Warehouse Wisdom. Weekly. 07/19/2024

Happy Friday!

Just when you thought the fireworks for the Fourth of July were over, a new kind of explosive situation rocked the freight industry. This time, it's not about celebrations but about a hijacked holiday haul.

Imagine an Illinois trucking company, Agility Express Inc., holding 36 confirmed loads hostage until ransom demands are met! Nearly two dozen freight brokers have had their companies targeted by this elaborate scheme just before the Fourth of July holiday. Rumor has it that the number of held loads could climb to around 50, costing a staggering $5 million.

So, as you hold on tight to your cargo tonight, let’s catch you up with this week’s newsletter. We will update you on June’s online retail sales, expected record-breaking sales of Amazon Prime Day, U.S. retail sales hold steady, Prologis reports strong 2Q, Maersk battles Red Sea disruptions, Port of Indiana to build sea container terminal, and more!

LOGISTICS VITALS

ONLINE RETAIL SALES CONTINUE TO BE THE CATALYST FOR GROWTH

Online retail sales in June skyrocketed, leaving total sales feeling a bit stagnant. According to data from the National Retail Federation's Retail Monitor and CNBC, online sales outpaced total sales by more than five times! Let’s look at the online and other non-store retail sales growth in June:

• 1.7% - month over month

• 23.08% - year over year

Despite growth in both online and total sales in June, consumers are sticking to buying the essentials due to high interest rates and lingering inflation. Looks like we're all stocking up on virtual shopping carts while the real ones gather dust.

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MARKETPLACES

AMAZON PRIME DAY RAKES IN OVER 14 BILLION AMID WORKER SAFETY CONCERNS; U.S. RETAIL HOLDS STEADY DESPITE ECONOMIC CHALLENGES

Amazon Prime Day made a lot of money - 14.2 billion, to be exact! This was not only the best result ever, but also represented an 11% increase over last year! So why did sales skyrocket this year? They're saying it's all about those juicy discounts between 9% and 22% off. Seems like Prime Day isn't just about snagging deals—it's practically a national holiday for savvy shoppers!

But, on the flip side, there is a dark side to Amazon Prime Day. It has been reported that Amazon Prime Day is also a cause of major injuries for warehouse workers. The report accuses Amazon of not sending injured workers for proper medical care to avoid having to report these incidents to OSHA. California even slapped Amazon with a $5.9 million fine for breaking the Warehouse Quota Law at two facilities.

And the overall economy seems to still be dealing well, despite inflation and uncertainty. U.S. retail sales stayed the same in June, with a drop in auto sales balanced out by strength in other areas. This shows consumers are hanging in there, boosting economic growth for the second quarter! Economists are cautiously optimistic, seeing strong consumer spending from wealthier households balancing out weaker trends in the lower-income groups. So, not all bad news, huh?

Even online grocery sales were up. Online grocery sales in the U.S. just hit $7.7 billion, a nifty 8% increase from last year. Delivery sales alone skyrocketed by 18% to $2.9 billion. David Bishop, the Partner at Brick Meets Click, says it's all thanks to those sweet deals from Instacart and Walmart and membership discounts. It's clear: convenience and savings are driving the grocery shopping trends.

WAREHOUSE LABOR

TRUCKING COMPANIES CONTINUE TO FIGHT AGAINST INDEPENDENT CONTRACTOR RULING

There may still be hope - trucking companies are still fighting the independent contractor rulings! Some Louisiana trucking companies and a moving and storage firm are not giving up the fight against the new U.S. Department of Labor rule on independent contractors. These companies, like Frisard’s Transportation, believe that reclassifying independent drivers as employees could put their whole operation at risk, costing them more money and taking away driver freedom.

They've now taken their case to the Fifth Circuit Court of Appeals, hoping for an injunction. The outcome of this battle will decide the fate of the rule, which now uses a six-factor test to determine whether someone is an employee under the Fair Labor Standards Act. Let's see how this all plays out.

COMMERCIAL REAL ESTATE

RURAL COMMUNITY FACES EVICTIONS FOR WAREHOUSE PARK AND PROLOGIS REPORTS STRONG Q2 RESULTS

Warehouse park forcing evictions from residential homes? That’s precisely what’s happening in California. Residents in a rural community in San Bernardino County are not happy about being evicted due to a new industrial business park. Residents in Bloomington are quickly offloading their properties for the warehouse project. On the other hand, renters claim they've been evicted without a say. The developer says this project will bring $500 million in total investments to Bloomington in over 30 years. But at what expense, though? And some states, like New York, are beginning to mount up resistance to mega warehouses.

And industrial warehouse demand is improving slightly despite the “uncertain macroeconomic environment.” Prologis, the big-name logistics warehouse operator, totally rocked the second quarter with core funds from operations at $1.34 per share. Despite the economic hurdles, they're feeling pretty good, mentioning a boost in customer demand and faith in growth, especially in data centers and energy (not warehouses). They've even upped their FFO guidance for the year, now looking at $5.39 to $5.47 per share.

FREIGHT & SHIPPING

TRUCKING INDUSTRY REVIVAL, GLOBAL SHIPPING WOES, AND PORT OF INDIANA SET TO EXPAND

Is the trucking industry finally turning the corner? It seems so, as the trucking industry is finally picking up speed after a rough patch following the Covid boom. Data from Motive shows that freight volume has shot up by 30% year-over-year in June. With less trucking capacity and more orders, logistics executives are confident the freight recession is ending, and rates will increase soon. While stocks for companies like JB Hunt, Knight-Swift Transportation, and Schneider National have been climbing, a recent lackluster earnings report from JB Hunt has added a touch of caution to the excitement.

J.B. Hunt's profit took a hit in the second quarter due to lower rates and freight volumes. They also had to deal with higher insurance and equipment costs. The company, often seen as a key player in the U.S. freight sector, only made $135.9 million, or $1.32 per share, compared to $189.6 million, or $1.81 per share, last year. Analysts were expecting higher earnings at $1.49 per share, but it didn't quite hit the mark.

And are we back to that $10,000 container again? The cost to ship a standard 40-foot container from Shanghai to New York is now almost $10,000. As a result, importers are frustrated, and some experts think the market is in a bubble. The shipping price surge is mostly due to missile and drone attacks by Yemen's Houthi rebels, forcing ships to avoid the Suez Canal shortcut. Now, fleets must take the longer route around Africa, causing shortages, delays, and higher costs. U.S. importers are feeling the pinch, bringing goods in earlier and paying a hefty price for peak season shipments.

And the Red Sea disruptions are officially causing global problems. Maersk is dealing with shipping disruptions in the Red Sea that are now affecting its global network. Since December, ships have been taking the long way around Africa's Cape of Good Hope instead of their usual routes to avoid attacks, resulting in longer trips and higher rates. This has caused congestion at alternative routes and hubs, messing with trade from Far East Asia, West Central Asia, and Europe. Despite all this chaos, Maersk is managing strong global ocean cargo demand and working hard to minimize disruptions.

Now, let’s talk about some good news: The Ports of Indiana will soon have a sea container terminal on Lake Michigan, a first for ocean vessels to reach the Chicago metro area via the Great Lakes. This terminal will serve various industries, including manufacturing, consumer goods, pharmaceuticals, food products, high-protein soybeans, specialty corn, and hardwoods - talk about a diverse crowd! Located at Ports of Indiana-Burns Harbor in northwest Indiana, the construction starts in 2025, and operations begin in 2026. It's time to set sail!

WAREHOUSE TECH

UPS EMBRACES ROBOT REVOLUTION AS WALMART CANADA PIONEERS GREEN TRUCK FLEET

Is a warehouse with more robots than workers the design of the future? It’s already happening at this UPS warehouse. At UPS' Velocity warehouse near Louisville, Kentucky, robots rule the roost over humans. With over 700 of them working around the clock in a massive 900,000-square-foot facility, they're handling inventory and orders with little human intervention. This warehouse is all about quick turnover for e-commerce, not just long-term storage. Retailers using this place also get their goods swiftly thanks to these robots, supporting the rise of one- and two-day shipping demands. Despite the high-tech automation, human workers remain integral for packing and final preparations. So, it's a mix of cutting-edge tech and human touch in modern supply chain management.

Walmart Canada just introduced its first hydrogen fuel cell-powered electric tractor from Nikola. This is just the beginning of their plan to get more of these cool trucks. This big investment is part of their $3.5 billion growth strategy to make more sales and faster deliveries using green technology. By 2028, Walmart Canada wants over 400 trucks to be powered by alternative sources. They want to be all high-tech and shake things up in the industry.

WAREHOUSE QUICK DELIVERIES

U.S. GOVERNMENT GRANTS $5 BILLION FOR AGING BRIDGES, PUROLATOR EXPANDS GLOBAL SHIPPING INTO CANADA, AND MORE…

• U.S. Government Grants $5 Billion for Aging Bridges

• Long Beach Port's Supply Chain Highway Secures $7.875 Million Funding Increase

• Purolator Expands Global Shipping into Canada

• Singapore's Port Congestion Appears to Be Easing

• Consumers Begin Back to School Shopping Early