Seeking faster transit times and greater certainty, a growing number of importers are moving products directly to customers without going through the DC.
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.
Walk into any large retail store and you're likely to see Arthur William's Industries' products nearly everywhere you turn. Chances are, though, you won't pay the least bit of attention to them: They're what Operations Manager Jim Morgan calls "the item nobody notices."
What William's Industries provides to many of the nation's largest retailers are store fixtures and merchandising equipment—the shelves and racks and such used to display their wares. Those fixtures may not be for sale, but retailers are just as particular about the timeliness and reliability of their delivery as they are about the shirts, housewares, and videogames they sell.
Making sure the fixtures get where they're going on time is a particular challenge when the supply chain stretches for thousands of miles. Like many other U.S. companies, William's Industries manufactures most of its products in China and brings them into the country through ports on the West Coast for distribution to its end customers. When Morgan joined the Cincinnati-based company about three years ago, it was in the throes of moving production to China and experiencing a lot of headaches with incoming shipments of finished goods. "The company policy was that suppliers would obtain the freight and give us a landed cost,"Morgan says. "We had no control over our own destiny."
Shifting some of its business to more reliable suppliers helped somewhat, but it didn't solve all of the problems. For Morgan, the situation reached its nadir during a 2004 new product launch, when the company needed to bring in 60 full containers over 45 days. "It was a nightmare," Morgan recalls. "We were not in control of the containers.We got through it, but it was not efficient."
That experience left Morgan, a materials manager at the time, determined to learn about logistics and find a way for the manufacturer to gain more control over its import pipeline and ensure timelier, more predictable deliveries to its customers. What he—and a growing number of importers—found out: If you want to speed up and stabilize the process, you need to take the bypass.
Not just about speed
Morgan eventually turned to Trade Direct, a service offered by UPS that brings merchandise in through West Coast ports, deconsolidates the shipments, and distributes them directly to its customers' customers. That service (and others like it) gives importers the opportunity to bypass their own distribution centers, cutting days out of the distribution cycle.
The idea of bypassing DCs is nothing new, but it appears to be growing in popularity. That's because it's not just about speed. It also addresses the three main drivers of cost in shipping: inventory, "touches," and distance, says Randy Strang, vice president of global solutions and implementation for UPS. "The biggest advantage is that as goods come into the country, rather than going to a regional DC, they go from the port of entry to the destination," he explains. "You can reduce inventory and the number of touches."
That's a big plus for importers that are trying to balance the competing objectives of cutting costs by sourcing from low-cost countries thousands of miles from their customers, and cutting cycle times and inventory levels. Eliminating the DC run also reduces the number of miles traveled, a decided advantage these days. "What we are seeing is that as fuel surcharges go up, [Trade Direct] is becoming more and more attractive," Strang reports.
On the fast track
Another obvious advantage to bypassing the DC (and thereby eliminating a touch) is the potential to reduce uncertainty and variability in transit times—a long-standing complaint of ocean shippers. That's the thinking behind OceanGuaranteed, a joint service launched last fall by contract logistics provider APL Logistics and less-than-truckload carrier Con-way Freight. The service links less-thancontainerload (LCL) ocean shipments with Con-way's domestic LTL network, a match-up that allows the providers to offer a day-definite, guaranteed LCL product for shipments from Asia to the United States.
The carriers created the program after research they had commissioned from consulting firm MergeGlobal revealed a need for faster, more predictable trans-Pacific service. Edward Moritz, vice president of marketing for Con-way Freight, notes that focus groups showed that importers were particularly concerned about transit time variability in LCL shipments. "Reliability and visibility are the two key words," he says.
Based on their findings, the MergeGlobal researchers, Brian Clancy and David Hoppin, proposed the creation of a new "fast track" ocean and land service under which LCL shipments would receive expedited processing at both the load and discharge ports, and then be injected directly into an LTL network for delivery to consignees. That proposal became the model for OceanGuaranteed.
Launched in September, the new port-to-door service is now available from seven Asian ports. Initially, OceanGuaranteed was offered from Hong Kong, Shanghai, and Shenzhen in China through Los Angeles to all continental U.S. destinations served by Con-way Freight. In January, the program was expanded to include service from Kaoshiung, Taiwan; Yokohama, Japan; Busan, Korea; and Singapore. According to Moritz, transit times from pickup in Asia to Con-way's farthest U.S. delivery points are 17 to 20 days. Transit times for traditional LCL services, he says, typically are 28 to 30 days, sometimes stretching out to 40 days.
High-speed connection
It's not just ocean shippers that are taking advantage of DC bypass services these days. Air shippers are giving them a try as well. Earlier this year, Kyocera Wireless Corp. signed a contract with supply chain services firm BAX Global to manage shipments of cell phones produced in mainland China to its customers in the United States. Under the agreement, BAX manages a new warehouse in Hong Kong that receives the phones from China and then ships orders by air directly to Kyocera's customers, eliminating the need for U.S. warehousing.
"Kyocera was looking for a process to streamline the whole supply chain," says Lisa Cain, global account director for BAX and manager of the Kyocera Wireless account. "It is basically a doorto- door service."
At the warehouse in Hong Kong, BAX receives instructions directly from Kyocera's inventory system. The warehouse performs some pick-and-pack services, but most of the goods arrive from the manufacturer ready for the end customer; in fact, product is often shipped out the same day it arrives at the Hong Kong warehouse. BAX ships full pallets of Kyocera's products via air carriers.Which carrier depends on the routing; Chicago, San Francisco, and Miami are the main gateways. Customs brokerage is handled by FedEx Trade Networks. BAX reports that Kyocera has already seen a significant reduction in transit times. "From their contract manufacturer, it is three to four days to the customer's door in the U.S.," Cain says. "A lot of times, we do it in two or three."
Simplification here, complication there
Although the DC bypass strategy simplifies some aspects of supply chain management, it can create complications elsewhere in the supply chain, warns Strang of UPS. For instance, it may require the shipper to allocate products to specific stores at the point of origin—something not all shippers are prepared to do. Retailers, for example, often prefer to postpone store allocation until merchandise is close to arrival at the destination port so they can base allocation on current demand.
In some instances, complications may also arise in the receiving process. That's particularly likely to be the case among small to mid-sized retailers, Strang notes. Oftentimes, the DC is the only part of their operation that's set up to receive imports—their stores don't have the capability to receive imports directly.
A number of large retailers have solved this problem by moving merchandise through what UPS calls "import flow centers"—DCs near the ports where containers are stripped and shipments are re-consolidated for domestic delivery. Now, Strang says, UPS is starting to see interest in third-party import flow centers from small and mid-sized retailers that want to do the same.
Allocation hasn't been a problem for William's Industries, which schedules its shipments for specific stores before the vessels set sail. The company ships in full containers from China, and two to five containers may move under a single bill of lading. Typically, a full container holds orders for a single retail customer, although the items may be bound for several different stores in the retailer's network. Most of the shipments are headed to existing stores for replenishing and replacing equipment. Orders for new stores still ship to the William's Industries distribution center in Cincinnati, where they are held until called for during construction. The new system works smoothly: First, the company sends orders to its suppliers in China. When the orders are ready, the factory contacts UPS, which in turn lets Morgan know which purchase orders are included, the number of containers, and when they will ship.
The supplier moves the containers to the port, where they are loaded on vessels bound for the West Coast. UPS picks up the containers and brings them to its facility in Carson, Calif., for deconsolidation. Domestic routing to individual stores depends on the size of each shipment. Though some shipments move by less-than-truckload or full truckload carriers, the company moves as many as possible via UPS ground service. "The direction from us is that anything that can go small package will go small package," Morgan says. "Everything we do is to minimize cost." Shipping charges from Carson are billed to the customer.
Quick and reliable
Morgan considers the program a great success. For one thing, he gets much more precise information about delivered costs than he did prior to implementing the service. Another advantage: The total cycle time from factory to customer is just three weeks now, compared to the five weeks it used to take to move goods first into his Cincinnati DC and then out to customers.
The improvement in William's Industries' speed, reliability, and overall cost has had a considerable impact on the shipper and its customers. For example, the assurance of faster, predictable deliveries has allowed the company to come to the rescue of customers who waited until the last minute to order. "It has gotten customers out of trouble," says Morgan. That ability to step in and save the day has earned the company more than just its clients' gratitude, he adds. "That's also helped us win orders."
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
Both shippers and carriers feel growing urgency for the logistics industry to agree on a common standard for key performance indicators (KPIs), as the sector’s benchmarks have continued to evolve since the COVID-19 pandemic, according to research from freight brokerage RXO.
The feeling is nearly universal, with 87% of shippers and 90% of carriers agreeing that there should be set KPI industry standards, up from 78% and 74% respectively in 2022, according to results from “The Logistics Professional’s Guide to KPIs,” an RXO research study conducted in collaboration with third-party research firm Qualtrics.
"Managing supply chain data is incredibly important, but it’s not easy. What technology to use, which metrics to track, where to set benchmarks, how to leverage data to drive action – modern logistics professionals grapple with all these challenges,” Ben Steffes, VP of Solutions & Strategy at RXO, said in a release.
Additional results from the survey showed that shippers are more data-driven than they were in the past; 86% of shippers reference their logistics KPIs at least weekly (up from 79% in 2022), and 45% of shippers reference them daily (up from 32% in 2022).
Despite that sharpened focus, performance benchmarks have become slightly more lenient, the survey showed. Industry performance standards for core transportation KPIs—such as on-time performance, payables, and tender acceptance—are generally consistent with 2022, but the underlying data shows a tendency to be a bit more forgiving, RXO said.
One solution is to be a shipper-of-choice for your chosen carriers. That strategy can enable better rates and more capacity, as RXO found 95% of carriers said inefficient shipping practices impact the rates they give to shippers, and 99% of carriers take a shipper’s KPI expectations into account before agreeing to move a shipment.
“KPIs are essential for effective supply chain management and continuous improvement, and they’re always evolving,” Steffes said. “Shifts in consumer demand and an influx of technology are driving this change, in combination with the dynamic and fragmented nature of the freight market. To optimize performance, businesses need consistent measurement and reporting. We released this study to help shippers and carriers benchmark their standards against how their peers approach KPIs today.”
Supply chain technology firm Manhattan Associates, which is known for its “tier one” warehouse, transportation, and labor management software products, says that CEO Eddie Capel will retire tomorrow after 25 total years at the California company, including 12 as its top executive.
Capel originally joined Manhattan in 2000, and, after serving in various operations and technology roles, became its chief operating officer (COO) in 2011 and its president and CEO in 2013.
He will continue to serve Manhattan in the role of Executive Vice-Chairman of the Board, assisting with the CEO transition and special projects. Capel will be succeeded in the corner officer by Eric Clark, who has been serving as CEO of NTT Data North America, the U.S. arm of the Japan-based tech services firm.
Texas-based NTT Data North America says its services include business and technology consulting, data and artificial intelligence, and industry solutions, as well as the development, implementation and management of applications, infrastructure, and connectivity.
Clark comes to his new role after joining NTT in 2018 and becoming CEO in 2022. Earlier in his career, he had held senior leadership positions with ServiceNow, Dell, Hewlett Packard Enterprise, Arthur Andersen Business Consulting, Ernst & Young and Bank of America.
“This is an ideal time for a CEO transition,” Capel said in a release. “Our company is in an exceptionally strong position strategically, competitively, operationally and financially. I want to thank our management team and our entire workforce, which is second to none, for their hard work and dedication to our mission of advancing global commerce through advanced technology. I look forward to working closely with Eric and continuing to contribute to our product vision, interacting with our customers and partners, and ensuring the growth and success of Manhattan Associates.”
The Japanese logistics company SG Holdings today announced its acquisition of Morrison Express, a Taipei, Taiwan-based global freight forwarding and logistics service provider specializing in semiconductor and high-tech logistics.
The deal will “significantly” expand SG’s Asian market presence and strengthen its position in specialized logistics services, the Kyoto-based company said.
According to SG, there is minimal overlap between the two firms, as Morrison Express’ strength in air freight and high-tech verticals in its freight forwarding business will be complementary with SG’s freight forwarding arm, EFL Global, which focuses on ocean freight forwarding and commercial verticals like apparel and daily sundries.
In addition, the combined entity offers an expanded geographic reach, which will support closer proximity to customers and ensure more responsive support and service delivery. SG said its customers will benefit from end-to-end supply chain solutions spanning air, ocean, rail, and road freight, complemented by tailored solutions that leverage Morrison's strong supplier and partner relationships in the technology sector.
The growth of electric vehicles (EVs) is likely to stagnate in 2025 due to headwinds created by uncertainty about the future of federal EV incentives, possible tariffs on both EV and gasoline-powered vehicles, relaxed federal emissions and mileage standards, and ongoing challenges with the public charging network, according to a report from J.D. Power.
Specifically, J.D. Power projects that total EV retail share will hold steady in 2025 at 9.1% of the market, or 1.2 million vehicles sold. Longer term, the new forecast calls for the EV market to reach 26% retail share by 2030, which is approximately half of the market share the Biden administration targeted in its climate agenda.
A major reason for that flat result will be the Trump Administration’s intention to end the $7,500 federal Clean Vehicle Tax Credit, which has played a major role in incentivizing current EV owners to purchase or lease an EV, J.D. Power says.
Even as EV manufacturers and consumers adjust to those new dynamics, the electric car market will continue to change under their feet. Whereas the early days of the EV market were defined by premium segment vehicles, that growth trend has now shifted to the mass market segment where franchise EV sales rose 58% in 2024, reaching a total of 376,000 units. That success came after mainstream franchise EV sales accounted for just 0.8% of total EV market share in 2021. In 2024, that number rose to 2.9%, as EVs from the likes of Chevrolet, Ford, Honda, Hyundai and Kia surged in popularity, the report said.
This growth in the mass market segment—along with federal and state incentives—has also helped make EVs cheaper than comparable gas-powered vehicles, J.D. Power found. On average, at the end of 2024, the average cost of a battery-electric vehicle (BEV) was $44,400, which is $1,000 less than a comparable gas-powered vehicle, inclusive of hybrids and plugin hybrids. While that balance may change if federal tax incentives are removed, the trend toward EVs being a lower cost option has correlated with increases in sales, which will be an important factor for manufacturers to consider as they confront the current marketplace.