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.
FedEx Freight, the less-than-truckload unit of FedEx Corp., announced today that it will increase tariff rates by 4.5 percent across its North American system, effective July 1. The increase by the nation's leading LTL carrier by revenues dramatically undercuts the recently announced tariff hikes by rivals UPS Freight, YRC Freight, and ABF Freight System Inc.
The increase will affect FedEx Freight's noncontractual business moving within the United States, within Canada, and within Mexico. It also covers shipments moving between the contiguous 48 U.S. states and Canada, and between the 48 states and Mexico, FedEx Freight said.
FedEx Freight also said it will maintain its current fuel surcharge levels, adding that its surcharges are, in aggregate, 29 percent less than the next six carriers combined.
Within the past three weeks, three of FedEx Freight's main competitors—UPS Freight, UPS Inc.'s LTL unit; YRC Freight, YRC Worldwide Inc.'s long-haul unit; and ABF, the largest division of Arkansas Best Corp.—have announced general rate increases (GRIs) of 5.9 percent. UPS' increases took effect today. The YRC and ABF increases are already in effect.
ABF said its increases would affect about 40 percent of its business. A spokeswoman for UPS Freight would not divulge such data, saying it was proprietary to the company. YRC did not respond to a request for comment by press time.
SMART STRATEGY, OR NOT?
The latest round of increases comes amid what has turned into a virtuous cycle for carriers. Freight demand, though not explosive, is holding up fairly well. Carriers have done a reasonably effective job of rationalizing capacity and pricing. In so doing, they have regained some of the ground lost during the last down cycle, when LTL revenues fell significantly and carriers were engaged in vicious rate wars that may have gained market share but did so at the expense of their profits.
Still, with the economy failing to fire on all cylinders, some wonder if the rate hikes are becoming overkill. UPS Freight, for example, has raised its tariff rates five times in the past three and a half years. None of those increases was less than 5.9 percent.
"While carrier costs are rising, larger-than-five-percent general rate increases are a bit strong, given the fact that these increases are passed down, and end up in many cases raising the price of the goods," said Charles W. Clowdis, Jr., managing director of transportation advisory services at the research and consulting firm IHS Global Insight.
To some, the FedEx Freight hike is reminiscent of the unpleasant days of predatory pricing, when the carrier was a primary player in that game. Back then the race to the bottom was driven by efforts to put YRC Freight (at that time the market leader, and with its parent facing bankruptcy) out of business. The gambit failed, as YRC not only stayed alive but has regained part of its luster under the leadership of CEO James L. Welch and Jeff Rogers, head of the YRC Freight unit.
"I think (FedEx Freight) is still of the opinion it can make a market-share grab somehow," said a trucking executive who asked not to be named. "It is a poor strategy, in my opinion. Fools can cut rates, but it takes a smart guy to raise them."
At press time, William J. Logue, president and CEO of Memphis-based FedEx Freight, had not responded to an e-mail request for comment.
With annualized revenues of just over $5 billion, FedEx Freight controls slightly more than 15 percent of the $32 billion U.S. LTL market, according to data from SJ Consulting.
An executive of a large shipper, whose $50 million annual LTL spend gives it the clout to get better and more stable pricing through contractual relationships, said the dynamics of GRI pricing are "a bit tough to understand" because "they only seem to widen the gap between the craziness of the carriers' standard rates and what people actually pay."
The shipper added that "anybody can get a 60-percent discount" off of a carrier's base rates, and that carriers lose credibility by publicly boosting tariff rates only to negotiate away most of those increases later on.
STRONGER DEMAND SIGNALS
In what could be considered a positive sign on the demand front, Old Dominion Freight Line Inc., arguably the nation's most successful truck line, on Friday increased its "expectations for growth" for the second quarter of 2013. The Thomasville, N.C.-based LTL carrier said it expects its daily tonnage to rise by between 5 and 5.5 percent compared to the same quarter in 2012. Old Dominion had forecast earlier this year that second-quarter tonnage would grow between 4.5 percent and 5 percent over the year-earlier period.
Old Dominion said its average daily tonnage rose 5.7 percent in April and 5.8 percent in May over the same periods in 2012. Revenue per hundredweight, a key measure of LTL carrier profitability, is expected to increase by 1.5 percent to 2 percent over the 2012 quarter. That forecast excludes the impact of fuel surcharges, Old Dominion said.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”