Warehouse Wisdom. Weekly. 1/26/2024

Only the most relevant news for SMBs to improve logistics – picked, packed, and delivered without the bias.

Author

Will Schneider
January 26, 2024

Happy Friday!

What’s the second-best thing compared to winning the lottery or marrying a sugar mama? Being a Walmart truck driver, apparently! Walmart truck drivers are cruising down the road to riches with salaries that make even office workers do a double-take.

According to the uber retailer, these highway heroes are earning big bucks, with salaries soaring up to $110,000 for first-year truckers – that's more than double the national median! But the real story is the reason Walmart pays its road warriors so handsomely. Their retail empire is literally built on the wheels of their fleet. You can get a few insights into how they’ve structured their wildly successful business, including how they’re now turning Walmart associates into truck driving machines.

This week, we explore the latest developments in U.S. ports, Amazon’s surveillance problem, advancements in autonomous trucks, more potential global freight challenges, the state of U.S. trucking, and shifting trends in commercial real estate. So, let’s ride through this week’s addition, and be sure to tip your hat the next time you see a Walmart truck on the highway.

LOGISTICS VITALS

ROUGH SEAS FOR PORTS IN 2023, BUT HOPE IS ON THE HORIZON

What's the deal with our ports? 2023 was a down year for U.S. ports across the board, but don't worry, there's a glimmer of hope for 2024! Port leaders are optimistic about trends for 2024, with hopes of increased container volume and investments in infrastructure and sustainability. The 2023 overall numbers looked dismal, but December showed the kind of trending up needed for a 2024 rebound, with west coast ports showing a slight edge over their east coast counterparts:

  • Port of Los Angeles: Processed 747,335 containers in December, up 2.5% YoY, but down 12.9% for all of 2023.

  • Port of Long Beach: Reported a 30.5% YoY increase in December but a 12.2% decrease for the year.

  • Port of Oakland: Saw a 6.1% YoY increase in December but an 11.6% decline for the year.

  • Port Houston: Rebounded in December with an 11% YoY increase, ending 2023 down 4%.

  • Port of Charleston: Ended the year 4.5% lower but noted over 20% growth in TEUs moved by rail.

WAREHOUSE LABOR

AMAZON FINED FOR EXCESSIVE MONITORING OF WAREHOUSE STAFF

Amazon was recently fined a hefty $35 million by France's privacy watchdog for overly intrusive surveillance of its warehouse staff in France. The French Data Protection Authority (CNIL) found that warehouse staff scanners recorded worker’s periods of inactivity and how quickly they performed certain tasks, such as removing an item from shelves or putting an item away, requiring staff to justify every break or interruption.

Workers were also found to be “idle” if their scanners were inactive for 10 minutes, putting employees under continuous pressure. The CNIL ruled the scanner system to be “excessive”. In a logistics world where record-breaking pick times and squeezing every ounce of productivity out of staff is common, it’s important to keep a delicate balance between monitoring employee performance and respecting their privacy. It's a wake-up call for warehouse operators everywhere to consider the legal implications of their monitoring practices.

After all, if we push too hard on good workers, we might have a mass exodus of warehouse workers flocking to Las Vegas to become Elvis impersonators, like Danny Turney, who transformed his life from stacking pallets to performing as "Danny Graceland." And with such a large push towards robots and automation, it’s still important to remember just how valuable “people” are in our warehouse and logistics operations. Simply put, according to Bart De Muynck in his latest piece – “people remain the key to the success of logistics.”

WAREHOUSE TECH

THE FUTURE IS NOW, AND IT’S ROLLING IN ON AUTONOMOUS WHEELS

Last week we reported on the serious momentum in driverless trucking that is taking shape. This week, truck ports are coming to a city near you! Ryder System, in collaboration with autonomous trucking firm Kodiak, has opened the first “truckport”, bridging cities like Houston, Dallas, and Oklahoma City, with plans for driverless operations between Dallas and Houston later this year. Meanwhile, Volvo Trucks North America is not far behind, unveiling their new Volvo VNL truck series. This series features advanced safety systems and a groundbreaking 24-volt electrical architecture, setting a new standard in the industry.

The U.S. Postal Service is also making significant strides in sustainable transportation. They've launched their first set of electric vehicle (EV) charging stations in Atlanta, a stepping stone towards operating the nation's largest EV fleet. By 2028, USPS plans to integrate over 66,000 EVs, including 45,000 Next Generation Delivery Vehicles. This move signifies a major shift in logistics operations, prioritizing environmental sustainability.

However, not everyone is enthusiastic about these technological advancements. Truck drivers are expressing concerns over advanced driver-assistance systems (ADAS), which, while improving safety, can lead to 'passive fatigue' and reliability issues.

And one ‘non-truck’ tech update in the world of drones. You knew they couldn’t just stop at drone deliveries for small packages, right? Now, Google’s Wing aims to think much bigger; Google's Wing is pushing the boundaries in drone technology, revealing a new delivery drone capable of carrying double the payload. This advancement underscores a significant leap in delivery logistics, with drones becoming increasingly capable of handling diverse and larger packages.

GLOBAL FREIGHT

NAVIGATING THROUGH CHOKE POINTS AND GEOPOLITICAL TENSIONS

The global shipping landscape is experiencing more disruptions than ever. In recent weeks we’ve reported on the challenges in the Red Sea, the Panama Canal, the U.S. Mexico border, and more. As if those weren’t enough, there are other areas of the world on the verge of potential panic, which means we should keep an eye out to navigate and supply chain shifts needed to survive. Here’s a link to a great map with potential logistics choke points to watch out for.

One such areas is the Korean Peninsula – a region critical to shipping but fraught with geopolitical tensions. A new warning has been issued for the region by experts, indicating the region is more dangerous than in recent memory. As a hub of maritime activity, its stability is crucial. In 2023, the U.S. imported over 7.46 million metric tons of goods from South Korea alone, not to mention substantial imports from Japan. Both countries are shipbuilding giants, accounting for 40% of global production. A disturbance here, especially given North Korea's escalating military ambitions, could ripple through global supply chains, spiking freight rates and squeezing new transport capacities. The recent attacks in the Red Sea are also causing a huge impact in China. With Chinese export containers increasing in some cases to $7,000 from $3,000, the far-reaching consequences of a single disruption have never been more evident.

But amidst all these uncertainties, the Panama Canal presents a potential intermodal opportunity. With careful planning and investment, rail could be an alternative route to circumvent the drought and mitigate some risks. Meanwhile, diplomatic efforts, especially in the Korean Peninsula, are essential to maintain stability and secure the flow of goods worldwide. These situations emphasize the need for agility and foresight in navigating the complex world of global freight.

U.S. TRUCKING

CONTINUED CONTRACTION BUT IS THE RECESSION ENDING?

The transportation and logistics sector has recorded its seventh consecutive quarter of contraction. The latest Index of Global Trade Health revealed that transaction volumes in the transport and logistics sector grew at six points below the expected range in Q4 of 2023. Despite modest signs of improvement in overall trade activity, the sector remains in contraction territory.

And December 2023 marked another decline in truck tonnage, concluding what has been the most challenging 12 months for freight since 2020. The American Trucking Association reported a 0.5% year-over-year dip in the For-Hire Truck Tonnage Index. While there was a slight increase from November, indicating a potential emerging from the recession, the overall year remained in negative territory.

Looking ahead to 2024, forecasting LTL (Less-Than-Truckload) trucking rates appears to be a guessing game. Some are projecting to increase by an average of 4%. Other economists think otherwise, projecting rates to remain flat. Who’s right? Only time will tell.

COMMERCIAL REAL ESTATE

WILL 2024 BE A BREAKING POINT?

Commercial real estate in 2024 doesn’t appear to have as much debate when it comes to predictions. While most project a slower year of growth, some experts go so far as to predict a darker scenario for America's commercial real estate. Howard Lutnick, CEO of Cantor Fitzgerald, has raised alarms about a possible $1 trillion debt default wave. This looming crisis is attributed to persistently high-interest rates and a large volume of debt approaching maturity. Lutnick warns of significant defaults and plummeting property prices, foreseeing a particularly tough period for real estate equity and REITs.

Furthermore, according to Capital Economics, the commercial real estate market is expected to face a reckoning in 2024. A significant amount of commercial real estate debt, around $2.2 trillion, is due by 2027, suggesting a wave of distress on the horizon. Many property owners have been extending their debts, but this strategy may prove unsustainable in the long term, especially as higher interest rates and tighter financial conditions make refinancing challenging.

Could this year be a breaking point?

WAREHOUSE QUICK DELIVERIES

EBAY, WAYFAIR, WALMART FACE WORKFORCE SHIFTS, AND MORE…

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“I think it's going to be a very, very ugly market owning real estate over the next 18 months to two years.”

-Cantor Fitzgerald