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 Corp. plans to hike its diesel and jet fuel surcharges effective Feb. 2 amidst the steepest decline in oil prices in
nearly six years.
The changes mean that most FedEx air and ground shippers will be looking at higher fuel charges next month except for those
shippers with contracts that contain specific language governing surcharge implementation. Typically, parcel contracts give the
carrier latitude to impose the fuel surcharge that's in effect on the day a package is picked up. The carriers are also free to
change surcharge levels without prior notice. Surcharge levels can fluctuate depending on changes in oil and fuel prices.
As of Monday, the national average for on-highway diesel fuel stood at $3.13 a gallon, according to data from the Department of
Energy's Energy Information Administration (EIA). The weekly index is the benchmark from which truckers set their fuel surcharges.
FedEx's diesel and jet fuel surcharges are based on price bands derived from the EIA index. With diesel prices remaining in a
range of $3.07 and $3.19 a gallon, surcharges imposed on FedEx surface transport shipments will increase to 5 percent from 3.5
percent, according to data from consultancy Shipware LLC.
In addition, with jet fuel prices at current levels of $2.30 a gallon, the fuel surcharge imposed on shipments moved by FedEx
Express, the company's air and international division, will rise to 6.5 percent from 4.5 percent, according to Shipware data. U.S.
jet fuel prices are set by the EIA based on a survey of spot prices in the Gulf Coast region. The survey is published monthly.
Diesel and jet fuel prices have declined precipitously during the past five months, mirroring the sharpest drop in U.S. and
world oil prices since the depths of the Great Recession in the first half of 2009. Jet fuel prices have fallen from $2.83 a
gallon in August to $2.29 a gallon at the end of November, according to EIA data. Diesel prices as of Monday were down more than
77 cents a gallon compared to the first week of 2014, the EIA said. The Gulf Coast region reported the lowest average diesel price
last week at $3.04 a gallon. California, as usual, recorded the highest price at $3.34 a gallon.
Alan B. Graf Jr., FedEx's chief financial officer, disclosed the impending change in mid-December during the company's
conference call with analysts to discuss its fiscal second quarter results. According to a transcript of the call, Graf said that although FedEx has benefited from the decline in fuel prices, the gains have been mostly neutralized by revenue reductions from lower fuel surcharges.*
Graf added that the six- to eight-week lag between FedEx's fuel payments and the surcharges imposed to recoup those costs
meant the company was stuck with higher prices in September before it could adjust its surcharges accordingly in November. For jet
fuel, for example, FedEx Express saw only an 8 percent sequential reduction in costs in its fiscal second quarter despite a near
30-percent drop in fuel prices during that period, according to Graf's comments during the call.
COMING INTO ALIGNMENT
Industry consultants say next month's adjustments are designed to achieve parity with archrival UPS Inc., whose diesel and
jet fuel prices have been higher since 2012 when UPS embarked on a fuel-hedging strategy designed to insulate its cost structure
against then-higher prices and the chances of them going higher still. Based on current diesel prices, UPS' ground fuel surcharge
for February would be 5.5 percent, according to data on the company's website. Based on current jet fuel prices, UPS' surcharge
on air and international services would be 7 percent, according to the website.
Rob Martinez, Shipware's CEO, said FedEx acted because it spent 2013 and 2014 taking less fuel surcharge revenue than UPS, and
it had grown tired of the disparity. The February adjustments could increase FedEx revenue by about 4 percent, according to
Martinez. Based on fiscal 2014 revenue of more than $45 billion, the change could translate into a $1.7 billion top-line boost.
What's more, FedEx stands to lose few, if any, business-to-business customers to UPS because its surcharge levels will still be
slightly below its rival's even with the increases, Martinez said. The two companies have a virtual lock on domestic
business-to-business parcel traffic.
Martinez expects FedEx customers to "grin and bear it" just as they have done with other price increases. Few shippers have
raised a furor over
the recent shift by both carriers from weight-based to dimensional pricing for ground parcels measuring less
than 3 cubic feet. If shippers aren't vocal in their opposition to what Martinez called a "major rate increase," there is little
reason to think they will object to FedEx's upcoming changes to its surcharge structure, he said.
Jerry Hempstead, a long-time parcel executive and now head of a consultancy bearing his name, said in a mid-December column in Parcel magazine that few FedEx customers are aware of the surcharge differential between the two companies unless a FedEx
representative raises the issue. Most shippers wouldn't be able to calculate the benefits during a competitive bid comparison
without using the services of a parcel consultant and sophisticated modeling software, Hempstead added.
Hempstead called the planned adjustment a "hidden rate increase" that will unlikely result in lost business to UPS as long as
the companies' surcharge tables are essentially in alignment. Still, he wondered how FedEx would be able to justify the planned
increases given the ever-descending trajectory of fuel prices.
Editor's note: An earlier version of this article incorrectly stated that Graf's comments were from CFO magazine. They are actually from a transcript of an analyst conference call.
For the past seven years, third-party service provider ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
Photo courtesy of Dematic
For the past four years, automated solutions provider Dematic has helped support students pursuing careers in the STEM (science, technology, engineering, and mathematics) fields with its FIRST Scholarship program, conducted in partnership with the corporate nonprofit FIRST (For Inspiration and Recognition of Science and Technology). This year’s scholarship recipients include Aman Amjad of Brookfield, Wisconsin, and Lily Hoopes of Bonney Lake, Washington, who were each awarded $5,000 to support their post-secondary education. Dematic also awarded $1,000 scholarships to another 10 students.
Motive, an artificial intelligence (AI)-powered integrated operations platform, has launched an initiative with PGA Tour pro Jason Day to support the Navy SEAL Foundation (NSF). For every birdie Day makes on tour, Motive will make a contribution to the NSF, which provides support for warriors, veterans, and their families. Fans can contribute to the mission by purchasing a Jason Day Tour Edition hat at https://malbongolf.com/products/m-9189-blk-wht-black-motive-rope-hat.
MTS Logistics Inc., a New York-based freight forwarding and logistics company, raised more than $120,000 for autism awareness and acceptance at its 14th annual Bike Tour with MTS for Autism. All proceeds from the June event were donated to New Jersey-based nonprofit Spectrum Works, which provides job training and opportunities for young adults with autism.
The logistics process automation provider Vanderlande has agreed to acquire Siemens Logistics for $325 million, saying its specialty in providing value-added baggage and cargo handling and digital solutions for airport operations will complement Netherlands-based Vanderlande’s business in the warehousing, airports, and parcel sectors.
According to Vanderlande, the global logistics landscape is undergoing significant change, with increasing demand for efficient, automated systems. Vanderlande, which has a strong presence in airport logistics, said it recognizes the evolving trends in the sector and sees tremendous potential for sustained growth. With passenger travel on the rise and airports investing heavily in modernization, the long-term market outlook for airport automation is highly positive.
To meet that growing demand, the proposed transaction will significantly enhance customer value by providing accelerated access to advanced technologies, improving global presence for better local service, and creating further customer value through synergies in technology development, Vanderlande said.
In a statement, Nuremberg, Germany-based Siemens Logistics said that merging with Vanderlande would “have no operational impact on ongoing or new projects,” but that it would offer its current customers and employees significant development and value-add potential.
"As a distinguished provider of solutions for airport logistics, Siemens Logistics enjoys a first-class reputation in the baggage and air-cargo handling areas. Together with Vanderlande and our committed global teams, we look forward to bringing fresh impetus to the airport industry and to supporting our customers' business with future-oriented technologies," Michael Schneider, CEO of Siemens Logistics, said in a release.
I recently came across a report showing that 86% of CEOs around the world see resiliency problems in their supply chains, and that business leaders are spending more time than ever tackling supply chain-related challenges. Initially I was surprised, thinking that the lessons learned from the Covid-19 pandemic surely prepared industry leaders for just about anything, helping to bake risk and resiliency planning into corporate strategies for companies of all sizes.
But then I thought about the growing number of issues that can affect supply chains today—more frequent severe weather events, accelerating cybersecurity threats, and the tangle of emerging demands and regulations around decarbonization, to name just a few. The level of potential problems seems to be increasing at lightning speed, making it difficult, if not impossible, to plan for every imaginable scenario.
What is it Mike Tyson said? Everyone has a plan until they get punched in the mouth.
It has never been more important to be able to pivot and adjust to challenges that can throw you off your game. The report I referenced—the “2024 Supply Chain Barometer” from procurement, supply chain, and sustainability consulting firm Proxima—makes the case for just that. The company surveyed 3,000 CEOs from the United Kingdom, Europe, and the United States and found that the growing complexities in global supply chains necessitate a laser-sharp focus on this area of the business. One example: Rightshoring, which is the process of moving business operations to the best location, means companies are redesigning and reconfiguring their supply chains like never before. The study found that large numbers of CEOs are grappling with the various subsets of rightshoring: 44% said they are planning to or have already undertaken onshoring, for instance; 41% said they are planning to or have undertaken nearshoring; 41% said they are planning to or have undertaken friendshoring; and 35% said they are planning to or have undertaken offshoring.
But that’s not all. CEOs are also struggling to deal with the rise of artificial intelligence (AI) and its application to business processes, the potential for abuse and labor rights issues in their supply chains, and a growing number of barriers to their companies’ decarbonization efforts. For instance:
Nearly all of those surveyed (99%) said they are either using or considering the use of AI in their supply chains, with 82% saying they are planning new initiatives this year;
More than 60% said they are concerned about the potential for human or labor rights issues in their supply chains;
And virtually all (99%) said they face barriers to decarbonization, with 30% pointing to the complexity of the work required as the biggest barrier.
Those are big issues to contend with, so it’s no surprise that 96% of the CEOs Proxima surveyed said they are dedicating equal (41%) or more time (55%) to supply chain issues this year than last year. And changing economic conditions are adding to the complexity, according to the report.
“As inflation fell throughout last year, there were glimmers of markets stabilizing,” the authors wrote. “The reality, though, has been that global market dynamics are shifting. With no clear-set position for them to land in, CEOs must continue to navigate their organizations through an ever-changing landscape. Just 4% of CEOs foresee the amount of time spent on supply chain-related topics decreasing in the year ahead.”
Simon Geale, executive vice president and chief procurement officer at Proxima, added some perspective.
“It’s fair to say that the complexities of global supply chains continue to have CEOs around the world scratching their heads,” he wrote. “The results of this year’s Barometer show that business leaders are spending more and more time tackling supply chain challenges, reflecting the multiple challenges to address.”
Perhaps the extra focus on supply chain issues will help organizations improve their ability to roll with the punches and overcome resiliency challenges in the year ahead. Only time will tell.
Investing in artificial intelligence (AI) is a top priority for supply chain leaders as they develop their organization’s technology roadmap, according to data from research and consulting firm Gartner.
AI—including machine learning—and Generative AI (GenAI) ranked as the top two priorities for digital supply chain investments globally among more than 400 supply chain leaders surveyed earlier this year. But key differences apply regionally and by job responsibility, according to the research.
Twenty percent of the survey’s respondents said they are prioritizing investments in traditional AI—which analyzes data, identifies patterns, and makes predictions. Virtual assistants like Siri and Alexa are common examples. Slightly less (17%) said they are prioritizing investments in GenAI, which takes the process a step further by learning patterns and using them to generate text, images, and so forth. OpenAI’s ChatGPT is the most common example.
Despite that overall focus, AI lagged as a priority in Western Europe, where connected industry objectives remain paramount, according to Gartner. The survey also found that business-led roles are much less enthusiastic than their IT counterparts when it comes to prioritizing the technology.
“While enthusiasm for both traditional AI and GenAI remain high on an absolute level within supply chain, the prioritization varies greatly between different roles, geographies, and industries,” Michael Dominy, VP analyst in Gartner’s Supply Chain practice, said in a statement announcing the survey results. “European respondents were more likely to prioritize technologies that align with Industry 4.0 objectives, such as smart manufacturing. In addition to region differences, certain industries prioritize specific use cases, such as robotics or machine learning, which are currently viewed as more pragmatic investments than GenAI.”
The survey also found that:
Twenty-six percent of North American respondents identified AI, including machine learning, as their top priority, compared to 14% of Western Europeans.
Fourteen percent of Western European respondents identified robots in manufacturing as their top choice compared to just 1% of North American respondents.
Geographical variances generally correlated with industry-specific priorities; regions with a higher proportion of manufacturing respondents were less likely to select AI or GenAI as a top digital priority.
Digging deeper into job responsibilities, just 12% of respondents with business-focused roles indicated GenAI as a top priority, compared to 28% of IT roles. The data may indicate that GenAI use cases are perceived as less tangible and directly tied to core supply chain processes, according to Gartner.
“Business-led roles are traditionally more comfortable with prioritizing established technologies, and the survey data suggests that these business-led roles still question whether GenAI can deliver an adequate return on investment,” said Dominy. “However, multiple industries including retail, industrial manufacturers and high-tech manufacturers have already made GenAI their top investment priority.”
Regardless of the elected administration, the future likely holds significant changes for trade, taxes, and regulatory compliance. As a result, it’s crucial that U.S. businesses avoid making decisions contingent on election outcomes, and instead focus on resilience, agility, and growth, according to California-based Propel, which provides a product value management (PVM) platform for manufacturing, medical device, and consumer electronics industries.
“Now is not the time to wait for the dust to settle,” Ross Meyercord, CEO of Propel, said in a release. “Companies should approach this election cycle as an opportunity to thrive in the face of constant change by proactively investing in technology and talent that keeps them nimble. Businesses always need to be prepared for changing tariffs, taxes, or geopolitical tensions that lead to unexpected interruptions – that’s just the new normal.”
In Propel’s analysis, a Trump administration would bring a continuation of corporate tax cuts intended to bolster American manufacturing. However, Trump’s suggestion for spiraling tariffs may benefit certain industries, but would drive up costs for businesses reliant on global supply chains.
In contrast, a Harris administration would likely continue the current push for regulatory reforms that support sectors like AI, digital assets, and manufacturing while protecting consumer rights. Harris would also likely prioritize strategic investments in new technologies and provide tax incentives to promote growth in underserved areas.
And regardless of the new administration, the real challenge will come from a potentially divided Congress, which could impact everything from trade negotiations to tax policies, Propel said.
“The election outcome is less material for businesses,” Meyercord said. “What is important is quickly adapting to shifting policies or disruptions that address ‘what if’ scenarios and having the ability to pivot your strategy. A responsive manufacturing sector will have a significant impact on the broader economy, driving growth and favorably influencing GDP. One thing is clear: the only certainty is change.”