First they wanted your parcel business. Then all they went after ground freight and international business. Now the companies best known for moving small packages have become big-time players in third-party logistics.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
It seems mighty odd in retrospect. Yet back when the term 3PL, or third-party logistics, first entered the lexicon, the radical notion of handing off responsibility for this crucial business function caused barely a stir. That's not to say Corporate America greeted the notion of logistics outsourcing with a collective shrug: The topic was endlessly debated at conferences and in the trade press. But the arguments centered less on the wisdom of outsourcing logistics than on the best kind of provider. Was it wiser to use an asset-based provider that could call upon its own trucks, warehouses, or whatever in a pinch? Or was it more prudent to seek out partners with no assets to speak of but that boasted strong logistics management skills?
Barely mentioned in the debate were some very big logistics players: United Parcel Service, Federal Express, Airborne Express and a company with only a small share of U.S. business at the time, DHL. Their early entry into the third-party business escaped most people's notice. Yet they were there right from the start, opening parts depot operations in which they stored clients' inventory close to their air hubs so they could rush the parts right out when needed.
But the days when the "express" carriers' third-party services carried a low profile are long gone. Today, UPS, FedEx and DHL—which swallowed up Airborne in 2003—all operate large business units designed for clients that want to outsource all or part of their logistics operations. Their 3PL businesses have developed well beyond the parts depot operations that gave them a toehold in the market.
Today, those businesses encompass everything from ocean shipping, customs brokerage, freight forwarding, warehousing and fulfillment to consulting. What's more, these carriers bring formidable networks and technological prowess to bear on the market.
Not surprisingly, shippers are signing on in droves. For example, DHL announced in February that it had been awarded all of Caboodles Cosmetics' distribution business. Caboodles, a Memphis-based supplier of cosmetics and accessories for teens, ships to retailers from DCs in Memphis and Mississauga, Ontario, and has a huge stake in ensuring that its cross-border shipments flow smoothly. And it appears that where Caboodles' deal with DHL is concerned, it's so far, so good. "By switching to DHL, we increased our on-time delivery service performance, reduced penalties for shipment delays and significantly improved the satisfaction of our retail customers," reports Patrick Duffy, the company's transportation manager.
Replacing the engine
Like Caboodles, Hub Distributing, an Ontario, Calif.-based owner of clothing stores, just completed outsourcing its entire distribution process to UPS Supply Chain Solutions. Hub Distributing (no relation to the intermodal marketing company Hub Group) is the parent of Anchor Blue, a 157-store apparel chain that markets to mid-income 16- to 19-yearolds, and Levi's Outlets by MOST, a 50-store chain selling Levi Strauss & Co. apparel.
The decision to outsource was made by Richard Space, senior vice president of logistics for Hub Distributing, who joined the company shortly after it was acquired by Sun Capital Partners. What he found was a company with an antiquated distribution system. The former owners, Space says, "thought store operations were the most important. They didn't look at what was keeping the engine running."
The sputtering engine Space inherited clearly hadn't seen much in the way of maintenance for quite some time. "The ERP was inadequate to handle the process flow," Space recalls. "We had nine miles of conveyor, no WMS, and 550,000 square feet of space." Receiving operations had gotten bogged down to the point where products weren't available until hours after their arrival (the facility receives 5,600 cartons a day from some 250 vendors, on average). Worse yet, the company, which ships about 5,000 cartons a day to the stores, had no visibility of shipments from the time they left the facility until they arrived at the stores. Even then, store managers had to open cartons to find out what they had received.
Though Space took some intermediate steps to get the goods moving through the building faster (he installed flow racking to replace picking off pallets, for example), he quickly became convinced that the situation called for more drastic measures. "We decided after doing some due diligence that by the time we retrofitted the building and brought in a new WMS, it would cost $5 million to $7 million and take two years," he says. "We wanted it much faster than that."
Though time was of the essence, Space tried not to rush the process of reviewing the outsourcing bids he gathered. "I've gone through five or six outsourcing projects," he says. "When you're outsourcing your DC—that's your lifeblood—you want to be sure of your partner in the operation." After reviewing seven proposals, the company picked UPS. "At the end of the day," Space says, "UPS brought more to the table in terms of technology and a partnership."
Hub Distributing is hardly alone among apparel companies in taking the outsourcing route. "Clothing is a particular sweet spot [for UPS]," says Scott Carter, a vice president of consulting in UPS Supply Chain Solutions' retail and consumer products consulting services unit. Part of the reason is that the business is highly seasonal. (Space, for example, reports that Anchor Blue has two peak seasons: back to school and Christmas.) "Your typical retailer [earns] 70 percent of its revenue in a short window at the end of the year," says Carter, noting that UPS is well geared to handle seasonal business.
Of course, seasonal business isn't limited to clothing companies. Carter cites the case of another customer that makes outdoor furniture (which requested anonymity)."They have a very narrow window to sell a lot of patio furniture," he says. Using sophisticated technology, UPS set up a system that allowed the furniture maker to meet 80 percent of its demand with non-expedited freight, shipping only the final 20 percent via expedited service. It was cheaper for the company to use that expedited freight than to carry the inventory in advance or to build a permanent nfrastructure that would be needed only eight weeks a year.
Quest for world domination
For all their success, it appears that UPS, FedEx and DHL are not content to gobble up domestic business. As more U.S. companies start sourcing and selling overseas, all three are aggressively marketing their international experience and expertise. For example, FedEx Trade Networks now offers an array of international business services, including customs brokerage, air and ocean forwarding, and trade consultancy services. Along with sister companies like FedEx Ground and FedEx Freight, FedEx Trade Networks can manage the flow of goods from point of origin to final destination, often bypassing customers' distribution centers.
"Our target audience—it may be a seasonal issue—does not want to go through the normal supply chain," says Gerald Leary, FedEx Trade Networks' executive vice president and chief operating officer. "We're finding more and more companies are part of an international supply chain. We can shave two to three weeks off the transit time over putting goods into a regular DC."
Not only is it quicker, it's easier. Take the case of a FedEx customer that purchased Halloween goods in China for distribution across the United States. (Again, the customer requested anonymity.) "We did a consolidation in China that made up several container loads," Leary says. "We moved the shipment to Los Angeles, where we cleared it through Customs." Some containers went to a nearby FedEx facility for stripping and deconsolidation into individual store shipments; others moved by rail to different regions of the United States. The result, says Leary: "The customer gets distribution to 400 outlets from one consolidation, then gets a single bill."
Leary touts FedEx's technology as a key differentiator from traditional forwarding service. "We know where the product is at all times," he says.
For its part, UPS offers international services through its Trade Direct business. "Trade Direct was born out of retail customers' needs," says Carter. "They want the perfect order from a supply base thousands of miles, three languages, and eight time zones away."
The idea, he insists, is not to create express shipments, but to build what he calls "warehouses in motion.""We want to create the ability to bypass DC operations in North America and go direct to the store shelf or as near as we can. We do that by managing order flow from the purchase order to handling containers in Asia. We're creating outbound containers that are store orders, so they can be distributed directly to the store. So we reduce the material handling requirements and number of touches."
A big plus, Carter adds, is the visibility provided by UPS's service. "The customer has a consistent, high-visibility flow of goods," he says. "We create a steady flow that allows customers to make real-time decisions based on real-time information without incurring unnecessary cost. For a clothing retailer, obsolescence or lost sales are a huge cost. If he knows he's getting too many large blues, he can stop the flow and instead arrange to get the pink smalls that are flying off the store shelves."
Here's our monthly roundup of some of the charitable works and donations by companies in the material handling and logistics space.
For the sixth consecutive year, dedicated contract carriage and freight management services provider Transervice Logistics Inc. collected books, CDs, DVDs, and magazines for Book Fairies, a nonprofit book donation organization in the New York Tri-State area. Transervice employees broke their own in-house record last year by donating 13 boxes of print and video assets to children in under-resourced communities on Long Island and the five boroughs of New York City.
Logistics real estate investment and development firm Dermody Properties has recognized eight community organizations in markets where it operates with its 2024 Annual Thanksgiving Capstone awards. The organizations, which included food banks and disaster relief agencies, received a combined $85,000 in awards ranging from $5,000 to $25,000.
Prime Inc. truck driver Dee Sova has donated $5,000 to Harmony House, an organization that provides shelter and support services to domestic violence survivors in Springfield, Missouri. The donation follows Sova's selection as the 2024 recipient of the Trucking Cares Foundation's John Lex Premier Achievement Award, which was accompanied by a $5,000 check to be given in her name to a charity of her choice.
Employees of dedicated contract carrier Lily Transportation donated dog food and supplies to a local animal shelter at a holiday event held at the company's Fort Worth, Texas, location. The event, which benefited City of Saginaw (Texas) Animal Services, was coordinated by "Lily Paws," a dedicated committee within Lily Transportation that focuses on improving the lives of shelter dogs nationwide.
Freight transportation conglomerate Averitt has continued its support of military service members by participating in the "10,000 for the Troops" card collection program organized by radio station New Country 96.3 KSCS in Dallas/Fort Worth. In 2024, Averitt associates collected and shipped more than 18,000 holiday cards to troops overseas. Contributions included cards from 17 different Averitt facilities, primarily in Texas, along with 4,000 cards from the company's corporate office in Cookeville, Tennessee.
Electric vehicle (EV) sales have seen slow and steady growth, as the vehicles continue to gain converts among consumers and delivery fleet operators alike. But a consistent frustration for drivers has been pulling up to a charging station only to find that the charger has been intentionally broken or disabled.
To address that threat, the EV charging solution provider ChargePoint has launched two products to combat charger vandalism.
The first is a cut-resistant charging cable that's designed to deter theft. The cable, which incorporates what the manufacturer calls "novel cut-resistant materials," is substantially more difficult for would-be vandals to cut but is still flexible enough for drivers to maneuver comfortably, the California firm said. ChargePoint intends to make its cut-resistant cables available for all of its commercial and fleet charging stations, and, starting in the middle of the year, will license the cable design to other charging station manufacturers as part of an industrywide effort to combat cable theft and vandalism.
The second product, ChargePoint Protect, is an alarm system that detects charging cable tampering in real time and literally sounds the alarm using the charger's existing speakers, screens, and lighting system. It also sends SMS or email messages to ChargePoint customers notifying them that the system's alarm has been triggered.
ChargePoint says it expects these two new solutions, when combined, will benefit charging station owners by reducing station repair costs associated with vandalism and EV drivers by ensuring they can trust charging stations to work when and where they need them.
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”
"Shrink" is the retail industry term for the loss of inventory before it can be sold, whether through theft, damage, fraud, or simple book-keeping errors. In the ongoing effort to reduce those losses, Switzerland-based retail tech company Sensormatic Solutions has expanded the scope of its Shrink Analyzer application to shine a light into previously unmonitored parts of brick-and-mortar stores where goods tend to go missing.
The newly enhanced, cloud-based application can now integrate radio-frequency identification (RFID) and electronic product code (EPC) data from overlooked parts of the building, like employee entrances, receiving doors, "buy online, pick up in store" (BOPIS) doors, or other high-risk areas selected by a store. It then integrates that data into Sensormatic's analytics engine to provide insights into when, where, and how shrink occurs to help users strengthen their loss-prevention strategies, the company says.
Those expanded capabilities allow the platform to provide enhanced "shrink insight" at locations beyond the store's main exit, Sensormatic says. For example, strategically placed RFID scanners at employee exits can reduce internal theft while providing item-level evidence for theft investigation efforts. Likewise, monitoring online-order pickup doors can help retailers both improve in-store e-commerce fulfillment accuracy and identify employee theft events, according to Sensormatic.
A few days before Christmas as I was busy preparing for the holiday, I received a text message from my bank asking if I had attempted to purchase a $244 Amtrak ticket in Orange County, California. Considering that I had the card in my possession and that I lived thousands of miles away from the attempted purchase location, I promptly replied "No." Almost immediately, a second message informed me that my card was locked and to contact my bank.
I'd like to say this was an isolated incident, but in 2024, I had to replace the same card four times. Luckily, it just took a quick trip to my local bank to replace the compromised card, but it was still an unwanted hassle.
Fraud is a never-ending issue facing not just consumers but businesses as well—no one is immune, it seems. In its latest industry report, "Occupational Fraud 2024: A Report to the Nations," the Association of Certified Fraud Examiners (ACFE) estimated that businesses lose 5% of their revenues to fraud each year. This report focused specifically on three basic types of occupational fraud: asset misappropriation, corruption, and financial misstatement. But what about other types of fraud?
The media often report on big organized theft rings stealing goods from trailers, trains, or containerships, or on bands of thieves breaking into warehouses or retail stores—but there are so many other ways in which fraudsters wreak havoc.
For instance, another area where fraud is rampant is consumer returns in the retail industry. Software company Appriss Retail, in collaboration with business management consultancy Deloitte, recently published its "2024 Consumer Returns in the Retail Industry" report. It states that "total returns for the retail industry amounted to $685 billion in merchandise in 2024." That might seem like a drop in the bucket compared to the $5 trillion in sales U.S. retailers racked up last year, but as the report's authors note in the executive summary, "the amount of fraud and abuse remains a significant issue that should be addressed. Fraudsters and abusers are often becoming adept at circumventing retailers' controls across all channels."
So what can businesses do? According to the ACFE study, internal controls (i.e., surprise audits, management reviews, hotlines or other reporting mechanisms, fraud training, and formal fraud risk assessments) are the best defense against occupational fraud.
When it comes to consumer returns fraud, Appriss Retail's report concludes that while retailers continue to adapt and refine their fraud prevention strategies, it's a delicate balancing act. The trick is for "retailers to implement solutions that have [a] minimal impact on the consumer experience," the report noted. "Brand loyalty can be fragile and competition continues to grow, so holding onto consumers is often a key to long-term success."
Then there's security and asset protection. Last October, I attended a session at the Council of Supply Chain Management Professionals' EDGE 2024 conference that focused on security and safety. In that session, Lee Ambrose, vice president of business development for Remote Security Solutions (RSS), discussed advanced strategies and technologies for violence prevention. But he also touched on asset/transit protection and specific solutions that can help companies discourage theft.
As an example, Ambrose cited his company's transit surveillance unit (TSU)—a portable monitoring device that can be installed on trailers to protect in-transit freight. According to the company's website, the TSU uses AI (artificial intelligence) detection, security cameras, and two-way communication to deter criminal activity, providing real-time detection and notification when unauthorized persons attempt to enter the trailer. It claims the device has a deterrence rate of 98%.
In the end, sometimes there is only so much a company can do to mitigate fraud/theft. But we are fortunate to have resources we can turn to if we need help. It's an uphill battle, but one that we will keep on fighting.