Warehouse Wisdom. Weekly. 1/5/2024

Happy Friday!

As we usher in 2024, there are numerous concerns looming over the logistics industry. The Covid-19 pandemic supply chain strategies that companies adopted with the hopes of not having to use except for rare circumstances are having to be put into immediate practice to overcome unthinkable challenges. Wars in the Ukraine and the Middle East, climate change, mass migration, and geopolitical tensions are disrupting supply chains like never before.

Supply chain professionals are moving from “just-in-time” inventory to “just-in-case” strategies, and back to just-in-time again. The trucking industry is bleeding from lower order volumes. Container freight rates are skyrocketing. Manufacturing is moving from China to Mexico, India, and Vietnam. And on top of all of that, the pre-pandemic choices that were slashed when Covid hit are not being brought back. Businesses are choosing a portion of consumer demand and are willing to give up potential sales in exchange for carrying lower inventory levels. Is our world ever going to be the same again?

All that to say that there’s a lot to catch up on this first week of the new year. There’s no time to waste, so let’s jump into this week’s newsletter, which explores the same-day delivery’s dominant player, continued Red Sea havoc, cool new warehouse Moonwalkers, interesting warehouse employee perks, and more.

LOGISTICS VITALS

WHO RULES THE RAPID DELIVERIES IN THE LAST TWO WEEKS OF THE HOLIDAYS?

The dust has settled on the end of the year sales figures. And there’s no surprise when it comes to who consumers rely upon for last minute holiday shopping deliveries:

• $222.1 Billion - Total online holiday sales in 2023, a 4.9% increase YOY. 

• $123.5 Billion - Total sales in November.  

• $98.6 Billion - Total sales in December.

• 29% - Amazon’s share of global online sales in the two weeks leading up to the holidays.

INBOUND CONTAINER FREIGHT

RED SEA HAVOC IS PUSHING CONTAINER & AIR FREIGHT RATES SKY HIGH

We didn’t realize our weekly newsletter would read more like a global news report of bad news, but that is exactly what’s been happening now for weeks. What seemed like a moment of returning to normalcy in the Red Sea has taken a turn for the worse. The US Navy is proving insufficient to deter attacks on commercial ships.

Maersk has again halted all ship movements in the Red Sea after one of its vessels, Maersk Hangzhou, was attacked with missiles and small boats on Saturday. This comes after the shipping carrier resuming sailing after an initial pause. Even the White Houses has warned that the potential for higher shipping costs could affect the U.S. economy. With 15% of global freight passing through this vital sea, the stakes are extremely high.

So, it should come as no surprise that container shipping rates are skyrocketing due to the crisis. The Shanghai Containerized Freight Index (SCFI) spiked 40% in the last week, to 1,760 points, its highest level since October 2022. The SCFI has more than doubled since this October.

With Chinese New Year looming, air freight rates are expected to increase as well.

WAREHOUSE TECH

WE’RE GOING BACK TO THE FUTURE WITH MOONWALKERS

We can’t contain our excitement this week with the announcement of one of the latest warehouse tech innovations. By excitement, we mean the level of excitement when we first watched Back to the Future and envisioned a future of flying cars and Marty McFly riding on hoverboards! Shift Robotics recently announced the launch of its newest product, the Moonwalkers X. What is a Moonwalker exactly? Well, they are strap-on powered wheels that have been designed specifically for indoor commercial use in distribution, logistics and warehouse settings, to benefit workers who might notch up 30,000 steps in a day. In fact, the current model has already been found to allow operatives to get around three times faster than by walking alone, while also potentially doubling productivity. We can’t wait to see warehouse workers zooming around the facility picking orders at warp speed!

And in other tech news, Amazon announced that it has completed the installation of its first electrolyzer system, enabling a sustainable supply of hydrogen fuel for low-emissions forklift trucks at its logistics facility in Aurora, Colorado. The technology uses electricity and water to produce hydrogen and compress it on site, which can then be stored in a storage tank. The tank can support a fleet of up to 400 hydrogen fuel cell-powered forklift trucks!

WAREHOUSE LABOR

ATTRACTING WAREHOUSE WORKERS WITH GYMS, GROCERY STORES, & BASKETBALL COURTS

The labor market in the U.S. is downright wonky. That’s the only way you can describe our current work environment where both new jobs listings are down, and employers are expressing intense challenges finding good, long-term staff. Not to mention, the demands of logistics jobs are increasing exponentially, with rising needs for talent that can implement the end-to-end solutions.

According to a recent Indeed report, as of December 29, 2023, open positions on the site declined more than 15% from a year earlier. (Thankfully, long-haul and delivery drivers are one of only two sectors where jobs are up on a year-over-year basis.) Separately, the U.S. labor department reported that the US job openings and quits are near a three-year low as the overall labor market eases. Even still, there are 1.4 job openings for every unemployed person, leaving employers with big pressures to not only find top talent but also keep them happy.

Which brings us to some of the more fun news we’ve seen in a while for new hires. In a bold move to attract and retain warehouse employees, warehouse operators across Europe are offering amenities that are off the hook. Some warehouse facilities include outdoor gyms with healthy foods and spaces for yoga, grocery stores and multipurpose courts for football and basketball. It goes far beyond foosball and ping pong tables! Maybe we should take a page out of Europe’s recruiting book?

COMMERCIAL REAL ESTATE

NOT-IN-MY-BACKYARD SENTIMENT GROWS TOWARDS WAREHOUSE DEVELOPMENT

The ‘not-in-my-backyard’ sentiment looks like it isn’t going anywhere in 2024. According to Prologis, it is becoming increasingly difficult to build warehouses because of opposition from community activists and residents of the surrounding areas. The battle is being waged across the country, with states like California and New York at the epicenter. Now we can add the Chicago area to the fun, with neighbors worried about noise and pollution pushing back hard on developers.

With the national vacancy rate standing still at 4.6% in December, rents up 7.7% year-over-year to $7.60 per square foot, and only 505 million square feet of industrial space under construction nationwide, companies are going to have to get even wiser in the use of their space.

In fact, it is pushing warehouses to operate beyond the typical 80-85% capacity, to 90-100%, according to CBRE. Creativity will be the name of the game in 2024, with the strategic use of outsourcing, using non-functional external storage space, leveraging dead retail space, and more.

WAREHOUSE OPERATIONS

WHAT WILL IMPACT SUPPLY CHAINS MOST IN 2024?

The Institute for Supply Management’s manufacturing gauge increased slightly to 47.4 in December, remaining in contraction territory for the 14th straight month – the longest streak since 2001. Of important note, the new orders reading fell 1.2% to 47.1. The culprits for the downturn have been both high borrowing costs from interest rate hikes and waning demand for goods. But with the Federal Reserve signaling lower interest rates to come, there is a dim light of hope at the end of the rather dark tunnel.

But with freight liner attacks and high interest rates, among so many other global pressures, what will the biggest supply chain disrupter be in 2024? Some seem to think the weather…

WAREHOUSE QUICK DELIVERIES

LAYOFFS, PAY CUTS, STRIKES, AND MORE…

• More Layoffs for UPS

• Nike Plans Layoffs, $2 Billion in Costs

• FedEx Pilots Face Pay Cuts, Contract Talks Resume

• India Truckers Strike

• Reduced US Postal Service Volume Hits FedEx Express 

• US, Mexico Partner on International Rail Car-Ferry Service

• Retail returns Hits $743B in 2023

• Pitney Bowes Looking to Overtake Amazon on Returns

• TikTok Hikes its Fees