DC Velocity - January 2015

newsworthy

since May 2006, when it bought Watkins Motor Lines, a Lakeland, Fla.-based less-than-truckload (LTL) carrier for $780 million.

A SHIFT IN STRATEGY

FedEx has had a fleeting but unsuccessful history with contract logistics companies. In 1998, it acquired Caliber Logistics, Caliber Systems Inc.’s contract logistics unit, in the same transaction that included Roadway Package System Inc. (RPS), Caliber’s parcel delivery operation.

FedEx transformed RPS into what is now known as “FedEx Ground,” which has become a highly successful ground parcel delivery operation. However, Caliber Logistics, considered at the time to be a solid operator, would effectively drop off FedEx’s radar screen and eventually out of sight.

If FedEx ignored Caliber Logistics, it could have been because it never saw much value in the contract logistics business, believing it to be a low-margin endeavor requiring more effort than it was worth. But through the years, UPS and DHL have built sizable global supply chain operations to augment their transportation services, leaving FedEx to wonder if it should rethink logistics.

FedEx took a major step in that direction two years ago, when it announced a revamp designed to add $1.6 billion annually to its bottom line by 2016 through a mix of cost cuts, productivity enhancements, and yield improvements. The centerpiece of the strategy has been a heavier focus on the ground parcel segment and a lessening of the role traditionally played by FedEx’s air express business, which is still its largest revenue producer. However, FedEx made clear it would play a more active role in nontraditional segments like supply chain management, freight forwarding, customs brokerage, and rail intermodal, and that it would aggressively court vertical industries with custom solutions similar to those offered by UPS and DHL.

The Genco acquisition, according to Armstrong, takes that strategy to an entirely new dimension. “This is a gargantuan deal and ramps up FedEx’s supply chain competitiveness with UPS … for retail, high tech, and health care customers,” he said.

—Mark Solomon
go figure …

6%–8%

The productivity hit suffered by 60 percent of truck fleets due to changes by DOT to the driver hours-of-service rule, according to an August 2014 survey. That figure is about double what many had originally projected. Congress last month tabled the controversial “restart” provisions of the rule until Sept. 30, the end of the federal government’s fiscal year.

SOURCE: BB&T

Report: Domestic shipments toted up best November numbers since ’07

U.S. shipment activity in November hit its highest level for any November since 2007, an indication that, unlike other post-reces-sion years, 2014 will end on a strong note when all the numbers are added up, according to a monthly index of freight activity released in December by audit and payment firm Cass Information Systems.

Shipment levels in November increased 4. 2 percent from the same period in 2013, though volumes were down sequentially by 0.2 percent, according to the report. November is seasonally a slow month for shipments as most goods that need to be available for the pre-holiday shipping season have already entered U.S. markets. This year’s lull was even more pronounced because retailers stocked up earlier than usual because of concerns of labor unrest at West Coast ports. As a result, the relatively slight sequential monthly decline was an encouraging development, according to Rosalyn Wilson, the report’s author.

Shipper expenditures in November dropped 0.7 percent from October’s results, mirroring the sequential monthly decline in volumes. However, year-over-year spending levels rose 5 percent and are near the record-high levels set in June.

The November sequential decline is the third such monthly drop since August. The October sequential declines were due in part to increasing congestion at West Coast ports, especially at the country’s biggest port complex, the ports of Los Angeles and Long Beach, which kept goods from moving in a timely manner.

Wilson, who at mid-year said 2014 would be the best year for freight activity since 2006, said nothing in the November data changed her view. Compared with the previous three years, when November and fourth-quarter volumes were “very dismal,” 2014 portends to be different, she said.

Wilson forecast that the volume gains would continue into 2015, leading to an imbalance favoring demand over existing supply, capacity shortages across surface transport modes, and rising rates for truck and rail services.

The data are culled from more than $22 billion in annual U.S. freight payables processed by Cass on behalf of its clients across a wide range of industries.