Category: Supply Chain & Logistics

In its short life, Pitney Bowes Global Ecommerce carved out a reputation for offering low shipping rates that helped it grow volume even when its future was highly uncertain.

Shein, Victoria’s Secret, BarkBox owner Bark and others benefited from the unit’s economical options, which relied on the U.S. Postal Service for last-mile delivery as industry-wide surcharges and rate increases strained shippers’ finances.

“Over the last 12 to 24 months, the larger customers that have come over to Pitney Bowes, a lot of them migrated because of price,” parcel shipping consultant Mark Waverek said in an interview with Supply Chain Dive.

But offering low prices didn’t help Pitney Bowes in its failed effort to make Global Ecommerce, or GEC, a profitable venture. After years of losses, earlier this month, Pitney Bowes sold its majority interest in the unit to Hilco Global, which will liquidate and wind down the business.

The liquidation process is expected to conclude early next year, but GEC delivery services like Domestic Forward Standard Delivery and Domestic Cross-Border U.S. Outbound have already shut down.

Customers will have to shift GEC-destined volume to other shipping providers, if they haven’t done so already. Experts told Supply Chain Dive that shippers must consider short-term and long-term factors as they adjust their carrier mixes, ranging from peak season performance to changes within the Postal Service’s network.

Multi-carrier strategies will help shippers

The shippers best positioned to avoid any disruptions from GEC’s shuttering are those who already have a flexible multi-carrier strategy in place, experts said. Considering the turmoil that has surrounded GEC in Pitney Bowes’ recent quarters, customers should have already been prepping contingency plans prior to the unit’s announced closure.

“The shippers that had two or more options set up for every ZIP code where their customers are located, they’re feeling good right now,” said Timur Eligulashvili, president of Logistics Remix, a parcel delivery carrier representative.

Shippers should evaluate their existing carrier mix first and see which options offer comparable pricing and delivery speeds to GEC before jumping to new providers, experts said. After all, implementing a new carrier can take time, and the clock is ticking as the holiday volume surge approaches.

“You got peak season coming up, you’ve got a hard shutdown over at Pitney Bowes [GEC], so you’ve lost a lot of leverage,” said Waverek, who is managing partner at PlaidMark Management and Consulting Services. “Unless you have a multi-carrier strategy already in place and Pitney Bowes was just a percentage of your allocated volume, you’re in a really bad position.”

While the timing of GEC’s shutdown isn’t ideal, carriers currently have plenty of space in their networks, especially compared to the capacity-strained stretch between 2020 and 2021 when the COVID-19 pandemic fueled a spike in home delivery. The softer market has led carriers to offer aggressive rate discounts and for pricing power to swing back into shippers’ favor.

“The good news is we’re still in the shippers’ market,” Eligulashvili said. “There’s slack capacity for delivery, and packages will find their way.”

Despite more favorable conditions for shippers, new carriers are unlikely to offer rates as generous to shippers as GEC did, Eligulashvili added.

“It’s probably not going to happen, but could they get close to them? And what combination of carriers will offer that? That’s the question,” he said.

Consolidators offer a straightforward alternative

The simplest option for shippers is to bring GEC volume to other shipping consolidators like DHL eCommerce and OSM Worldwide, according to experts. Like GEC, these companies send parcels to Postal Service facilities for final-mile delivery and offer economical shipping options for lightweight packages.

However, shippers looking at these companies as a long-term alternative should gather information about the impact ongoing changes at the Postal Service will have on service reliability and pricing, Waverek said. The agency recently hiked rates and nixed ounce-based pricing for its Parcel Select service, which consolidators rely on.

That uncertainty may lead shippers to look beyond consolidators for long-term GEC replacements. National parcel carriers such as FedEx and UPS, along with regional alternatives, could be viable options if their pricing is strong enough to sway former GEC shippers, experts told Supply Chain Dive.

Large-scale businesses may also be able to ink a direct contract with the Postal Service and leverage its Ground Advantage delivery offering as the agency looks to attract more direct customers into its network. The Postal Service’s mailing options also work for lightweight packages, Gordon Glazer, senior consultant and USPS specialist at Shipware, said in a LinkedIn video.

“There’s a 50-to-60% save there,” Glazer said. “These packages move just as fast as the ground service, but it does require different tracking symbology as well as specialized packaging in order to conform with the physical requirements of the Postal Service.”

Even after shippers shift volume to other providers, the GEC shutdown could present some lingering operational headaches, particularly for package returns.

GEC will pick up returns from the Postal Service until Sept. 5. But if a customer returns a package after that date, where will it end up? Oscar Gladman, senior director of parcel at Kenco Group, said these packages could be held up at a Postal Service facility until a shipper retrieves it themselves.

“It might create an issue for returns customers for a little while who were printing labels and putting them in outbound packages,” Gladman said

With contract talks between Canada’s major railroads and its union workers at an impasse, the prospects of a work stoppage starting Thursday looms closer to reality.

Logistics experts have warned of supply chain disruptions should Canada’s major rail carriers Canadian Pacific Kansas City and Canadian National shut down.

While contingency planning across all transportation modes is underway to avert service disruptions, business leaders and representatives from U.S. and Canada-based organizations seek a quick resolution to the crisis, with some calling for government intervention.

Below are some excerpts on what industry leaders are saying about the looming Canadian railroad workers strike.

Vancouver Fraser Port Authority

“The impact to the Port of Vancouver will be significant, with approximately two-thirds of all cargo volumes at the port moved by rail, including 90% of international exports,” the port told Supply Chain Dive in an email. “Trade through the Port of Vancouver plays a vital role supporting Canada and our economic prosperity, with approximately $1 of every $3 of Canada’s trade in goods outside of North America moving through the Port of Vancouver.

“It took many months to clear the backlog of congestion from the 13-day strike by B.C. longshore workers in 2023 at the Port of Vancouver, with delayed shipments and overburdened infrastructure struggling to restore normalcy.”

Retail Industry Leaders Association VP for Supply Chain Jessica Dankert   

“As with any supply chain disruption, retailers are concerned with the expected congestion and delays, and potential ripple effects — including impacts on U.S.-based networks. Retailers have been focused on implementing contingency plans to mitigate the impact on consumers. We urge both parties to keep negotiating until a deal is reached that prevents a shutdown,” Dankert wrote in an email.

Canadian Chamber of Commerce President and CEO Perrin Beatty

“After the labour disruptions at our ports in British Columbia and the St-Lawrence Seaway, a strike at both of our Class 1 railways would be a terrible blow to Canada’s diminishing reputation as a reliable place to do business. We simply don’t have the capacity to replace the movement of goods by rail.”

“With trade accounting for more than two thirds of Canada’s GDP, our ability to get goods to and from market determines whether we will be competitive in the global economy, but our supply chains are only as strong as their weakest link. This is not the time to put further strain on an already fragile system; we need to ensure our supply chains are reliable and resilient.”

“We respect the right to collective bargaining and believe sincerely that the best deals are reached at the table. These repeated work stoppages are damaging the economy, jeopardizing predictability for businesses, and escalating uncertainty for Canadian families who are contending with an increased cost of living.”

Retail Council of Canada

“Rail shipments are vital to retail supply chains as our industry gears up for back-to-school and the holiday shopping season. A shutdown of Canada’s two main railway companies would be a one-two punch to retailers that could result in empty shelves across the country. RCC urges the parties to come to an immediate resolution and for the federal government to step in immediately if they do not.”

“RCC has joined a chorus of 80+ business associations in calling for immediate action by the Prime Minister and government to avert a disastrous shutdown of Canada’s rail network. Retailers need reliable rail to ensure Canadians have access to all the goods they need for their daily lives.”

National Grain and Feed Association

“Operational railroads are essential on both sides of the border for the integrated North American supply chain. While we believe a negotiated solution is always the preferred outcome, the government should be prepared to move quickly if negotiations fail.”

National Institute of Supply Chain Leaders BC 

“Should a lockout occur, it will likely precipitate substantial disruptions throughout the province. Expected impacts include delays in transportation and a considerable backlog affecting the movement of goods both into and out of the region, as well as within the province. We strongly advise businesses and consumers to proactively prepare for these potential disruptions. Where feasible, consider alternative transportation options to mitigate the effects of any delays,” the institute wrote in an email.

National Retail Federation  

”NRF encourages the negotiating parties to remain at the table until a new deal is reached. We are already starting to see embargoes for certain commodities, and a shutdown of cross-border rail service would negatively impact retailers during the height of peak shipping season. We continue to see supply chain disruptions caused by a variety of issues. It is critical we avoid self-inflicted disruptions that result in a shutdown of services and hinder the transport of goods to market in a timely manner. The overall impact won’t just be a shutdown, but also the time it takes to recover from a shutdown,” Jonathan Gold, VP of supply chain and customs policy, wrote in an email.

Union Pacific Railroad

“For Union Pacific, a rail stoppage in Canada would mean thousands of cars per day not moving across the border. Everything from grain and fertilizer during the critical summer season, and lumber for building homes could be impacted. A prolonged shutdown could have even more significant implications. As Union Pacific adheres to embargoes related to the potential lockout, we are working to minimize impact to our customers and the U.S. supply chain. We remain in close communication with the Canadian railroads,” the railroad wrote in an email.

SPRINGDALE, ARK. – Tyson Foods Inc. announced that six of its plants achieved Zero Waste to Landfill (ZWTL) gold level validation. UL validated these efforts to UL 2799 Environmental Claim Validation Procedure (ECVP) for ZWTL.

The company was recognized for reducing the production of all by-products like animal fats, hides and inedible proteins and reusing or recycling the remaining by-products to support conservation and efficiency. 

Six plants have earned gold status, meaning that 95%-99% of their waste has been diverted from landfills. The facilities are located in Newbern, Tenn., Obion County, Tenn., Nashville, Ark., Hope, Ark., Albany, Ky. and Camilla, Ga.

“We’re proud of our team members and the work they are doing to reduce waste to landfills,” said Katherine Pickus, vice president of sustainability and global impact at Tyson Foods. “These validations reflect Tyson Foods’ dedication to making a positive difference in the communities where we live and operate.”

Tyson said it designed an integrated waste management system to ensure resources are reused and reduce greenhouse gas (GHG) emissions through the reduction of energy use needed to create new materials. 

“Tyson Foods’ participation in this voluntary third-party validation marks their leadership in the pursuit of waste reduction and recycling,” said Doug Lockard, vice president and general manager of UL’s retail and consumer products group. “We look forward to validating more Tyson Foods’ facilities and continuing to support their circular economy journey, which provides a clear way for the company to measure and track progress to meet sustainability goals.”

To achieve ZWTL goals, each location identifies methods for handling waste in ways to avoid disposal at landfills. The ZWTL approach provides criteria for how to dispose of materials such as packaging, compost, liquids and food. 

KANSAS CITY, MO. — Shippers of grain, food and other products expect to face better prospects for logistics in 2023, hoping much of the COVID-induced issues are in the past as well as a nationwide strike by railroad workers that was averted by legislative action.

“Logistics as we know it has been spun out of rhythm over the past two years, with supply and demand discrepancies, low reliability, global port congestion, labor shortages, capacity constraints and more all coming together to put pressure on rates,” shipping giant A.P. Moller – Maersk said in a recent report. “While the circle of inflation affecting freight rates and freight rates affecting inflation is set to continue in the short term, the outlook is positive for pressure coming down in the not-too-distant future — albeit not to the levels seen before COVID due to inflation’s impact on operational costs.”

Truck, rail, barge and ocean freight rates don’t always react to broad economic changes in concert. While the entire transportation industry appeared to crumble during COVID, normally any number of factors may affect each mode independently, regionally and in other ways.

The Council of Supply Chain Management Professionals said in its latest Supply Chain Quarterly that freight volumes for sea, air and trucks are expected to decline in 2023, and that freight rates for all three “are on track to drop from their pandemic high points,” noting a “severe rate of contraction in transportation prices measured in November.”

The US Department of Agriculture said in a recent Grains Transportation Report that third-quarter transportation costs for shipping soybeans to China and Europe from both the United States and Brazil declined from the second quarter. During that period, truck rates fell in both countries (with lower diesel fuel prices a factor in the United States) and ocean freight rates declined due to weaker demand for bulk commodities (in part related to COVID lockdowns in China). 

In the United States, barge freight rates rose as lower water levels restricted movement on the Mississippi River, and rail freight rates also moved higher. The cost of US shipping corn and soybeans to Japan also declined from the second quarter.

In the United States, lower grain and soybean exports are an influence on freight demand and rates. The USDA forecasts 2022-23 US wheat exports down 3.1% from 2021-22 and down 22% from 2021, corn exports down 16% and 24%, respectively, and soybean exports down 5% and 10%.

“Quarter-to-quarter and year-to-year ocean freight rates decreased mainly because of falling global trade and shrinking demand from Asia for bulk grain products,” the USDA said.

Trade sources also have noted an oversupply of bulk freight capacity.

For ocean freight, not only has volume for bulk commodities decreased, but containers also are in oversupply, potentially leading to “an all-out price war” in 2023, according to one industry expert.

As with ocean freight, trucking capacity remains available, a stark contrast to conditions early in the pandemic.

Many suggest the trucking industry is the best barometer for logistics, even if it may be less important than rail, barge and ocean vessels for agricultural commodities. The American Trucking Association said trucking accounts for about 80% of total freight spending. While more expensive per mile than other modes of transportation due to smaller load volumes, trucks are the key source of “quick” freight movement and the all-important “last mile.”

Spot freight rates (excluding fuel surcharges) for trucks peaked in January 2022 after more than doubling from May 2020 lows, according to DAT Freight and Analytics.

Year-over-year spot truck rates may be down more than 25% in the first quarter of 2023 and may be down 25% to 35% from their January 2022 peak by the end of 2023, Yan Krasov, CFA and partner at William Blair Investment Management, said in a recent Institutional Investment report.

Arrive Logistics forecast spot truck freight rates to hold “relatively stable” in 2023 (after falling in 2022) and contract rates to “normalize,” falling from pandemic highs as freight tonnage declines as economic conditions move toward pre-pandemic levels.

The impact of fuel prices on freight costs to shippers is an unknown for next year. The average on-highway diesel price reported by the Energy Information Administration was $4.754 per gallon as of Dec. 12, down more than $1 per gallon, or 18%, from the late June high of $5.81 per gallon, but still up more than $1 per gallon, or 30%, from a year earlier.

The much-forecast arrival of a recession in 2023 should help reduce freight demand and subsequently freight rates as consumers buy less (although the relationship is far more complicated than that). High freight costs were seen as a major contributor to rising US inflation and now may contribute to helping rein in inflation.

MILL CREEK, WASH. — Hodie Meats entered a deal with Northlake Partners (NLP) to implement its NorthScope ERP software.

NLP developed the software to specifically support processors, food manufacturers and food distributors.

“The team at Hodie Meats was looking for a cohesive system built for the food industry, and we’re happy NorthScope can meet their needs by providing the full traceability of their product that is crucial to their business paired with the functionality and flexibility to scale as their business grows,” said Vince Pluhacek, NLP sales manager.

Accompanying Hodie Meats’ implementation of new software, NLP will provide training, configuration, report layout, design and customization, as well as go-live and post go-live support. Hodie Meats plans to use NorthScope’s financial, general ledger, accounts payable, accounts receivable, sales and inventory functional features.

Hodie Meats said NorthScope will support its USDA-inspected, fresh-in, fresh-out further meat processing business that recently opened in Georgia in December 2022.

LA QUINTA, CALIF. — Conditions at US ports and for freight moved by truck have improved from COVID “chaos,” but challenges remain for rail shippers, speakers said Feb. 28 at the International Sweetener Colloquium.

“We’re back to normal after two or three years of chaos,” said Marcel van Dijk, cargo marketing manager, The Port of Los Angeles, adding that conditions already were softening on the West Coast, although he noted that more ships were being routed through the Panama Canal to the Gulf and East Coast due in part to the unsettled labor situation in the West. The threat of a strike by more than 22,000 maritime union members working without a contract since July 1 appears to have eased as both parties (the Pacific Maritime Association representing employers and the International Longshore and Warehouse Union representing workers) said talks were ongoing and have indicated progress and an intention to reach an agreement. He said The Port of Los Angeles had made improvements and was in the process of making more changes to speed container movement out of the port by trucks. 

Jim Ritchie, president and chief executive officer, RedStone Logistics, said there was more capacity in the truck freight market since COVID, but the question was “will it get put to use effectively?” He noted that the industry had more drivers than before the pandemic as higher rates translated into higher salaries that attracted more drivers. As driver salaries increased, he said, drivers chose to reduce driving hours to improve lifestyle rather than to drive more. He noted that a truck driver shortage has been an issue for 20 years, in part because driver salaries lagged increases seen in other blue-collar jobs.

“Who doesn’t want to leave home for three weeks and live in your car,” Ritchie asked sarcastically, referring to the challenge of attracting younger people to drive trucks, noting efforts to lower the minimum interstate truck driver age to 18 and changes in immigration policy, both of which were “by no means settled yet.” 

While there have been improvements in port performance and truck freight capacity since COVID, railroads remain challenged.

Jill Brubaker, executive director, Rail Customer Coalition, said rail freight issues persist, in part due to a lack of competition as many locations served by rail are “captive” to a single carrier and there was “no competitive pricing.” She noted that labor issues remained after railroads laid off about 30% of their workforce during COVID and many workers weren’t returning to work despite railroads’ “working hard to get employees back.” She said rail service was hampered by railroads’ attempts to “create record profits” for shareholders.

CHICAGO — The Kraft Heinz Co. announced plans to build a $400 million automated consumer packaged goods (CPG) distribution center in DeKalb, Ill. Spanning 775,000 square feet, the facility will be one of the largest of its kind in North America, Kraft Heinz said, with a 24/7 automated storage and retrieval system.

“The DeKalb distribution center is expected to play a critical role in our larger distribution strategy, moving more than 60% of Kraft Heinz dry goods in North America through our automated facilities,” said Carlos Abrams-Rivera, Kraft Heinz executive vice president and president, North America. “It’s a testament to the dynamic, out-of-the-box thinking of our supply chain teams whose work enables us to operate with greater efficiency and agility every day.”

The new distribution center will be able to deliver double the volume to Kraft Heinz’s customers while helping to reduce the company’s environmental footprint. Through sustainable technology and reduced waste, Kraft Heinz will take a step closer to its ESG (environmental, social and governance) goals with this development.

“We’re driving end-to-end transformation across our entire supply chain, investing in automated technology and digitized solutions to increase the agility of our logistics operations,” said Erin Mitchell, vice president of logistics and head of network restructuring at Kraft Heinz. “The construction of our new DeKalb distribution center is the latest example of this transformation in action. We have designed it to help ensure the delivery of our delicious, innovative and iconic products at the right time for our customers and consumers for years to come.” 

To make Kraft Heinz’s vision a reality, the company has partnered with Trammell Crow Co., a global commercial real estate developer; Krusinski Construction Co., a general contractor; Daifuku, an integrated logistics automation provider; and the City of DeKalb and the DeKalb County Economic Development Corp. on the development of the facility. 

The facility is scheduled to be operational in 2025 and is expected to bring 150 new jobs to the DeKalb area.