Warehouse Wisdom. Weekly. 11/08/2024

Happy Friday!

In a shocking twist that seems more like a spy movie script than the weekly logistics news, Western official believe that Russia was responsible for an alleged plot to smuggle bombs onto DHL cargo planes, aiming to “test the transfer channel for such parcels” to reach North America. The case is not only an example of the volatile global political environment, but also serves as a reminder of how fragile and everchanging the supply chain industry has become, with professionals now being charged with game planning strategies and tactics never considered before.

But bombs on cargo planes is just the beginning. This week’s news brings more port disruptions throughout Canada, an uncovering of the staggering numbers behind the Houthi attacks in the Red Sea, a small parcel shipping price war, another global hit to TikTok, continued Amazon FBA marketplace headaches, and more. Let’s dive right in…

Ocean Freight

Continued Canadian lockouts and strikes, ports pile up, and patience runs thin

Is there just no end to the ocean freight striking? This week, Western Canada’s ports remain gridlocked as labor disputes turn container ships into floating parking lots. On Monday, 700 forepersons represented by International Longshore and Warehouse Union (ILWU) Local 514 were locked out by ocean carriers and terminal operators. As employers and unions battle it out, the ripple effects keep hitting small businesses in the supply chain. Will either side back down, or is this the new normal?

And at the second largest port in Canada in Montreal, labor strikes continue to plague the port. Port officials are urging Prime Minister Trudeau to step in and mediate. With commerce stalled and businesses scrambling for alternatives on both sides of the country, the pressure is on for deals to be struck and further crisis averted.

In other ocean freight news, the Houthi attacks in the Red Sea are costing Egypt a jaw-dropping $6 billion in lost Suez Canal revenue. All the while, reports are indicating that the Houthis are taking in $180 million a month in illegal “transit fees” in addition to the serious destruction that is being caused on the open seas.

Small Parcel Shipping

FedEx and UPS wage ware for small biz dollars

FedEx has launched a competitive new discount program aimed at capturing more small and midsize business (SMB) market share, offering discounts along with perks like reduced surcharges, faster delivery, and simplified billing. Rolled out through partners like Pitney Bowes and Auctane, discounts are reported to be up to 90% for some services. FedEx hopes these tailored discounts will attract budget-conscious businesses managing high volumes of e-commerce orders.

Meanwhile, FedEx and UPS are locked in a fierce rate competition, each vying to attract small and midsize businesses (SMBs) with enticing discounts. Both shipping giants have ramped up their promotional offerings, hoping to win over budget-conscious business customers. Standing to gain most are smaller shippers with freight spend of less than $500,000 annually. If you haven’t spoken with your sales rep lately, now’s the time.

Logistics Vitals

Online grocery shopping growth spikes in Q3

Online grocery shopping continues to rise, with Q3 sales showcasing strong growth as consumer habits shift. Here are the key takeaways:

• Growth Spurt: Online grocery sales in September rose by $2 Billion year-over-year, demonstrating sustained demand for digital grocery options.

• Consumer Behavior: The delivery segment grew 45% year-over-year and the ship-to-home segment grew 30%.

• Largest Share: Store pickup remained the largest segment, but only great 5%.

Online Marketplaces

Canada draws the line with TikTok and Amazon sellers’ frustrations are boiling

Canada recently shut down TikTok’s Canadian subsidiary, citing significant concerns over the app’s data privacy practices and potential risks to national security. This move follows a comprehensive national investigation into TikTok’s data handling, particularly regarding its access to Canadian users’ personal information. Alongside the closure, Canada issued a strong warning to citizens about privacy risks associated with the app, joining a growing list of countries scrutinizing TikTok’s ties to China. As regulatory pressure increases globally, TikTok’s estimated 1.1 billion users worldwide could soon face tighter restrictions and closer government monitoring.

Frustrated Amazon sellers are taking the platform to court. Sellers accuse Amazon of arbitrary suspension of seller accounts, freezing of sellers’ inventory, charging deactivated accounts for storage, removal, and disposal of inventory, and limited options for sellers to appeal or rectify account suspensions. In this David vs. Goliath battle, sellers are pushing for major reforms.

Adding to the drama, with peak holiday season approaching, Amazon sellers are finding themselves caught in between a rock and a hard place - torn between holding costly excess stock or risking low inventory. With Amazon struggling to implement its new inbound fulfillment makeover and with the company experiencing capacity constraints, the struggle for optimal stock levels could impact holiday order fulfillment.

In the meantime, Wayfair is launching a new customer loyalty initiative as it works to regain traction amid declining sales. Loyalty is now the name of the game in online retail.

And with lower sales forecasts, Walmart has reduced holiday imports, expecting a softer holiday season. It’s looking like a frugal festive season in retail, with less stock filling the shelves.

Warehouse and Logistics Operations

China invades U.S. warehousing and commercial rents are finally dropping

Chinese logistics companies are now making substantial investments in U.S. warehousing, with some major players acquiring millions of square feet of industrial space to support their expanding global logistics networks. Cainiao, Alibaba’s logistics arm, recently acquired over 1.5 million square feet of U.S. warehousing, marking a significant move into the American market. These investments reflect a strategic shift as Chinese firms aim to enhance delivery speed and efficiency for international customers, especially with rising e-commerce demand.

Thankfully, a much-needed reprieve has come to the industrial real estate market. After months of surging rent prices, U.S. industrial rents showed a rare decline of 3% in Q3. Experts predict this might create a more balanced supply-demand landscape heading into 2024.

Mysterious "supply chain fees" may be one reason grocery bills keep climbing, as retailers pass extra costs on to consumers. These fees—ranging from "fuel surcharges" to "demand fees"—are often added by suppliers to offset rising transportation and production expenses. With grocery costs continuing to rise over 2% the last year, consumers and supply chain professionals may be hitting back at these fees to reduce overall expenses.

And Amazon’s drone program is expanding into Arizona, meaning faster (and airborne) deliveries could soon be a reality for Grand Canyon state residents.

Warehouse Quick Deliveries

Amazon AI stumbles, online only retailers rule the web, and more…

• Amazon’s AI assistant fumbles in shopping tasks.

• Amazon brand aggregators’ buying sprees hit a roadblock.

• Amazon and online rivals rule the retail web.