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LTL Is Capturing The Middle-Mile

COVID-19 has made a tremendous impact around the globe, and the United States was certainly no exception. The less-than-truckload (LTL) sector in particular saw volumes drop to levels not experienced since the Great Depression. However, for the 25 largest carriers in the US, the total revenue decrease was a mere 2.7 percent for 2020. Compare that to a staggering drop of 23.8 percent during the Great Recession a little more than 10 years ago.   

The intervening years of 2010 to 2018 saw a period of continual growth for the nation’s largest LTL carrier firms including a 10.7 percent growth spike year-over-year for 2018.  

The LTL sector is growing in spite of the financial disruptions

So why is this important? While recessions and economic downturns come and go, if one was to look closely, they would see that the LTL sector is growing in spite of the financial disruptions, and has been for over a decade.  

LTL Sector Homes In On Retail Market 

Historically speaking, the LTL sector has been focused on industrial manufacturing, which represents 60 percent of the total trucking tonnage in the country according to data collected from the US Census Bureau. Given the slow recovery of the US industrial complex, many carriers were unable to achieve year-over-year gains.  

The saving grace for the LTL industry has been the emergence of e-commerce.

The saving grace for the LTL industry has been the emergence of e-commerce, especially in the wake of the pandemic, as many house-bound consumers turned to sites like Amazon to fulfill all their shopping needs. As a result, LTL carriers have been picking up the “middle-mile” slack, hauling freight to end-of-the-line distribution and fulfillment centers. 

“The middle-mile for the retail sector was a huge contributor to shipment and revenue growth for the industry,” said Satish Jindel, President of Transportation Research and Consulting firm SJ Consulting Group. “For those LTL carriers who have traditionally avoided retail customers, it may be time to re-evaluate that thinking and look beyond just handling shipments where their trucks can bump the [industrial loading] docks,” Jindel added. 

The middle-mile, while good for both sustainability and growth of the LTL sector, isn’t without its own set of complications. More commonly, LTL carriers are delivering freight to big-box stores, shopping centers, and locations that lack even the simple convenience of a loading dock to receive freight. In some cases, LTL carriers are even moving into the last-mile phase by delivering large or bulky items directly to a customer’s home.  

Jindel points out that LTL volumes are declining faster than LTL revenue, at 5.4 percent and 4.5 percent respectively, according to data from an SJ Consulting Group analysis.  

“That’s an indication carriers are doing a better job of capturing price for the cubic attributes of their shipments, enabled by deployment of thousands of dimensioning machines,” Jindel said. The increase in e-commerce-related LTL freight and dimensional pricing “presents a great opportunity for the LTL industry to correct many of the ills of the past,” Jindel added, which includes many obsolete systems the industry has used for decades including but not limited to paper bills of lading, discounted rates, and outdated published tariffs.  

A Promising Future

Overall, the LTL sector is faring well given the circumstances. While many industries are still feeling the sting of the first half of 2020, when the pandemic brought almost everything to a grinding halt, the LTL sector has recovered and will continue to grow in the future.  

As the nature of the trucking industry tends to be a bumpy ride at the best of the times, the growth of the less-than-truckload sector in the United States indicates that carriers are flexible enough to handle any obstacles in the road ahead. This is incredibly important as it is unlikely that e-commerce growth is going to drop off at any point in the foreseeable future – due to the change in consumer buying behavior.  

Even smaller carrier operations are finding their own niches in the market, handling local fulfillment while their larger counterparts eat up the middle-miles. All in all, the pandemic has brought about a restructuring of the supply chain for many businesses, and carriers are responding in kind, ready to carry the load.   

Top 3 Factors To Consider In 2021 For The Trucking Industry

With the effects of 2020 reverberating into the new year, business carries on in some unusual new ways. Most notably, COVID-19 disrupted the global supply chain and profoundly altered the flow of goods. E-commerce has shaken the retail industry’s logistics approach, as Amazon’s model dramatically altered consumer expectations in a phenomenon now known as the “Amazon Effect”. Under orders to stay home, much of the world turned to online retailers like Amazon for shopping that was previously done locally and in person. Between hard to predict consumer behavior and the erratic flow of goods, outlooks on capacity continue to vary and become more heavily influenced by urgency. 

Impacts Of COVID-19

COVID-19, which required government response worldwide, presented many barriers to the existing standards of freight. Many workers considered non-essential by governments, happened to be essential in producing, packaging and transporting goods. Borders were closed to stop the spread, further bottle-necking the flow of supply chains. The threats that COVID-19 presented to supply chain security, continuity and resilience exacerbated traditional risks faced every year and also created new vulnerabilities and risks that experts will need to tackle in the year ahead. 

“The Amazon Effect” and E-Commerce

As slowdowns became prevalent in other major carriers such as FedEx and UPS, Amazon remained comparatively unphased.  Obsessed with customer satisfaction, Amazon was well seated to thrive during what was for most others, a crisis. With COVID-19 creating changes in best-fit practices, Amazon contributed to the plight of its competitors by raising the bar.

Consumers had come to expect options like free shipping, free return shipping, same-day delivery, and high visibility. As Forbes states, “last-mile delivery is one of the most challenging problems in fulfillment,” and “The Amazon Effect” has had its heaviest influence here. Amazon has the same logistics focus as it’s competitors, inventory and freight. However, it has shifted the weight of this focus largely on controlling its freight costs. Since last-mile delivery is almost exclusively by road, shifting investment towards freight allows delivery models to expedite delivery with smaller fleets.

For freight shippers to keep pace, they will need to make logistics-minded investments that allow them to evolve with the pervasive influence of Amazon’s near-instant gratification. 

Due to the high influence of this phenomenon over last-mile delivery, the trucking industry will continue to be affected in 2021. For freight shippers to keep pace, they will need to make logistics-minded investments that allow them to evolve with the pervasive influence of Amazon’s near-instant gratification. 

Ideal Capacity for Profitability 

2020 came with many uncertainties, but there is one thing the trucking sector knows about shares: they tend to outperform as the industry emerges from capacity-related stress or economic pressure. Inventory to sales ratios are at record lows. Businesses that responded to The National Federation of Independent Business (NFIB) Optimism Index showed that increasing their inventories was a chief priority in their developing plans for 2021.    

Given the industrial exposure of LTLs, the most optimistic of analysts are preparing for a bull market.  

The end of 2020 sees all-time highs in LTL stock trading. Many analysts are projecting that the COVID-19 vaccine will increase not only consumer economies but provide a catalyst to company inventories-related-spending. Of course, the implication of this outlook is positive strides in the industrial sector. Given the industrial exposure of LTLs, the most optimistic of analysts are preparing for a bull market.  

FTL shipping has many benefits over LTL in expedition, and is favored for it’s lower spot rates. However, as factors like the Amazon Effect come into play, it is important to think critically about best-rate decisions.

FTL shipping has many benefits over LTL in expedition, and is favored for it’s lower spot rates. However, as factors like the Amazon Effect come into play, it is important to think critically about best-rate decisions. 

Trucking stands to see plenty of action in 2021. If freight companies can accurately forecast capacity-related needs, they will remain insulated from the chaos 2020 brought with it’s unprecedented factors as they continue to hit the open road into 2021.  

Strengthening Capacity Foresight

BlueGrace offers end to end support by assessing and integrating your needs into projections from our data analytics team. Partnering with an extensive list of carriers, BlueGrace can help ease the significance of the dreaded capacity crunch. If you would like more information on how BlueGrace can help you meet tightening deadlines and reduce transportation costs, contact us at 800.MY.SHIPPING or fill out the form below to speak to one of our experts today!

New Year Resolution: Start Collecting More Data in 2021

Most of us are happy to have put 2020 behind us. A new year means a new start and for most people, that means setting goals of making it out to the gym, cutting back on the indulgences and maybe paying a little more attention to the checkbook. With everything the past year has thrown at us, a fresh start sounds like just the thing the doctor ordered.  

If 2020 has taught businesses anything, it’s that our supply chains are not nearly as secure as we might have once thought.

However, resolutions need not only apply to individuals. A new calendar year is a perfect time to set some goals for your organization and start planning new business strategies. If 2020 has taught businesses anything, it’s that our supply chains are not nearly as secure as we might have once thought. COVID-19 has exposed quite a few vulnerabilities in both the procurement and distribution process of goods and materials and the overall transportation process. As many organizations have scrambled to find alternative suppliers and quick solutions to the myriad of problems that cropped up from the pandemic, now is the time to reflect on what we’ve learned and begin to implement a more robust system to be better prepared for when such disruptions happen again in the future.  

So what should the number one resolution be for every organization that is responsible for managing a supply chain? As you might have guessed from the title, it’s time to start collecting more data. 

The Big Benefits of Big Data 

Over the past two decades, information technology has grown by leaps and bounds, which, considering how outdated most practices are in the freight industry, it’s a welcome change.

For starters, the process of digitalization means that companies are moving away from paper logs and forms, countless emails and phone calls, and are automating their processes. Not only does this result in fewer human errors (a missing form here and a mis-click there), but it expedites the entire process of booking and shipping freight, allowing organizations to operate more smoothly and efficiently.

However, the benefits of this process don’t stop there. Digitalization also creates the opportunity to collect data that would otherwise fall into the unknown. That data is what creates the necessary visibility into your supply chain and day-to-day operations to truly understand what’s happening behind the scenes.  

In the past, companies have simply operated blindly. A carrier was booked, the cargo was moved, it arrived where it needed to go, maybe late, maybe on-time. Job done. However, in today’s marketplace, that’s not enough as the “Amazon Effect” has pushed customer expectations to new heights. Consumers aren’t content to order their package and wait. They want real-time updates as to where their goods are; they want ultra-fast delivery times; they want it for free (or as close to free as possible), and they want it now.  

Simply put, good data drives better service. 

In the B2B world, shipments must be on time, in full, or shippers run the risk of getting hit with fines, penalties, and chargebacks. Not to mention the risk of losing preferred supplier status, which is a major hit when dealing with big retailers like Wal-Mart. With competition tighter than ever for just about any industry, providing that insight isn’t just a nicety, it’s a necessity. Simply put, good data drives better service.  

How Do I Collect More Data? 

This is one of the most important questions every company needs to be asking themselves. The supply chain is capable of generating vast amounts of data, in some cases, too much. There are a few problems with this. First problem is that the data either gets overlooked, or siloed away where it doesn’t serve any other purpose than consuming bandwidth. Companies that ignore their data miss out on some significant opportunities to improve their operations and reduce their overall operating costs.

Without a focal point and clear goal, too much data is just as bad as not enough data. 

The second issue is that even if companies begin collecting the data, they end up getting lost. This is known as “analysis paralysis” a state in which so much data comes flooding in and there is no conceivable means of separating what’s good from what’s not. Without a focal point and clear goal, too much data is just as bad as not enough data. 

This brings us to the third point, oftentimes there is no clear goal or direction to go with the data. Data analytics is a powerful tool that can push shippers to new levels of operational efficiency if they know which direction to go with it.  

To that end, many shippers decide to bring in help from outside their organization either by working with a third party logistics provider or by incorporating a transportation management system (TMS).

A TMS is key in helping you mine valuable data from your supply chain, which increases your operational visibility and offers insights into areas where your company can improve. But it also goes beyond that. A TMS can also reduce your operational costs, which, given what we’ve seen from 2020, will be an essential survival strategy for every company going forward into the new year.  

The good news is, implementing a TMS into your organization doesn’t have to be a costly or disruptive endeavor, and the benefits that can be realized from both the supply chain optimization and the cost reduction are significant. Moreover, the data collected from utilizing a transportation management system can create an insight into your organization that you might not have had otherwise. That insight is both powerful and necessary should you decide to take your resolution a step further and perform an internal audit of your operations.  

The New Year is just around the corner, so it’s time to start making your resolutions and more importantly, planning to make them a reality. Request your FREE Supply Chain Analysis today!

The Impact Of The Amazon Effect On Traditional Freight Transport

Before the e-commerce segment rose to mainstream relevance, the retail industry’s logistics part had seen little disruption over decades preceding it, sandwiched between opaque workflows and stifling inefficiencies. That said, the consequential impact that e-commerce has on the workings of the supply chain today would not have been possible without the online retail behemoth Amazon and the ‘Amazon effect’ that lies in its wake.

In essence, Amazon obsessed over its customers.

Put simply, the Amazon effect is the evolution of supply chains from looking at end consumers as ‘yet another’ part of the value chain to putting them at the center of their operations. In essence, Amazon obsessed over its customers, aligning its product offerings and services to ensure the highest standards in parcel delivery experiences.

Subsequently, the consistent efforts of Amazon to provide impeccable delivery fulfillment to its customers snowballed to create an environment where expedited shipping became a parameter that set businesses apart from their market competitors. Eventually, this led businesses to start looking at delivering faster and keeping their customers in the loop on last-mile parcel movement.

While the need for visibility and expedited shipping have long been an expectation within the supply chain industry, they are not possible without digitalization.

While the need for visibility and expedited shipping have long been an expectation within the supply chain industry, they are not possible without digitalization. In many ways, digitalization within the freight industry can be inferred as the direct consequence of e-commerce. Data in supply chains remains frozen within siloed operations, as companies continue to cut off their data streams and not gain insights by feeding them to data-driven algorithms.

Meanwhile, consumer expectations within e-commerce have overflown from its business to consumer (B2C) segment to the business to business (B2B) segment of freight logistics, where shippers are increasingly expecting better experiences while moving freight. Shippers often rationalize their visibility requirements, contending that when Amazon could show them precision location status of individual parcels, fleets could afford to track entire containers.


Amazon effect’s impact on inventory levels

The e-commerce segment differs from the traditional retail industry in the way the former reduces the number of intermediary nodes within supply chains connecting the manufacturer with the end consumer.

Traditional retail moves products through several nodes in the supply chain, including manufacturers, distribution centers, and retail inventories, before selling to end consumers in retail outlets. E-commerce compresses this value chain, cutting out the retail inventories and storefronts, and replacing it with a multitude of last-mile delivery models.

As e-commerce bites into the physical retail market, there is a steady shift in the size of inventories and the way they are held. The depth in e-commerce offerings has translated into an increase in the variety of products stocked in inventories, inevitably showing up as an expansion in overall inventory volumes.

However, the inventory volume increase is not proportional to the expected increase. Shortening of lead times can be one of the reasons for the inventory volumes to not increase to expected levels. That apart, while logistics stakeholders look to stock products that are in demand, they also opt to stock limited quantities and not worry about overstocking due to short lead times. This way, companies also reduce the risk of stocking product lines that have become obsolete. Obsolete product lines are a real possibility as product demand is an extension of consumer interest in a said offering, which can abruptly change in a matter of days.

This is especially true of electronics, where older versions witness a rapid fall in demand as improved versions hit the market. The ease of e-commerce makes it easier for manufacturers to approach the market without intermediaries, increasing the chances of entire product lines being trashed due to a better alternative mushrooming in the market.


Last-mile delivery disrupted by the Amazon effect

Amazon’s customer obsession has ensured that the last-mile segment is one of the primary differentiators for delivery fulfillment within the e-commerce market. The last-mile is expected to be nimble, with the gravity of consumer expectations making it one of the crucial parts of freight movement.

Retailers are reevaluating their supply chains, attempting to consistently improve their customers’ delivery experiences. Technology has come to the rescue, with several additions being made to the way the last-mile is handled, including automated delivery bots and VTOL drones. Dynamic route optimization is part of a last-mile delivery company’s arsenal, with delivery vans given routing instructions based on parameters like location, parcel specification, and delivery time windows.

or logistics at large, there are two main operational costs – inventory and freight.

For logistics at large, there are two main operational costs – inventory and freight. While expenses on inventory and freight are comparable, the Amazon effect has successfully pushed scales towards freight costs – courtesy, an inordinate increase in air freight movement due to expedited shipping options. However, with the last-mile almost exclusively fulfilled over the road, the trucking industry would inevitably continue being impacted by the ubiquitous Amazon Effect.

Help Wanted: The 2020 Seasonal Logistics Hiring Boom

The seasonal shopping madness is already underway as retailers begin priming their customers for the holidays. 2020 has, without a doubt, been one of the strangest years for just about everything. The global pandemic, a myriad of natural disasters, and a tense presidential election will very likely mean that consumers are going “all out” for the holidays, and companies like Amazon and Walmart are happy to help them with their purchase needs.

Many retailers, including Target and Walmart continuing through the month to meet the needs of online shopping.

Because there are still global restrictions and precautions in place due to COVID-19, we can expect to see a surge in e-commerce and retail sales. For example, Amazon’s Prime day, which usually takes place in July, happened in October this year. While Amazon hasn’t released their total sales figures, they did say that third party sellers on the marketplace earned over $3.5 billion. Black Friday looks to be on target as one of the biggest Black Friday ever, in terms of sales. Many retailers, including Target and Walmart continuing through the month to meet the needs of online shopping.

These companies are bracing for the massive capacity crunch, which could affect up to 7 million packages per day, between Thanksgiving and Christmas.

The real question is whether or not logistics companies will have the necessary capacity to deliver all of these orders. Even big players in the game, FexEx and UPS have already reached capacity. With the bulk of orders still to come, retailers and logistics companies alike are telling customers to shop and ship earlier than ever before. These companies are bracing for the massive capacity crunch, which could affect up to 7 million packages per day, between Thanksgiving and Christmas.

All Hands on Deck at Amazon

To make sure they are ready for the holiday rush, Amazon has announced that they will be hiring 100,000 workers.

Amazon is a giant machine with an uncountable number of moving parts. To make sure they are ready for the holiday rush, Amazon has announced that they will be hiring 100,000 workers. While they didn’t say if these workers will be seasonal specific or full-hires, the goal is to flesh out Amazon’s logistics and fulfillment network. Amazon is offering a minimum starting wage of $15/hr and up to $1,000 sign on bonus in some markets to entice warehouse and delivery workers. Amazon also plans to open 100 additional buildings across it’s fulfillment, sortation, and delivery network. The e-commerce giant intends to bolster their capacity by upwards of 50 percent by the start of the peak season to meet the uptick in demand.

UPS ups Their Workforce

UPS is also looking to bring in 100,000 seasonal employees to prepare for the holiday season.

UPS is also looking to bring in 100,000 seasonal employees to prepare for the holiday season. Much like Amazon, the UPS ranks have already swelled at the beginning of the year to meet the logistics needs of the e-commerce boom caused by the pandemic.  During the second quarter of 2020, UPS saw a 23 percent growth of package volume over the same time last year which forced the company to bring on an additional 39,000 workers. The shipping deadlines for UPS are December 15 UPS Ground, December 21 UPS 3 Day Select, December 22 UPS 2nd Day Air, and December 23 UPS Next Day Air. UPS will also impose surcharges ranging from $1 to $3 per package on high-volume US residential shippers.

FedEx is Growing its Capabilities

FedEx will expand its Sunday home delivery service to cover nearly 95 percent of the U.S. population.

In addition to the 75,000 seasonal workers hired for 2020, a 27 percent increase from last year, FedEx is putting more effort into growing its delivery capabilities. The company will expand its Sunday home delivery service to cover nearly 95 percent of the U.S. population. FexEx will also be increasing Ground’s network capacity and expanding the coverage radius of FedEx Freight Direct service. The shipping deadlines for FedEx are December 15 for FedEx Ground, December 22 for FedEx 2Day, December 23 for FedEx Standard Overnight, and December 25 for FedEx Same Day. FedEx will also be applying peak season surcharges to high-volume shippers, ranging from $1 to $5 depending volume.

The USPS Freight Prediction

The United States Postal service will bring on it’s usual 35,000 to 40,000 seasonal workers for positions

The Postal service is preparing for the busy season, with an expected 15 billion pieces of mail and 800 million packages. The United States Postal service will bring on it’s usual 35,000 to 40,000 seasonal workers for positions such as mail handlers, holiday clerk assistants, and mail processing clerks. USPS, like FexEx, is working on a different angle, and will be pushing its Click-N-Ship feature, allowing users to order free Priority Mail boxes, print shipping labels, purchase postage, and request free next-day package pick up. The USPS urges customers to plan accordingly as it predicts that December 14th will be the busiest day online with more than 13 million customers predicted to be on the postal service website for help with shipping holiday gifts. USPS shipping deadlines include December 18 for First-Class Mail and packages, December 19 for Priority Mail, and December 23 for Priority Mail Express.

Preparing for the Surge

This was one of the earliest holiday season kick offs ever, not to mention the biggest one to date. It is estimated that holiday spending will reach $1.15 trillion, a 1 to 1.5 percent increase from 2019. This year will see a dramatic increase in online sales as more and more customers avoid brick and mortar stores. Even with the increased personnel and investments in increased infrastructure, it’s unclear as to whether or not retailers will be able to handle the strain of increasing sales volumes. Even after the holidays are over, demand will still be radically steep as the post-holiday reverse logistics debacle begins. 

About BlueGrace

When companies want superior supply chain management services and best-in-class technology, they turn to BlueGrace. Why? Our progressive approach to transportation management helps customers of all sizes drive savings and simplicity into their supply chains.

But that’s only part of the story, because your success doesn’t depend on shipments and deliveries alone. To thrive, it needs dependable relationships between customers, carriers, and logistics experts. When Bobby Harris founded BlueGrace in 2009, he saw that even the top logistics firms were overlooking the true heart of their job. So, he built a company that put its people and its customers before profit. The proof of that is evident in our core values, our caring culture, our countless community efforts, and in the heartfelt testimonials from our customers.

We’re Hiring!

Looking for a job that’s miles away from ordinary? Do you want to work in a place where your voice will be heard and your passions celebrated? Do you want a career in one of the fastest growing business sections in the U.S? Why not join the BlueGrace team?

We’re always on the lookout for the humble and caring, the motivated and driven, the bold and talented – for those who want to have fun while contributing to the growth of a nation-leading company. Sound like you? Apply today!

You Want To Be A Supplier For Whole Foods, Right?

While brick and mortar stores haven’t died out completely, the pandemic hasn’t done them any favors. Not being able to leave the house due to COVID-19, many consumers are realizing that it’s not only easier to shop online for their household consumables, but that it’s preferable to having to run out to the store when the pantry starts running low.

Whole Foods, for example, has done incredibly well, owing largely to its owner, Amazon. Much like Walmart, Target, and Apple, Whole Foods, and Amazon have seen some incredible growth in their grocery sector.

“During Amazon’s second quarter of 2020, the retail giant continued to see huge gains overall due to the impact of COVID-19, with online grocery sales alone reaching three times last year’s figures,” reads an article from SupermarketNews.

The second quarter, which ended on June 30, 2020, left Amazon with an overall net income at a staggering $5.2 billion, compared to the $2.6 billion during the same quarter last year. It should come as no surprise that net sales surged 40% from $63.4 billion in 2019 to $88.9 billion.

While the pandemic was at its full height and lockdowns were initiated, consumers took to their keyboards to go shopping.

Spending Money to Make Money

Of course, with higher than average sales comes higher than average operating costs. As Amazon conducted more business, it also had to increase its operating costs to keep pace with the influx of new orders.

Amazon created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions

Jeff Bezos, founder and CEO, noted in a statement, “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefit, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions.”

Amazon’s Grocery Sales Continue to Grow. Rapidly

It’s hard to believe that Amazon originally started as a bookstore. Now it’s become a full-service virtual grocery store, which has been paying dividends for the once bookseller.

“Amazon’s second quarter was another highly unusual quarter,”says Brian Olsavsky, chief financial officer & senior vice president. “As I mentioned on our last earnings call, we began to see a significant increase in customer demand beginning in early March, and demand remained elevated throughout Q2. Strong early demand in groceries and consumable products continued into Q2, while demand increased during the quarter in our other major product categories like hardlines and soft lines.

Amazon, which owns more than 500 Whole Foods stores, said it increased grocery delivery capacity by more than 160% and tripled grocery pickup locations during the second quarter

It was only three years ago that Amazon bought out Whole Foods, which gave it the necessary oot in the door to begin selling groceries online. While this move garnered some criticism it turned out to be a smart move on Amazon’s part in the long run. “Amazon, which owns more than 500 Whole Foods stores, said it increased grocery delivery capacity by more than 160% and tripled grocery pickup locations during the second quarter,” says SupermarketNews.

“We’re reaching more customers with our grocery offerings,” said Olsavsky. “Online grocery sales tripled year-over-year.”

Getting in is the Easy Part

Obviously, being a supplier for a company like Whole Foods is ideal, especially when you can indirectly hitch your star to Amazon. However, becoming a supplier for Whole Foods is the relatively easy part. On the other hand, living up to their high standards and demands is where things get decidedly more difficult.

If you’re thinking of becoming a supplier for Whole Foods or want to understand better what it means to be a supplier and how have requirements and the business changed now that they are part of the Amazon juggernaut, read our Whole Foods white paper.

Walmart+ vs. Amazon Prime: How Different Are They?

Amazon delivered a swift blow to retailers with the introduction of Amazon Prime. Walmart is fighting back.

Amazon spent years building what was to be its competitive advantage in e-commerce, its formidable distribution network. By building distribution centers across the country, investing in algorithms to optimize pick-time, and hiring operational wizards from Walmart and other competitors, Amazon gets products to customers anywhere in the United States cheaper and faster than anyone else.

Walmart went in the opposite direction, taking a ‘build it, and they will come’ approach, building stores in rural areas and locating them close enough together to allow for shared warehousing and logistical resources. Walmart plays in the low margin discount retail arena, and they do it better than anyone else. Perishables such as bread and milk are extremely low margin products, but the wide range of offerings gets customers in the door more often and buying more while they’re there. This is their secret, money-making-sauce, the strategy that allows for a wide distribution of fixed costs and lowers their break-even point.

In 2005 Amazon launched a little thing called Amazon Prime, a membership program with perks which is now enjoyed by roughly 150 million global paying members.

In 2005 Amazon launched a little thing called Amazon Prime, a membership program with perks which is now enjoyed by roughly 150 million global paying members. At the time, Walmart was the giant, its profits being larger than Amazon’s revenue. A decade and a half later, however, and Amazon reigns supreme over online sales. In 2019, Amazon accounted for almost 40 percentof the US e-commerce market. Walmart lagged far behind with slightly more than 5 percent.

An ethos of sales is to make it easy for customers to do business with you. Prime aims to do just that. For $119 a year, Amazon Prime offers services such as music and video streaming, one-day shipping on more than 10 million products, and same-day delivery from Amazon Fresh or Whole Foods. It has its loyalty base hooked and has customers shopping more often and spending about twice as much as non-prime customers. 

Walmart, however, still reigns supreme in brick-and-mortar retail.

Walmart, however, still reigns supreme in brick-and-mortar retail. As reported by Recode, they’re now fighting back with an expansion to their grocery-delivery subscription service, which launched last year. Walmart will be using its 20% market share (of an $800 billion category) as a foothold to launch the introduction of Walmart+. To differentiate themselves, Walmart is looking to include perks that Amazon won’t be able to replicate and may offer discounts on fuel and prescription drugs. 

Walmart’s Delivery Unlimited service currently delivers groceries from more than 1600 US stores and costs $98 per year or $12.95 monthly and offers a free 15-day trial to lure new members. It also offers a per delivery fee for non-members and is testing a service that will take the extra few steps and deliver your groceries right to your fridge.

Widening the Customer Base

As we laid out in our Walmart and Whole Foods white papers, Millennials are outpacing baby boomers as the largest living adult generation, and their buying patterns are heavily focused on eCommerce. 

CEO Doug McMillon has given Chief Customer Officer Janey Whiteside the task of widening their customer base to include more upscale shoppers and create a seamless customer experience, whether shopping online or instore. Whiteside has also put together a product team, to be headed by Chief Product Officer Meng Chee and will focus on using advancements in tech to improve the customer experience.

Amazon is now also widening its target customer base to include lower-income shoppers and is hoping to lure them into Prime memberships with monthly membership rates.

Although both Walmart and Amazon deliver groceries to food stamp recipients, only Walmart currently offers a monthly membership fee option. Amazon is now also widening its target customer base to include lower-income shoppers and is hoping to lure them into Prime memberships with monthly membership rates. Customers may find more financially viable than a one lump sump yearly membership fee.

Walmart has had a bumpy road in its foray into e-commerce. In 2016 Walmart bought out Jet.com for $3.3 billion, but Jet failed to become a driver for online grocery sales and provide the boost into urban areas they were looking for. Walmart announced in June of last year that it would be folding Jet into its e-commerce operations and ended Jetblack, the AI-powered personal shopping service it rolled out in May of 2018.

Back in 2017, they tested a program called ShippingPass, a $49 per year two-day shipping membership, which was then discontinued, members were then refunded their $49 fee.

Both Amazon and Walmart are forerunners into e-commerce, struggles, and even failures are to be expected. Far from being out for the count, it seems Walmart is coming back swinging.

Do you ship to Amazon, Walmart, Target or other large retail or grocery store chain? The rules are changing and it is getting harder and harder to be able to adhere to them. This is where the logistics experts at BlueGrace Logistics can help your team! Feel free to contact us using the form below and set up a 15 minute chat to discuss how we can help you succeed!

The Fifty Shapes of Amazon Logistics

Digital and physical are reaching a point of total convergence, something that would have been unheard of 20 years ago. Companies like WholeFoods and Amazon are changing up their logistics goals in a big way, something that is likely to ripple through other similar industries.  

Amazon Tips its Hand to Logistics  

It’s unarguable at this point that Amazon has a knack for developing an in-house system and turning it into a massive profit generator down the road. We’ve seen it before with Amazon cloud computing when the company needed to boost its data handling capabilities. Now Amazon’s cloud drive, known as Amazon Drive has become a for-profit service that is used around the world.  

So what happens when the e-commerce giant turns its eye towards logistics?  

Amazon Logistics  

We’ve seen over the past few years that Amazon isn’t content to wait for packages to be delivered at someone else’s pace. With Amazon Prime, subscribers have grown accustomed to two-day delivery, a feat which has made smaller companies buckle under the weight of consumer expectation. Not content to rest on their laurels, however, Amazon is pushing the envelope again towards next or even same-day delivery. Banking on the fact that as more people realize they can get their items delivered even faster the more people will sign up for a Prime Subscription. And so far the gamble has paid off.  

“Driven by Prime Free One-Day Delivery and Free Same-Day Delivery, it was another year in which Amazon was able to set shipping records. That was rewarded with a 4% surge in its stock. It now sports a market capitalization of $927 billion,” says the MotleyFool. 

“For the holiday period, the tech giant set records for the number of people who tried Prime. In one week alone, Amazon said five million new customers either began a Prime membership or started a trial. The number of items delivered via Prime Free One-Day and Prime Free Same-Day Delivery nearly quadrupled compared to a year ago,” the Fool adds.  

This year, Amazon’s in-house logistics delivered more than 3.5 billion packages compared to FedEx’s 6 billion. Which isn’t terrible when you consider the fact that Amazon started as an internet book store. What’s more, is 60 percent of Amazon customers opted to ship to an Amazon drop point to pick up the packages themselves, further pushing back FedEx, UPS, and the United States Postal Service.  

It wants to control everything from shipping out of the warehouses to delivery to customers’ porches.

“It wants to control everything from shipping out of the warehouses to delivery to customers’ porches. That requires large upfront investments. In the second quarter of 2019 alone it spent $800 million to expand its one-day delivery for Prime Members. It’s also investing $1.5 billion to develop an air hub in Kentucky that’s slated to open in 2021 and will be home to fifty aircraft. Amazon announced its Delivery Service Partner program in May, enabling entrepreneurs to create delivery networks to handle last-mile deliveries for Amazon. The company is also investing tons of money into drone technology and, in June, debuted its Prime Air Drone design,” reads the Fool.  

Building their own in-house logistics network means less reliance on the now “competition” and giving their customers little reason to shop anywhere else. Amazon is also hedging a bet that by using its own logistics network, it can eventually cut down on the cost of packing and delivery.  

The Convergence of Digital and Physical and the Reimagining of the “Store”  

Amazon building its own logistics network is also changing the landscape for the traditional brick and mortar retailers. Within the past two years, we’ve seen the fall of some major retailers like Toys R’ Us and Bon-Ton. These companies are among those that lacked the ability to grasp the importance of a digital presence and the shape of consumer expectations. As we enter into a new decade, many traditional retailers are beginning to change the way they do business, which might be the only thing that keeps them out of Amazon’s massive shadow.  

“Shopping malls and physical outlets may have seen their best days for foot traffic. However, they have been given a new “lease” on life as fulfillment locations. Retail giant Target Corp. uses virtually all of its 1,900 stores as fulfillment locations, and about 80% of its online orders are fulfilled through a store. The new decade will see an increasing convergence of digital and physical operations as brick-and-mortar locations are positioned as hubs closer to the customer and e-commerce sites direct more package delivery to retail outlets, ABI Research said in a late December study,” reads an article from Yahoo! Finance. 

As e-commerce takes an ever-larger share of total retail sales, the strategy and execution of delivery networks will become the axis of success.

“As e-commerce takes an ever-larger share of total retail sales, the strategy and execution of delivery networks will become the axis of success. Regardless of the industry, logistics will increasingly be the difference between an enterprise’s success or failure,” the article continues.  

Even grocery stores are changing the way they serve their customers. 20 years ago, we never would have considered ordering our produce and perishables online, especially not for delivery, yet new startups like Misfits Market and Butcher’s Box are doing just that. Virtually every major grocery store chain now offers some form of digital grocery shopping where customers can order their items and have them delivered to their car in the parking lot.   

These are just some of the changes we’ve seen in the past few years, but some grocery stores are taking it to a whole new level.  

A True Change of Pace for Whole Foods 

Perhaps one of the biggest changes in the grocery scene is what we’re seeing from Whole Foods. The organic food market was purchased by Amazon in August of 2017 and under the titan of commerce’s influence has become a supplier for other retailers. How have they been doing so far and what does that mean for their logistics network? Download our White Paper about the subject and learn how you can establish processes and systems that are in line with supermarkets and retailers’ requirements, such as On-Time and In-Full (OTIF) or Must Arrive By Date (MABD). 

How Can SMBs Contend With Big Box Retailers?

Small and mid-size businesses are finding themselves in a difficult position in today’s market, courtesy of the Amazon effect. Consumers now expect free shipping and in most cases they expect it to be either two days, one-day, or even same-day delivery. That’s all well and good when you have a massive financial engine to throw behind it (having your own in-house logistics and distribution network doesn’t hurt either) but for smaller companies, that’s not always an option. Instead, SMBs are left with the choice of eating exorbitant shipping fees to meet customer expectations or stick with standard delivery and risk losing their market share.  

In 2020, SMBs are going to have to make some tough decisions on how they invest their shipping and logistics dollars,

Through 2019, this tension has been growing, complicated even more so by big-box retailers, Walmart in particular. In 2020, SMBs are going to have to make some tough decisions on how they invest their shipping and logistics dollars, when and where to invest in technology over team (or vice versa), and where they can go for reliable and affordable delivery options. 

The Ever-Growing Logistics Challenge

SMBs are going to have their hands full when it comes to figuring out the best route to go for logistics, especially when trying to keep up with Big Box Influencers. Walmart has put a tight fist on logistics with its MABD and OTIF policies. In an effort to keep products on the shelves exactly where and when they need them, the retail superstore has begun punishing carriers who don’t deliver everything they are supposed to, exactly when they’re supposed to deliver it. Given that Walmart is an incredibly lucrative contract for carriers they will, of course, oblige. Ensuring that Walmart gets exactly what it needs. 

SMBs don’t typically have that sort of clout, however. So what options do they have available to them? Understanding that their customers expect a new level of service that would never have been considered as possible 20 years ago, SMBs will have to look at alternative logistics strategies to ensure that their customers are happy while keeping profit margins in the black. 

Knowing where to Source Carriers

Knowing where to source carriers from is among the top challenges for SMBs. Sure, there’s a UPS store down the street, but is that the most cost-effective means of shipping out goods? There’s also a USPS in every town on the map, but will they get products there on time? These are just some of the questions that SMBs will have to be able to answer. 

All of these questions and variables make it incredibly difficult for smaller companies to come up with a stable plan for their logistics.

There’s also the matter of fluctuating shipping rates, and tightening capacity, which are subject to change with seemingly little or no notice. All of these questions and variables make it incredibly difficult for smaller companies to come up with a stable plan for their logistics. Most of them are resigned to the fact that they will have to increase their shipping and logistics budget and hope for the best. 

Investing in Technology

Tech is another difficult consideration for SMBs. On the one hand, many companies realize that it’s important to have the right technology solution in place. On the other hand, it can be expensive to the point of being cost-prohibitive. What technology should smaller companies invest in? What is going to help them the most to stay relevant and viable in today’s market? These are questions that don’t always have an easy or straightforward answer and that tends to make smaller companies more hesitant when deciding how to invest their logistics dollars. 

Taking a Lesson from the Big Box

If Amazon and Walmart have taught us anything it’s “if you can’t beat ‘em, join ‘em.” Amazon has taken several pages from their competitors’ playbooks and made it work for their own operations and the same can be said for Walmart.  Learn more about the supplier retailer relationship from our whitepaper here.

In addition to managing the relationship with shippers, it might also be time to involve the financial experts that are in your industry.

In addition to managing the relationship with shippers, it might also be time to involve the financial experts that are in your industry. Many businesses tend to compartmentalize their logistics and their C-Suite when ultimately, both have tools and skills that the other needs to not only survive but thrive. We’ve also got something to say about that as well.

Lastly, if you still have questions about how to compete with the big box stores or make your logistics dollars go further, let us know. The BlueGrace expert team is ready, willing, and able to answer your questions and to help turn your business into a lean, green, logistics machine it was always meant to be.  

Amazon’s Next Frontier: The Food and Grocery Business

Amazon has already proved its mettle in the e-commerce space and in the distribution sector. Earlier in the year the company also staked its claim in the digital freight brokerage industry. Now, it has set its sight on the grocery business.   

Amazon’s Grocery Connect 

Unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet.

For the uninitiated, Amazon is not new to the food business. It has been operating in the food and grocery sector since it acquired Whole Foods in 2017; Amazon Go stores; and its fresh grocery delivery service. However, unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet. According to an article published in The Motley Fool, Amazon’s CFO Brian Olsavsk speaks about the company’s latest quarterly results saying, its sales from physical stores, which are principally Whole Foods revenue, were actually down by 1.3% from the previous year — “this is the only major segment of Amazon’s net sales that didn’t show any growth”. 

This has not dissuaded the company from making further investment in the food and grocery business though. Early last month, it announced its plans to launch a new brick and mortar food and grocery store brand. The first store will be opened Woodland Hills, California in 2020.  This new business will be separate from its existing food and grocery business.  

With this announcement, one can say with certainty that for next year, one of Amazon’s major business goals will be to acquire a large slice of the global grocery and food retail market which is estimated to be worth USD 12.24 trillion by 2020

What will be different in the new venture?  

While Amazon has a presence in the food business, its reach has been limited. According to news reports, Amazon is aiming to reach a wider customer base. While Amazon’s Whole Foods business caters to the high-end customer, the new stores will be designed to cater to mid and low-income households. The new stores are expected to enable Amazon to offer their customers a range of products more in line with other large retailers like Walmart, Costco, and Kroger.   

In an article in Forbes retail expert Neil Stern, explores in-depth what the customer can expect from Amazon’s yet to be named new grocery venture: 

  • The new store will be omnichannel from the beginning 
  • It will have ample space for in-store picking and holding facilities 
  • The focus will be on mainstream products 
  • It will be more price-competitive than the Whole Foods business  
  • It may focus more on Amazon’s private label  

Will technology be a part of the new venture?  

Anything that Amazon does is powered by technology.

Anything that Amazon does is powered by technology. So it goes without saying that technology will be a large part of the newly announced grocery venture as well. In his article, Neil shares that the new store might not be as tech-savvy as the facilities available at Amazon Go stores. Further adding that technology in the new store might not be immediately scalable.  

Irrespective of the level of savviness, we can safely assume that technology will play an important role in the store, if not initially, then going forth.  

What’s in it for you?  

Business opportunities.  

Anyone associated with the business world knows, Amazon works on a large scale. The new grocery venture will sell a wide range of products. To run this operation efficiently and competitively, Amazon will need to source products from a variety of suppliers. And for this, the e-commerce behemoth will need to enlist a large number of suppliers.   

While working with a large scale operator like Amazon has its perks, it also has stringent requirements. Organizations like Amazon expect high quality, regular supply of goods, and adherence to delivery timelines from their suppliers. Given the fact that the e-commerce giant is a technology-driven company, it will also look for tech-savviness in its business partners.  

So, what are the qualities required to become a supplier for such a large scale venture? 

You need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center. 

While the company will share what it would look for in a supplier, there are a few things that are usually expected from suppliers working with large scale multinational companies such as Amazon: 

  1. Quality products: There can be no compromise on this ever. The product, packaging, and delivery all have to follow a set standard. Any deviation from the standard can lead to losing the contract.  
  2. Technology: Technology is gradually taking over the retail space. Data transfer, reports, and invoicing are all done electronically, usually with the help of specialized software. Suppliers need to ensure that their organization is not only able to transfer required data in a systematic way electronically but is also connected internally through technology. This will help ensure both accuracy and speed in work and data exchange.  
  3. Strong supply chain: A robust supply chain with end-to-end visibility is an essential requirement to do business with large scale organizations such as Amazon. For this, you need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center. 
  4. Reliable transporters: Another important factor in successfully servicing a large retail store chain is a reliable transporter/carrier with a well-connected network and a good track record of on-time delivery.  

To know what other factors come into play for qualifying as a supplier for a large, food and grocery retail chain, download our whitepaper  Whole Foods: Thriving as a supplier in the complex supermarket supply chain.  

The food and grocery retail landscape is set to change with new technologies being adopted by the retail leaders. To cater to them and work alongside them, their suppliers will also have to deploy modern technology in their business.  This is where we can work with you to make your supply chain – Amazon ready or any food and grocery retail business ready.  To know how we can assist you in getting there, connect with our team at 800.MY.SHIPPING or fill out the form below.

GRI Season: The Importance and Benefits of Digitalization 

The arrival of fall marks the beginning of the biggest annual influx in demand for the transportation of freight. This is caused by the flurry of demand from shoppers that crop up in anticipation of the holiday season. While increased demand means increased business opportunity, it can also mean a headache for players in the logistics industry — shippers, forwarders, carriers and retailers alike — as they gear up to deal with the season’s intensity. Retailers hire on seasonal employees, while carriers brace for capacity to be pushed to the limits.

Carriers raise their rates to compensate for increased costs in fuel, equipment, technological investment, and the cost of paying their drivers.

Peak season manifests in the costs shippers pay to carriers in the form of General Rate Increases (GRIs). Carriers raise their rates to compensate for increased costs in fuel, equipment, technological investment, and the cost of paying their drivers. Depending on the current economic climate that year, GRIs can be higher or lower, but average at around 5 percent.

Which factors will be especially affected during this year’s peak season, considering the current economic climate?

Higher demand for e-commerce

Consumers’ love affair with online shopping is not going anywhere anytime soon. E-tailer juggernaut Amazon.com had their most successful Amazon Prime Day in history. International shoppers purchased over 100 million products on the website and the company saw more sign-ups for its Prime service on July 16, the Monday before the event than any day in company history.

With the boom showing no signs of slowing down, the rising costs to secure capacity are sure to remain a theme during peak season this year.

E-commerce directly affects the demand for logistics services, as it raises the demand for more routes and last-mile services. With the boom showing no signs of slowing down, the rising costs to secure capacity are sure to remain a theme during peak season this year.

The driver shortage

With the simultaneous driver shortage caused by a retiring generation of truck drivers and the somewhat unpopular ELD mandate, carriers are paying higher than average wages in order to attract good drivers. The domino effect through the supply chain means that this is another cost reflected in the GRIs that shippers pay, and ends up detracting from your company’s bottom line.

Continuously rising fuel costs

During the spring of 2018, diesel prices increased in every region of the country with prices above $3 per gallon in many key logistics regions of the United States, and in August, diesel fuel costs 23 percent more compared to the previous year. However, there is light at the end of the tunnel. According to the Journal of Commerce, U.S. contract truckload rates will likely cool down to a more modest 5 percent on average in 2019, but will still be higher than in years past; the overall increases are another major factor that will continue to play into rising GRIs.

In the Case Study, “Manual Cost Removal and Freight Cost Reduction for Hardware,” BlueGrace explores a scenario in which a big box client grapples to deal with increases in GRIs. The client was operating with a single national carrier model, which at a time, was working sufficiently enough for the supplier. However, as demand increased and their business had grown, the old-fashioned operational system began to prevent the company from reaching its full potential. Operations were becoming time-consuming, employees were becoming overwhelmed, and profits were suffering.

Negotiating GRI costs with carriers during times of unexpected rate increases was a major emerging problem for the company.

Negotiating GRI costs with carriers during times of unexpected rate increases was a major emerging problem for the company. Its lack of digital booking meant that there was no way for them to verify if the invoiced amount of the shipment was the same as the quoted amount of the shipment. In addition, the overwhelming amount of volume being moved was creating a bottleneck in the process, due to the time required to record data manually.

The supplier contacted BlueGrace to address these issues, agreeing to integrate its in-house Enterprise Resource Planning (ERP) system with BlueShip®, BlueGrace’s Transportation Management System (TMS). In doing so, they were able to negate the time-consuming process of manually booking shipments by digitalizing the process. Digitalization also enabled the client to access its own data with better transparency, allowing it to make better-informed business decisions.

Once processes are made electronic, companies like BlueGrace are also able to help businesses save by using their pre-negotiated contracts with all of the carriers whose GRIs don’t adhere to the standard set by larger companies and working with online service providers directly to handle complex negotiations so that the client doesn’t have to.

Once processes are made electronic, companies like BlueGrace are also able to help businesses save by using their pre-negotiated contracts with all of the carriers whose GRIs don’t adhere to the standard set by larger companies and working with online service providers directly to handle complex negotiations so that the client doesn’t have to. The result is a lower cost paid by the client, and a healthier bottom line; the supplier detailed in the case study ended up saving 13 percent of their yearly freight spend, which added up to $260,000 annually.

To find out how implementing can enable your business to achieve its optimal cost reduction surrounding issues like GRIs to reach its full profit potential during the peak season rush, contact us at 800.MYSHIPPING or fill out the form below to speak to one of our freight experts today.