel is designed to help retailers and brands provide faster delivery at lower costs by leveraging Pitney Bowes’ logistics network. The service is part of the company’s strategy to strengthen its position in the growing e-commerce shipping sector, responding to the increasing demand for faster and more reliable delivery solutions.

14. Over 600 layoffs hit supply chain firms in California, Illinois and New York

Over 600 layoffs have hit supply chain companies in California, Illinois, and New York. Amazon, DHL, and GXO are among the companies closing facilities and reducing headcount due to factors like facility closures, contract losses, or strategic acquisitions. Amazon's Chicago fulfillment center will close, affecting 211 workers, while DHL is shutting down a site in Illinois, laying off 106 employees. These layoffs reflect ongoing shifts in the logistics sector as companies optimize operations.

15. After more than 3 decades, NRF won’t publish its annual shrink report this year

The National Retail Federation (NRF) will not release its annual retail shrink report for 2024, marking a shift in how retail loss data is shared. This decision comes amid increased attention to theft and loss prevention in the retail industry. The NRF cited the need to review how it collects and reports such data, leaving a gap in widely used retail metrics for this year.

16. Heavy frontloading sets up US-Asia trade for falling rates, imports

Heavy frontloading of imports from Asia into the U.S. has led to an oversupply of goods, causing spot freight rates to decline. Importers have been rushing to bring in goods early, anticipating potential disruptions and taking advantage of lower costs. However, this buildup in inventory is expected to push rates down further as demand tapers off. The market is adjusting to this trend, with expectations of falling rates through the remainder of the year.

17. Mexico Wants to Curb Chinese Imports With Help From U.S. Companies

Mexico is seeking to reduce its dependence on Chinese imports by collaborating with U.S. companies to boost local production and attract investment. This strategy aligns with Mexico's broader goal to strengthen its manufacturing sector and integrate more deeply into U.S. supply chains. The effort is part of a larger shift driven by trade tensions and supply chain disruptions, positioning Mexico as a nearshoring hub for North American companies seeking alternatives to China.

18. Savannah working through anchored vessels in wake of strike, weather disruption

The Port of Savannah is working through a backlog of anchored vessels caused by recent labor strikes and weather disruptions. These delays have impacted operations, but the port is making progress in clearing the congestion. The disruptions have contributed to challenges in supply chain flow, and the port is focusing on recovering its normal operational efficiency in the coming weeks.

19. The ILA strike is over. What should shippers prioritize now?

The recent strike by the International Longshoremen’s Association (ILA) has ended after a three-day walkout, affecting East and Gulf Coast ports. Although operations have resumed, shippers are advised to expect residual delays as ports work through backlogs. The disruption highlights ongoing vulnerabilities in labor relations at U.S. ports, which could continue to impact supply chains. Shippers should remain vigilant and plan for potential future delays.

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