Welcome back to CrossDock.
In our previous newsletter, we highlighted the alarming potential of a UPS strike that could disrupt the entire US economy. The fear of supply shortages and delivery delays was real.
Today, we bring a glimmer of hope. UPS and the International Brotherhood of Teamsters, have brokered a tentative contract deal after exhaustive negotiations, averting a nationwide strike involving 330,000 UPS employees. Both parties are celebrating this as a victory.
However, the situation is still developing. A fraction of UPS workers, especially part-timers, feel the deal falls short of their expectations of the hourly wages, working conditions, benefits, and more. Additionally, doubts remain over UPS's ability to effectively roll out the agreed-upon changes and benefits. The success or failure of this agreement will unravel in the coming months. Stay tuned as this high-stakes situation continues to evolve.
In this newsletter:
- UPS and Teamsters’ tentative deal
- Whole Foods’ Amazon One adoption
- Tiktok’s entry into e-commerce
- Kraft Heinz’s state-of-the-art automated warehouse
- Softbank and Symbotic’s joint venture
- Progolis’ record quarterly revenue
Freight and Shipping
UPS and Teamsters Reach Tentative Agreement, Preventing Nationwide Strike
UPS and the International Brotherhood of Teamsters have reached a tentative five-year agreement, warding off a potential nationwide strike. This deal, supported by the Teamsters' negotiating committee, guarantees wage raises for all UPS employees and includes provisions for air conditioning in new delivery vans.
Agreement Details and Union Voting
The agreement entails a $2.75 hourly pay raise in 2023 for both full-time and part-time employees, escalating to a $7.50 increase over the contract's lifespan. This raises the hourly wage of part-time workers from $16.20 to $21, a significant surge but less than the $25 demanded by some union members. Union members are scheduled to vote on this deal from Aug. 3 to Aug. 22. As UPS commits $30 billion as a result of these negotiations, employees' reactions to the deal have been mixed.
Economic Impact and Future Implications
Experts have expressed relief over the agreement, given the potential disruptions a strike could have caused to the retail industry. Union members' approval might be challenging due to recent inflationary pressures and pandemic hardships. The last UPS strike in 1997 resulted in significant customer loss and market share reduction for the company, emphasizing this agreement's importance. This deal will also see the installation of air conditioning in new delivery vans, a point of contention among some workers.
For context: The Scale of UPS in the United States
Source: ABC News
It is undeniable that UPS has a tight grip over the US Logistics market. Not only does it employ a fourth of all workers in the sector, but it also facilitates almost 25% of all parcel shipments. The numbers only highlight and amplify the seismic impact of any disruption to UPS’ operations, such as a nationwide strike, to the overall supply and shipping activity in the US.
Retail and E-commerce
Whole Foods to Deploy Amazon One Palm Recognition at 500 Stores by 2023
Whole Foods Market plans to install Amazon One's palm recognition and payment system in over 500 stores by 2023. Currently, the biometric service is used in more than 200 Whole Foods locations across 20 states.
Amazon One's Expanding Reach
Launched in late 2020, Amazon One now operates at more than 400 retail locations across the U.S., clocking in 3 million uses to date, a figure Amazon regards as a "critical milestone." Last summer, the payment systemtechnology was rolled out to 65 California stores. By April, itthe technology had been implemented in 11 Denver-based Whole Foods stores as well.
Whole Foods' CTO, Leandro Balbinot, expressed excitement about the nationwide expansion, reflecting Amazon's continuous effort to integrate its advanced technology into Whole Foods since acquiring the company in 2017.
TikTok Aims for E-commerce Expansion Amid Market Competition
TikTok, a popular social media platform, is set to boost its e-commerce foothold by aiding Chinese suppliers to directly sell to US consumers. This ambitious step is aimed at inflating its e-commerce transactions from $5 billion last year to a projected $20 billion this year.
Direct Sales Model
Chinese suppliers, under TikTok's new approach, will only receive payment post securing U.S. buyers. To prevent unsold inventory build-up, the platform plans to return unpopular items back to the suppliers.
Competition and Controversy
The expansion plans will position TikTok in direct competition with platforms like Temu and Shein, both known for low prices and wide selections. However, these platforms have faced backlash over product quality, employee working conditions, and environmental impact.
Broader Platform Features
Furthering its global reach, TikTok recently announced its decision to allow users to post text-based content, thereby directly challenging Instagram and Twitter
The total number of Tiktok’s monthly active users in the US, providing a strong user base for its upcoming e-commerce and fulfillment services.
Kraft Heinz's $400M Bet on Automated Distribution Center
Kraft Heinz announced plans to invest over $400 million in a state-of-the-art automated distribution center in DeKalb, Illinois. The 775,000-square-foot facility, set to open in 2025, will improve supply chain efficiencies and expedite product distribution.
Leading the Automation Trend
The DeKalb center will play a crucial role in Kraft Heinz's distribution strategy, handling over 60% of its North American dry goods through automated facilities. The center features an automated storage retrieval system that runs 24/7, developed in partnership with Daifuku Wynright.
Automation is a rising trend among industry players, with a forecast that 26% of warehouses will be automated by 2027, up from 14% a decade earlier.
This investment aligns with CEO Miguel Patricio's strategy to harness technology for supply chain solutions, following a $30 million boost in sales from AI application to supply chain visibility.
Drone Powered Inventory Monitoring
Inventory mismanagement is a recurring hurdle in warehouse operations. The typical issues involve reconciling record discrepancies, repositioning misplaced goods, and more.
One groundbreaking solution is to introduce drones for inventory tracking. The conventional use of drones for intra-warehouse transportation is being reimagined. They are now seen as a tool for real-time inventory monitoring across various locations, an initiative that is more cost-effective and enhances workforce productivity by reducing manual counting and tracking of stock.
A pioneer in this field, startup Gather AI, is revolutionizing inventory management with its drone technology. A single drone can survey and capture images of over 300 pallet locations per hour, supposedly making it 15 times more efficient than traditional barcode-based counts.
Though this technology is relatively new with only a few early adopters, the initial results indicate a promising future for drone-assisted inventory tracking warehouse management.
SoftBank and Symbotic Invest in AI-Powered Warehouse Automation
Japanese technology investor, SoftBank Group, and warehouse automation firm Symbotic have joined forces to build warehouses powered by artificial intelligence (AI). The majority-owned joint venture, called GreenBox Systems, is backed by a $100 million investment from both companies.
Leveraging AI for Next-Gen Warehousing Solutions
The cornerstone of this collaboration lies in the AI-powered systems supplied by Symbotic, a deal worth $7.5 billion over the next six years. Known for providing innovative robotic solutions, Symbotic is set to implement its state-of-the-art technologies to retrofit existing facilities into automated hubs.
The JV will capitalize on AI's transformative capabilities to offer the "warehouse-as-a-service" model, a scalable solution for customers needing flexible space in multi-tenant facilities across the supply chain.
This technological upgrade is expected to give GreenBox an edge in the warehousing industry. SoftBank, holding a 65% stake in GreenBox, aims to harness AI's potential to revolutionize warehouse operations, a sentiment echoed by CEO Masayoshi Son as he steers SoftBank towards "offence mode" in the sector.
Upon operation, Symbotic forecasts annual recurring revenue exceeding $500 million from software, parts, and services sales to GreenBox.
Prologis Boosts Industry Outlook with Record Quarterly Revenue
San Francisco-based REIT Prologis posts record Q2 profits and revenue, underpinned by strategic acquisitions. As the world's largest industrial property investor, Prologis foresees brighter prospects ahead.
Boosted by Strategic Acquisitions
Prologis doubled its Q2 revenue to $2.45 billion year-over-year, chiefly due to key acquisitions like Indianapolis-based Duke Realty.
Additionally, they’ve recently acquired 14 million square feet of industrial space from Blackstone Group for $3.1 billion.
This acquisition strategy was backed by $7 billion in new debt issued in Q2. Despite a slightly cooling industrial market, Prologis boasts a robust portfolio with an impressive 97.5% average occupancy. Looking forward, they predict a 5.5% increase in net earnings for shareholders and a 9.5-10% rise in same-property net operating income.
Thank you for reading, we’ll see you in the next edition!