Supply Chain by the Numbers

- Feb. 25, 2016 -

  Supply Chain by the Numbers for Week of Feb. 25, 2016 - See March 4 Numbers Here

US Truckload Rates Continue to Slow Amid Weak Volumes; Amazon Bumps Free Shipping Threshhold Up, Maybe to Boost Prime; How Many New Locus Robots are Needed per Picker? Container Growth Second Lowest Ever in 2015



That was the very weak rise in US truckload rates year over year in January, according to the Cass Linehaul Index report this week from Cass Information Systems. That follows similarly low increases closing out 2015, with average rate increases of 1.9%, 1.6% and 1.1% in October, November and December, respectively. Conversely, rates were up more than 5% year over year in the first three months of 2015. That slowdown in rates may be good for shippers, but also may be sign of a slowing economy. For example, the American Trucking Association's Freight Tonnage Index was down 1.4% in January. Avondale Partners, which collaborates with Cass on the report, says carrier bankruptcies being at historic lows, truck counts up, and the relaxation of the 34-hour restart rule for drivers - which increased effective capacity - are also helping to pushing rates down.




That's how many of the new Locus Robotics machines are needed per distribution center worker, according to the companies CEO Bruce Welty in an interview with SCDigest last week. The Locus robot system is similar to – but different from – the Kiva System robots that ushered in the “goods to picker” concept in distribution center operations. In fact, Welty's company Quiet Logistics (a 3PL) was a Kiva user until Amazon acquired Kiva in 2012, after which Amazon stopped selling to external companies. In need of an alternative solution, Welty and team came up with the Locus robots, which Welty says use a "task to person" concept – in effect DC associates meet a robot at a location for a pick, with the robot then moving to the next location for that order or to shipping if the order is complete. While eight robots per workers may seem high, Welty says the approach is more productive that Kiva's, and brings high ROI. See the full story here: Understanding the New Locus Robotics DC Picking System.


That's the level has now set for free ground shipping on most orders, up from $35 before. At one level, that may be good news for Amazon's own bottom line, and perhaps even those of its on-line rivals, by at least modestly plugging the financial hole that is free shipping. But then again, many see the move as directed to push even more Amazon customers to its Prime service, where for $99 per year you get unlimited free two-day shipping on millions of items, as well as free two-hour delivery in a growing list of cities that now numbers at least 20 under the Amazon Prime Now program. Amazon's shipping costs in the fourth rose to 12.5% of sales, up from 10.9% in the same quarter last year.



That was the anemic growth in global container shipping traffic in 2015, the second lowest year on record, surpassing only the decline seen in the deep recession year of 2009. That weak rise was also well below global economic growth of about 3.5% (depending on the source) last yea, continuing a recent trend in which global trade comes in below GDP growth worldwide, when before the recession the opposite was the rule. But of course, global container shipping capacity continued to expand, up about 5% last year versus the 1% rise in volumes. That is a recipe for tough times, and sure enough rates reached historic lows at the end of 2015, below even variable operating costs. Maersk Lines lost $165 million in Q4 – and it was among the better performers. The analysts at Alphaliner expect shipping capacity increases to slow this year – to 4% - but that will still be a least 1-2 percentage points above container growth, so expect rates to continue to stay at rock bottom levels.