Jay’s Parcel Notes: May 2 – May 15

I’m Jay Kent, managing director of SLB Performance, a consulting firm that helps companies reduce supply chain costs, implement BI tools, and improve in-stock and customer service. After 25 years of leading some of the most complex supply chains in the industry, I began advising companies in multiple industries and verticals. It’s important to understand the market to mitigate costs and improve efficiencies. So, twice a month, I’ll share parcel news and thoughts. Be sure to hit the subscribe button to receive the latest newsletter in your LinkedIn notifications.

• Good story from the WSJ(Subscription may be required) – Store owners once viewed e-commerce as a mounting threat to their survival. Now, more bricks-and-mortar stores are thriving after integrating their properties with the online shopping experience. Nearly 42% of e-commerce orders last year involved stores, up from about 27% in 2015, according to research firm GlobalData.

At the end of 2023 (latest data from the Census Bureau), e-commerce represented 15.9% total retail sales.

• U.S. Postmaster General Louis DeJoy agreed to pauseplanned further consolidation of the postal service’s processing network after a bipartisan group of senators raised concerns about the impact on mail deliveries.
• USPS is seeking an average 25% price hike for high-volume shippers to enter packages for regional delivery through its Parcel Select service. The price hike, which would take effect on July 14 and must be approved by the Postal Regulatory Commission, is because USPS no longer intends to give incentives for parties to aggregate mail volume from multiple shippers and bring such volume directly to the destination delivery unit according to Reuters.
• The New Mexico Environment Department awarded UPS a $473,222 grantto replace 16 diesel delivery vehicles with compressed natural gas, or CNG, vehicles. UPS is retiring diesel-fueled vehicles and replacing them with cleaner vehicles.
• FedEx ordered 150 electric trucksto add to its pickup and delivery fleet in the United States in an effort to reduce carbon emissions according to The Shyft Group. FedEx plans to add the Blue Arc EV Trucks to its fleet after previously testing the vehicle on last-mile delivery routes in Memphis.
• FedEx Freight confirmedthat it is closing seven service centers across the U.S. this year as the division continues to make alignments to its freight network.

FedEx recently presented at BofA Securities 31st Annual Transportation, Airlines, and Industrials Conference. A transcript is available from Seeking Alpha.

A few tidbits:

• I think the USPS situation will allow us to better adapt to a changing environment in the market because we will not be as wedded to the daytime operations on the Postal Service contract as it exists today. John Dietrich – FedEx EVP and CFO
• On the eCommerce side, we’ve seen a return of eCommerce and growth in eCommerce, actually. There’s this whole discussion on destocking, which is we believe has taken place, but we haven’t seen the restocking yet. So I think that gives us some potential upside. I talked about industrial production as somewhat depressed. There could be some potential upside there. John Dietrich – FedEx EVP and CFO
• We’ve done a lot of work to maximize the efficiency of Ground. We’ve been able to capitalize and bring our total line haul costs down and absorb some of them, what was previously ad hoc line haul expense into our network, which is all part of DRIVE and the technologies that we are implementing in DRIVE. John Dietrich – FedEx EVP and CFO
• And the demand environment, we are going to continue to go after some of the things you talked about SMB business as well as health care and some of the higher-yielding ground traffic. John Dietrich – FedEx EVP and CFO

Monthly Tips

And if you missed it, a reshare of a video I did with Cathy Morrow Roberson last week on last-mile delivery speed and a couple of tips to save money but still provide excellent service. Each month we’ll discuss a different supply chain topic and include tips to succeed.