Warehouse Wisdom. Weekly. 3/29/2024

Happy Friday!

It's that time of year again when we juggle chocolate eggs and basketball brackets. So, to all of you who are celebrating, Happy Easter! And to our basketball enthusiasts, we hope your March Madness bracket hasn’t busted. Remember, it's not about the winning but the bragging rights that come with it!

As you can see, we are making every effort to keep a positive spirt, given the catastrophic collision of a container ship and the collapse of the Baltimore Bridge. More on that later…

But fear not; not all news is bad! Such as, orders for U.S. durable goods increasing by 1.4%, and business investment also rose this February. Looks like the manufacturing side of the economy might be making a bit of a comeback.

So, grab your lucky jerseys because we're about to tackle this week’s newsletter. We will catch you up on the ocean shipping reform, the advancement of drones in fast food and cargo, UPS and FedEx's new logistic approaches, Alibaba's cancellation of Cainiao's IPO, and more!

LOGISTICS VITALS

CONTAINERIZED FREIGHTS IMPORT SHOWS 14% INCREASE IN JANUARY AND FEBRUARY OF 2024

Following 14 months of annual falls, data recently released by S&P Global Market Intelligence indicated that containerized freight imports heading for the United States posted annual gains in February for the sixth consecutive month:

• 21% - The percentage increase in imports compared to February 2023 (2.44 million Twenty-Foot Equivalent Units).

• 14% - The annual percentage increase in U.S.-bound imports during the first two months of 2024 (5.04 million TEU, over 2023’s 4.40 million TEU).

S&P Global Market Intelligence Research Director Chris Rogers stated that although the 14% increase is a significant recovery, the 5.04 million TEU is still significantly below the 2022 peak of 5.21 million TEU and is comparable to the same period in 2021, at 5.07 million TEU.

GLOBAL SHIPPING AND LEGISLATION

BALTIMORE BRIDGE COLLAPSE THROWS PORT OPERATIONS INTO DISARRAY; U.S. HOUSE ACTS TO REFORM OCEAN SHIPPING

Maryland’s Francis Scott Key Bridge collapsed when the Singapore-flagged MV Dali container ship hit the bridge at 1:35 a.m. on March 26, 2024 (Tuesday), throwing a sizable wrench into the operations of the Port of Baltimore, and disrupting shipping flows across the U.S. A bystander near the Baltimore harbor has captured a video as the container ship struck the bridge.

With at least six individuals missing and rescue efforts ongoing, the closure of the Patapsco River and blockage of the Port of Baltimore present major challenges. The timeline for reopening the port is still in the air, causing headaches for the maritime community. Carriers are also scrambling to reroute vessels and find alternative ports, which could strain capacity elsewhere on the East Coast.

The Port of Baltimore, a major trading hub that handles billions of dollars’ worth of goods annually and has handled over $80 billion in cargo in 2023, will face rough waters ahead. Things appear uncertain as around 107 vessels cannot call at the port. This isn't simply a shipping issue; it's having a ripple effect affecting big businesses close to the port and disrupting the freight flow in the area.

As the industry struggles to redistribute the wide range of goods usually handled by Baltimore, the collision is predicted to cause an unexpected rise in cargo volume at other East Coast ports. Logistics firms are stepping up as the dust settles to minimize delays and guarantee the seamless movement of cargo despite the chaos.

Amidst all the chaos in ocean freight, the U.S. House of Reps is trying its best to protect businesses from crazy ocean shipping waters. Retail groups commend the U.S. House of Representatives for passing the "Ocean Shipping Reform Implementation Act" to the U.S. Senate for additional review this week.

This measure seeks to improve pricing and capacity transparency in ocean shipping. By establishing benchmarks, the bipartisan act will defend against unjustified costs, provide equal access to shipping capacity, and enhance transparency. It will also establish a supply chain information data standard and strengthen the Federal Maritime Commission's oversight duties. Watch out, ocean shippers; big changes are on the horizon!

WAREHOUSE AND LOGISTICS TECH

DRONES ON THE RISE & TECH INVESTMENTS DOES NOT DELIVER EXPECTED RESULTS

Where’s the beef? It’s on your doorstep after a Wendy’s delivery by drone! DoorDash and Wing, the drone delivery division of Google's parent company, Alphabet, are teaming up in the U.S. after testing the waters in Australia for a year. And they're ready to make it happen in Christiansburg, VA, with Wendy’s as their first restaurant partner. Here's the deal: you place your order for drone delivery, and it gets packed up at Wendy’s. Then, a Wing drone swoops in to deliver it to you in 30 minutes or less. So, stay tuned for more drone delivery locations in the U.S. later this year!

Aside from drone food deliveries, cargo drones are also now a thing! Imagine getting van-sized loads of freight delivered to you faster than ever, through the air, and without a pilot. It's happening with the help of technology! Dronamics, a cargo drone airline, is teaming up with Qatar Airways Cargo to use their Cessna-sized Black Swan aircraft for remotely controlled drone deliveries. This partnership not only expands the reach of both airlines but also brings us closer to the future of logistics. Talk about high-flying efficiency!

But be careful about all that tech spend! According to a PwC survey, 69% of operations and supply chain officers said that tech investments are not delivering results as expected. Tech investments? More like tech disappointments! And that's not good news, especially when 45% of CEOs think their company won't survive in 10 years. It's time to get those tech investments on track!

INDUSTRIAL REAL ESTATE

COMMERCIAL CONSTRUCTION FACES HEADWINDS: TENANT DEMAND DROPS, VACANCY RATES RISE, AND ECONOMIC UNCERTAINTY LOOMS

According to the “Q1 U.S. Industrial Construction Overview” report from Cushman & Wakefield, commercial construction is hitting some speed bumps this year. With tenant demand dropping and new construction hurdles growing, things are slowing down dramatically.

As if that wasn't enough, economic uncertainty, soaring inflation, and pesky high-interest rates are cooling occupier demand. 52% of newly built facilities in 2023 are still up for grabs, increasing the vacancy rates nationwide.

But hey, it's not all doom and gloom, as the industrial construction pipeline is returning to normal after a four-year boom. Modern logistics spaces are still a hot commodity, with most new facilities getting swooped up in the past three years. And even though the construction pipeline is shrinking, we can still expect many new product deliveries by 2025.

SMALL PARCEL FREIGHT

BATTLE OF THE FREIGHT SERVICES: UPS 'NETWORK OF THE FUTURE' VS FEDEX ‘NETWORK 2.0’

UPS is getting serious about automation by closing around 200 facilities in the U.S. and shifting to more volume in automated package hubs. They're calling this their "Network of the Future" initiative, aiming to save $3 billion by 2028. They're also closing 40 sorts this year and automating dispatching for package cars and feeder trucks. UPS is not messing around when it comes to the future of logistics!

And nothing can stop UPS now, as they expect positive results after a very difficult 2023. UPS expects profit growth over the next three years, aiming for annual revenue as high as $114 billion by 2026, a big jump from last year's $91 billion. The company also plans to surpass a 13% adjusted operating margin. Despite challenges like soft package delivery demand and high labor costs resulting from a recent union agreement, UPS has stayed optimistic and focused on its goals.

Meanwhile, FedEx quietly takes steps to integrate its Express and Ground delivery networks to close the gap on UPS. FedEx is charging ahead with Network 2.0, bringing it to over 50 locations in 2024. Shippers will no longer have to queue pickup times using both Ground and Express units. FedEx’s long-term revamp is to create a more flexible, efficient, and intelligent network that will give UPS a run for its money!

ONLINE MARKETPLACES

ALIBABA SCRAPS CAINIAO IPO, SHIFTS FOCUS TO FULL OWNERSHIP AMID MARKET CHALLENGES

Alibaba Group has scrapped plans for the IPO of its logistics arm, Cainiao Smart Logistics Network. Instead, Alibaba is opting to purchase all outstanding shares for up to $3.75 billion, aiming for full ownership by June or July, as they currently hold a 64% stake in Cainiao. Alibaba made the decision during difficulties in the IPO market and a strategic review of its logistics and e-commerce division.

Chairman Joe Tsai highlighted Cainiao's strategic approach, emphasizing the need for deep integration with Alibaba's e-commerce operations to enhance competitiveness and to double down on their logistics investment. Cainiao, provides warehousing and fulfillment services, last-mile delivery and pick-up posts, and reverse logistics to customers of Alibaba’s Taobao and Tmall e-commerce sites. Just another day in the world of e-commerce giants, right?

WAREHOUSE QUICK DELIVERIES

SAME-DAY DELIVERIES, AMAZON UPDATES, EASTER SHOPPING, AND MORE…

• Lowe's Partners with Shipt for Same-Day Delivery, Expands Reach to 1,200 Stores Nationwide

• See Some Mind Boggling Amazon E-commerce Statistics

• Amazon Pharmacy Expands Same-Day Prescription Delivery to NYC and LA

• What to Expect for Easter Spending 2024

• European B2B E-Commerce Rockets to $1.5 Trillion in Sales

• Supply Chain Companies are Expecting Big AI Cost Savings