Buckle up; there may be rough waters ahead in the world of logistics. While it’s good news that global production and manufacturing orders are on the rise, signaling business growth, the downside is that container capacity continues to tighten. Shippers are already planning volume diversion to the West Coast, not waiting to see what comes of East Coast labor negotiations, and two major firms are testing out humanoid warehouse robots. Here’s more on this week’s industry news.
Just when shippers thought the supply chain snafus of 2021 were a relic of the past, it appears that container capacity is getting squeezed again, and rates are rising – with some saying ocean carriers are price gouging. Shippers tell The New York Times that containers are hard to come by, sailings are getting longer, and bookings are being canceled.
Xeneta reports the average price of shipping a 40-foot container from China to Europe has risen from $1,200 to $7,000 since October. It’s below the $15,000 peak in late 2021, but still 5x average pre-pandemic rates. The Shanghai to Los Angeles rate is $6,700, and nearly $8,000 for Shanghai to New York; both were around $2,000 in December, according to Xeneta.
The COO of New Balance told the NYT that spot rates it paid for 40-foot containers have risen 40% month-over-month, similar to the phenomenon during the pandemic.
Container volumes are expected to increase significantly at West Coast ports, particularly Los Angeles/Long Beach and Seattle/Tacoma, as shippers address concerns of labor issues at East Coast and Gulf Coast ports this fall. This is according to the latest US Port/Rail Ramp Freight Index from ITS Logistics.
The International Longshoreman Association (ILA), representing 85,000 port workers at 36 East Coast and Gulf Coast ports, is reportedly seeking wage increases in excess of the 32% gained last year by the International Longshore and Warehouse Union (ILWU) on the West Coast. The union cited high profits earned by container lines since the pandemic, the NYT reported.
Efforts to automate port operations are a particular sticking point in contract negotiations between the ILA and the US Maritime Alliance (USMX), representing port operators. In fact, talks between the ILA and USMX broke down earlier this month when the union alleged APM Terminals and Maersk are using automated gates to replace workers at the Port of Mobile and other locations.
A bill passed on June 8 in the New York legislature would require warehouse operators to come up with an injury reduction program. In particular, the bill calls on companies to identify and address the risk of musculoskeletal/ergonomic injuries from the repetitive motions common to warehouse work. The bill claims that New York’s warehouse industry sees 7.8 cases of injuries resulting in lost time or restricted duty out of 100 full-time workers, compared to 1.5 cases out of 100 for all other private industry jobs in the state.
The bill, yet to be signed by Gov. Kathy Hochul, is supported by the Teamsters; the union has been trying unsuccessfully to organize Amazon warehouse workers. The union is part of a coalition called New Yorkers for a Fair Economy that is urging Hochul to sign the bill into law.
“The Warehouse Worker Injury Reduction Act makes New York a national leader in taking on the Amazon injury crisis,” said Thomas Quackenbush, president of Teamsters Joint Council 18, in a news release. “Workers are suffering preventable injuries because employers like Amazon are putting their profits ahead of safety. This legislation will force companies to change their warehouse design and practices to prioritize workers.”
A law enacted in 2022 in New York requires warehouse operators to disclose production quotas to workers. It also prohibits the adoption of quotas that would prevent legally protected breaks and prohibits retaliation against employees who fail to meet an undisclosed quota.
Logistics firm GXO and Amazon are both testing the use of humanoid-like robots powered by artificial intelligence for eventual use in their warehouses.
GXO is conducting a proof-of-concept program with robot maker Apptronik. Its industrial humanoid robot is 5-foot-8 tall, can carry 55 pounds, and uses swappable batteries that extend its operating time. It uses linear actuators to recreate a full range of mobility enabled by human muscles. Apptronik said the robot’s “force control architecture and flexible safety zone perimeter” make the robot safe around human workers. It’s being evaluated in a lab setting before being deployed to a U.S. distribution center.
Last year, GXO increased the total number of warehouse automation units by 50% from 2022 and tested new hardware and software, including AI-powered robotics and autonomous vehicles.
In related news, a report from Harvard Business Review stated that warehouse automation systems work better in a so-called “co-bot” scenario where they operate collaboratively with human associates.
HBR researchers said its study found “reports of human redundancy have been greatly exaggerated,” adding that “human beings still have a lot to contribute, even to highly automated processes.” For the time being, they said, combining robotic systems with human labor “is often a more efficient, flexible, and cost-effective bet than a completely automated center.”
The researchers concluded that purchasing many robots to increase throughput levels was cost-prohibitive for most organizations. On the other hand, the co-bot model led to significant efficiency gains when designed properly, including creating “restrictive human work zones.” Benefits included reduced travel time, less fatigue, increased productivity, and more highly motivated workers.
Two deals at opposite ends of the financial scale took place in the world of logistics and supply chain this week.
Truckload brokerage firm RXO Inc. plans to acquire UPS’s Coyote Logistics brokerage division for $1.025 billion, while parcel delivery startup Delivered is acquiring same-day delivery firm Parcel Pickup out of bankruptcy court for $100,000.
Chicago-based Coyote Logistics works with 100,000 network carriers and manages 10,000 loads per day, UPS said. It acquired the business in 2015 for $1.8 billion from private equity firm Warburg Pincus to bulk up its full truckload and backhaul services.
“As UPS positions itself to become the premium small package provider and logistics partner in the world, the decision to sell our Coyote Logistics business allows an even greater focus on our core business,” said UPS Chief Executive Officer Carol Tomé. She had told analysts on a January earnings call that UPS was considering “strategic alternatives” for Coyote, part of the company’s supply chain solutions business unit.
The Parcel Pickup assets will augment Delivered’s ability to provide same-day delivery services, Supply Chain Dive reported. Parcel Pickup gained a lot of grocery delivery business during the pandemic, with customers that included Walmart, Kroger, and Home Depot. But it was done in by a variety of factors, said Nate Skiver of LPF Spend Management in a February LinkedIn post, including a soft market, too much competition, and funding drying up.
Even if spot rates for containers don’t approach $30,000 again as they did in 2021, the type of pricing escalation currently taking place, along with tightening capacity, is doubtless causing pain for shippers. All eyes are on port traffic buildup on the West Coast, with the heaviest wave of peak season reloading yet to come.
And as New York looks to tackle warehouse worker injuries from repetitive motions, Amazon and RXO are hoping their humanoid robot tests will help reduce this risk in the near future.
In the midst of this uncertainty and upheaval, shippers should look for a reliable logistics partner who can help alleviate the pressure and cost of insourced fulfillment and delivery.
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