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Supply Chain by the Numbers

- Jan. 3, 2020 -

  Supply Chain by the Numbers for Jan. 3, 2020

Expect to Spend a Lot More to Ship Heavy Parcels; US Stores Closures Set Record in 2019; Delivery Van Orders Soaring; December PMI Falls Yet Again



That is the surcharge that both UPS and FedEx say they will now levy to deliver packages that weigh more than 50 pounds. Previously, the extra fee applied only to parcel that exceed 70 pounds in weight. Both parcel carriers are reducing their thresholds as part of their annual round of rate increases – in an environment where both UPS and FedEx are struggling with profitability. Shipware LLC, a shipping consulting firm, estimates that 14.5% of packages sent by its 100 largest shipper clients would be hit by the $24 fee under the new rules, up from 8.4% when the threshold was 70 pounds. The question for shippers that send heavy packages of multiple items will be if it is cheaper to send more packages that stay under 50 pounds or ship fewer parcels and take the surcharge hit. If the former strategy is embraced, it is possible the parcels get separated in the carrier’s network, requiring an extra stop the next day. FedEx and UPS say the changes to the threshold are being made so that they are properly compensated for the increasing number of large and heavy packages that are moving through their networks as things like televisions, furniture and auto parts are increasingly ordered online.



That’s how many retail store closures were announced in the US in 2019, up 63% from 2018, when more than 5,700 stores closed, according to new data from Coresight Research. It also sets a new record, topping the 8000 stores shuttered in 2017. Of course, ecommerce is getting most of the blame for the dramatic rise in retail outlets being closed, but some experts say the US had to many stores even without the switch to on-line shopping. "Even without the advent of online, there would be this reckoning," Michael Brown, a retail practice partner with the global management consulting firm A.T. Kearny, told NBC News, adding that "What online has done is make it really expensive to continue operating a large store base, and with a competitive online experience there had to be a rationalization for the number of stores and the role they played."



That is the projected increase in US sales of cargo vans when all the numbers are soon tallied, driven by – what else – growth in ecommerce deliveries. That will make automakers happy, as demand for regular cars is about flat for the year that was. Sales are expected to stay strong through for the next five years at least, as growing ecommerce volumes and more rapid delivery times create demand for small, versatile vehicles. Of course, Amazon alone is a big if not the biggest factor, having ordered in 2019 some 20,000 new vans that will be leased as part of its Amazon Delivery Partners program. It also then more recently announced that it will acquire as many as 100,000 electric delivery vans over the next decade from Rivian Automotive, a company it partially owns, with the first ones scheduled to show up on the road in 2021. Traditional van market leaders include Mercedes-Benz, with its Sprinter van; Ford and its Transit van; and Fiat Chrysler’s ProMaster van.



47.2 – that was the December reading for the Purchasing Managers Index from the Institute for Supply Management, in data released Friday. That was well below the 50 mark that separates manufacturing expansion from contraction in the index. It also marked the 5th straight month below that 50 mark, and was the lowest reading since June 2009, the bottom of the recession. Still, ISM says the data shows the overall economy grew at a 1.3% rate – not very strong, but not recession territory either – and represented GDP growth for a record 128th consecutive month. ISM said that "Demand contracted, with the New Orders Index contracting faster [versus November], the Customers' Inventories Index remaining at 'too low' status and the Backlog of Orders Index contracting for the eighth straight month (and at similar rates to November)."

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