Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
For 106 years, UPS Inc. has been guided by a linear and logical philosophy. It identified a
problem or an opportunity, and then developed clear and consistent processes to address it.
Atlanta-based UPS has come to view its strategy as something of an irresistible force, and its long history of
success somewhat validates that claim. But as UPS announced yesterday it was abandoning its $6.8 billion buyout
of Dutch delivery firm TNT Express, it became clear the irresistible force had met its match in an immovable object,
namely the deeply entrenched and byzantine antitrust culture of the European Union (EU).
When UPS agreed last March to acquire TNT Express, it figured it was following a logical path. TNT Express was
foundering, it lacked management direction, and its customer service metrics were declining. It was piling up
losses in Europe, Brazil, and Asia. Despite having the largest market share of any European parcel carrier at
about 18 percent, it faced a future of irrelevance against the well-capitalized likes of UPS, DHL Express, and FedEx Corp.
To many, a buyout was TNT Express' only hope of avoiding a death spiral and a subsequent yard sale of its assets. Enter UPS,
and only UPS. No company made a counteroffer for TNT Express. Thus it became a battle between UPS and the European Commission
(EC), the EU's regulatory body.
UPS presumed the EC would welcome a nearly $7 billion injection of capital at a time when the continent was facing
the worst financial crisis in decades. UPS thought regulators would recognize TNT's dire situation and approve a deal
that would preserve its assets and possibly thousands of jobs, while giving shippers a strong alternative for transport
and logistics services. UPS also believed it could address any antitrust concerns that would be thrown its way.
UPS may not have foreseen what lay ahead. The EC submitted a list of competitive issues. UPS and TNT Express made
three separate proposals in an attempt to remedy the concerns, including the sale of assets and allowing competitors'
access to network capabilities in various countries. The EC never gave UPS any guidance as to whether it was on the
right path or on what needed correcting. As one source close to the situation remarked about the EC's modus operandi,
"They don't tell you what to do."
All that UPS had to go by were public statements by EC officials that they were concerned about the company's
ability to create an environment of "equivalent competitive pressure" by ensuring that assets were sold to a viable rival.
The stipulation that UPS sell to a viable rival presented a problem. In an ironic twist, considering that some felt that
UPS' bid was designed to keep TNT Express out of FedEx's hands, UPS and archrival FedEx held very informal discussions about
asset sales. The conversations, however, never made it up to the CEO levels, and FedEx, which has never been truly interested
in TNT Express, continued to demonstrate its disinterest.
UPS also tried to strike a deal to sell assets to DPD, the German parcel unit of French postal firm La Poste. But DPD
lacked the infrastructure needed to rise to the EC's ambiguous demand of "equivalent competitive pressure."
Finally, the EC told the companies that it was "working" on rejecting the deal, and UPS did what many long thought it
would do when pushed to the limits of its logical thought process: It walked.
UPS will certainly live to fight another day. While it paid TNT Express a $267 million "breakup" fee for terminating the
purchase, that's small change for a company that generated $3.6 billion in free cash flow through the first nine months of 2012.
There are a lot of other transportation and logistics companies in the world that would welcome a buyout, and UPS has the firepower
to oblige.
Indeed, many in the investment community breathed a sigh of relief that UPS would avoid the scenario of committing nearly $7
billion of shareholder wealth to an acquisition only to spawn a messy and expensive integration process on a continent where
regulators don't make it easy to execute. UPS' stock price rose 1.7 percent yesterday as the market—for a day at least—reacted
positively to the news that the deal was dead.
THE FUTURE FOR TNT
For TNT Express, the future is uncertain at best. In a statement, it admitted the saga had
become a distraction to management, and it would work towards reassuring customers and employees
of its commitment to compete on a standalone basis. It has been reported the company will use the
termination fee to improve its balance sheet.
The failed deal shaved about 40 percent off TNT Express' share price yesterday, though by mid-day today in European
trading its share value had rebounded about 5 percent. With TNT Express' shares significantly cheaper today than they
were on Friday, it would be reasonable to wonder if that would spark some buying interest.
At an investor conference in March 2011, FedEx CFO Alan B. Graf Jr. said the company would stay away from TNT Express
because it was too richly priced. Given that Memphis-based FedEx has since embarked on a strategy to expand internationally
through organic growth and smaller acquisitions, a gulp of this size, even at what might be considered a discounted price,
seems farfetched.
As for DHL, its silence speaks volumes. Publicly, it has shown no interest in TNT Express. However, DHL harbors hard
feelings towards UPS for trying to block DHL's 2003 takeover of Airborne, and it would surprise no one if DHL and its parent,
German giant Deutsche Post, used their combined lobbying heft in Brussels to torpedo the deal and drive down TNT Express' share
price to levels ripe for DHL's picking.
Jerry Hempstead, who battled UPS for decades as a top U.S. sales executive for Airborne and then DHL, doesn't believe the
last word has been written on Big Brown's involvement. "Knowing UPS, I just can't see them giving up and walking away," said
Hempstead, who runs an Orlando, Fla.-based parcel consultancy bearing his name.
Barring an acquisition, though, Hempstead sees no future for TNT Express on its own. "I believe that the termination fee
will now be insufficient to save TNT from implosion," he said.
Unless a suitor steps up or TNT Express can engineer a remarkable turnaround, the endgame could be a breakup of the
once-proud company, a wholesale dumping of assets, and perhaps the loss of many jobs. If that is the case, the EC will have to come to grips with the fact that in the interest of preserving its unique concept of competition, it aided and
abetted the immolation of a prominent European company.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!