CrossDock | September 2022

Hello reader,

Welcome to the September edition of CrossDock, our monthly newsletter, where we bring you the latest stories and insights from the e-commerce, warehousing, and logistics domain.

Peak season is around the corner, and along with the predicted spike in sales, there are multiple facets of challenges faced by global retailers. Recent economic headwinds such as forecasting difficulties, supply chain delays, sky-high inflation, and labor shortages can be very strenuous to roll with this holiday season.

Global logistics giants are deploying technologies and adding delivery surcharges that reduce the complexities of the supply chain during this rush hour. In this edition, we unearth many such changes that we are observing in this space and the implications they have in the larger context of e-commerce and logistics.

In this newsletter:

1. Holiday season 2022 faces a steep decline in e-commerce demand
2. OnTrac and DHL announced peak season delivery surcharges
3. A new service of Amazon offers long-term inventory storage to its sellers
4. UPS plans to hire 100K seasonal hires this peak season
5. CommerceHub to acquire ChannelAdvisor in a $635 million deal
6. CIOs of Logistics firms will introduce robots in their warehouses

Holiday Season 2022 faces a steep decline in e-commerce demand

Carrier partners like FedEx and UPS which struggled a lot to meet the demand from retailers like Amazon and Walmart, now have prodigious delivery capacity. Since online sales began to fade during the last year’s peak season, these carriers can deliver 110 million packages per day which outrun the current holiday season demand by 18 million packages per day.

Financial Challenge of the Delivery Companies:

As per ShipMatrix President Satish Jindal, these carriers might face financial challenges if they don't curb peak season hiring. They are facing challenges to cope with the extra cost of the seasonal workers as the no. of low-margin order delivery has significantly increased.

UPS plans to hire more than 100,000 seasonal employees for the peak season. Considering the slower global demand, FedEx will combine their sorting centers and slash working hours as a cost-cutting strategy. Due to the change in market dynamics, these delivery firms will offer discounts for more customer engagement next year.

OnTrac and DHL announced peak season delivery surcharges

nTrac and DHL have rolled out their home delivery surcharges for the 2022 holiday season, joining other carriers such as FedEx and UPS. The peak residential surcharge of OnTrac and DHL will be active from Oct 30 to Jan 14, 2023, and Oct 2 to Jan 21, 2023, respectively.

OnTrac’s Peak Season Surcharge:

Like UPS, OnTrac will also compare the extra amount of home delivery volume a shipper is carrying compared to its baseline volume. An additional handling surcharge of $6.50 and a large package surcharge of $70 will remain active during the peak season.

OnTrac is yet to have a merger with LaserShip, which launched a transcontinental service for delivering packages. However, LaserShip has not yet confirmed if the OnTrac surcharges are applicable for transcontinental deliveries.

DHL’s Peak Season Surcharge:

DHL has imposed a fee of $3.20 per package for the SmartMail products and returned items based on distance and shipping speed.

Though experts forecast a steady peak season this year, capacity constraints can be a concern as large carriers like UPS and FedEx focus more on profitable order volumes like healthcare and B2B shipments.

Amazon to offer long-term inventory storage to its sellers

Amazon announced that third-party sellers use their distribution centers for long-term inventory storage and automated distribution which allow seamless inventory replenishment. Now, sellers can reduce costs while having ample stocks while integrating bulk storage operations with Amazon’s fulfillment network.

Amazon’s pay-as-you-go service:

AWD (Amazon Warehousing & Distribution) is available for sellers using Fulfillment by Amazon. By next year, wholesale customers and physical stores can also access Amazon’s distribution centers. As per VP of Amazon Distribution and Fulfillment Solutions, Gopal Pillai, this pay-as-you-go service frees the sellers from the cumbersome process of shifting inventories from their facilities to Amazon Fulfillment centers. In this way, sellers can also manage their global inventory levels on the Amazon seller central platform.

Founder of RMW Commerce Consulting, Rick Watson stated that companies like Shopify, Maersk, and American Eagle are competing with each other in different aspects of the supply chain. When compared to others, Amazon has much less storage rates as it leverages significant high order volumes flowing in its network.

UPS plans to hire 100K seasonal hires this peak season

Last week UPS announced hiring 100,000 seasonal employees ahead of the peak season across 100 locations to handle the extra influx of packages.

Seasonal Hiring of UPS:

CEO of UPS, Carol Tome expects a better peak season this year, as the inventory levels of their customers are in great shape to meet the high demand. UPS plans to hire positions like CDL and delivery drivers, driver helpers, and package handlers to ensure a reliable service to their customers.

Technological Deployment of UPS:

UPS will deploy a “smart package initiative” at 100 facilities before the peak season to enhance warehouse productivity by eliminating manual scans. They will also introduce two automated facilities online this year, which will counterpoise the increase of workforce wages as an operational expense.

Hiring trends of major carrier partners:

During the pandemic, carrier companies experienced workforce shortages in 2021 to excess staff capacity in 2022. Carrier partners like USPS also plan to hire 28,000 seasonal hires, followed by FedEx.

CommerceHub to acquire ChannelAdvisor for a $635 million deal

CommerceHub, a New York-based leading commerce network connecting supply, demand, and delivery for global retailers, has announced a definitive agreement to acquire 27.5 million outstanding shares of ChannelAdvisor, a top provider of cloud-based e-commerce solutions to brands, at $635 million.

Under the terms of the transaction, stockholders of ChannelAdvisor will receive $23.10 per share, representing a premium of 57% over ChannelAdvisor’s stock price of Sept 2, 2022.

Expanded Capabilities of this Acquisition:

This acquisition enables the brands to manage private and public marketplaces alongside retailer connections only with a single vendor. Retailers can access multiple brands, with over 18K customers transacting $50 billion approx in gross market value. Insight Partners, GTCR, Sycamore Partners, and Goldman Sachs Asset Management are a few investors who participated in this deal.

As per Bryan Dove, CEO of CommercialHub, the new merger will proffer a broader network with their channels and new products while enabling the combined customer base to grow their businesses.

The acquisition creates a new opportunity to accelerate the innovation in shaping the future of e-commerce as it will benefit from the added resources and flexibility stated by David Spitz, CEO of ChannelAdvisor.

CIOs of logistics firms to introduce robots in their warehouses to improve peak season performance

The labor shortage that started since the advent of the pandemic has accelerated robotic technology adoption, especially during the peak season. CIOs of leading logistic firms DHL, GXO Logistics, and Kenco Logististics Services invest in warehouse robots that stopgap labor crunches and technology limitations.

DHL Supply chain North America plans to leverage 2000 collaborative robots in 2022 for moving inventories across the warehouse. Globally, GXO Logistics will introduce 5800 robots, followed by 120 robots by Kenco Logistics Services this year.

Challenges of Robots across the Warehouse:

While the robots are efficient in moving goods from one point to another, they struggle to pick up objects like clothes, foods, and anything which are not present in a box in the warehouse. Sometimes robots work slower than humans, said Sally Miller, CIO of DHL’s North American Supply chain.

Sandeep Sahakar, CIO of GXO Logistics, stated that only 1 out of every 10 proof-of-concept tests results in implementation because of a lower return of investment.

Another challenge is that the robots are not tested in actual realistic environments. When these robots start working in dirty, dusty, and cold warehouses, they work with limited capabilities, added Kristi Montgomery, VP of Kenco Logistics. Kenco will pilot a robot that will unload trailers at half the speed of a human.

Thank you for reading! We’ll see you in the next edition of CrossDock.

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