Commerce giant Amazon is no stranger to disrupting industries. From its early years of disrupting the book retail industry by making new and used books more accessible than ever, to changing the way people grocery shop with its purchase of Whole Foods, Amazon has challenged other businesses to keep up with the so-called Amazon Effect.
Now, Amazon is aiming to disrupt the shipping industry by changing their two-day shipping program into a ubiquitous, one-day shipping model across the U.S. It is now up to other businesses to adjust under the added pressure to keep up with Amazon and the heightened expectations of consumers. This change also has the potential to disrupt the trucking industry as faster turnaround will be in high demand.
Amazon Announces Next Day Shipping
In April of 2019, Amazon made the announcement that one-day shipping would soon replace two-day shipping as the norm from Amazon Prime customers across the country. Previously, one-day shipping was reserved for specific areas, primarily those in large, metropolitan cities. Amazon also stated that they are expecting to invest $800 million during the second quarter this year to create the delivery infrastructures and warehouses necessary to make one-day shipping possible everywhere.
Amazon already has 100 million Prime members across the U.S. who pay $119 per year to receive free shipping and one-to-two-day shipping on goods including clothes, books, home supplies, dry goods, and even groceries in select areas. That means that Prime is already in 50 percent of U.S. households. With one-day shipping expanding to all areas of the country, more people than ever will be able to enjoy their orders arriving on their doorsteps in less than 24 hours. Additionally, Amazon can expect their member pool to grow exponentially. While this sounds like great news for Amazon and its members, these changes are leaving retailers needing big changes to retain their customer base.
Retailers Respond to Amazon Next-Day Shipping
Soon after Amazon’s next-day shipping announcement, Walmart alluded to their own one-day shipping plan in a short tweet:
“One-day free shipping…without a membership fee. Now THAT would be groundbreaking. Stay tuned.”
This tweet not only stated that Walmart had plans to mimic Amazon’s one-day shipping model, but they have also hinted at their plans to offer this service without the membership fee Amazon requires.
In May of 2019, Walmart came through on their promise and announced their plans to release one-day shipping across the country. They stated that they will begin next-day shipping in Phoenix, Las Vegas, and Southern California, then expand the service to 75 percent of the U.S. by the end of 2019. Since Amazon has not released a set date for their next-day shipping expansion, there is a chance Walmart may beat Amazon to certain areas of the country. This could cause some consumers to be less interested in an Amazon Prime membership, since there is already a similar service for free.
Walmart is not the only retailer to quickly respond to Amazon’s new supply chain model. Home Depot has also announced its plan to offer next-day delivery for up to 50 percent of the U.S. population by the middle of 2019. Its CEO also stated the company is already offering this service to 36 percent of the population.
Over the years, Target has taken steps to keep up with Amazon’s ever-changing shipping services. In March of 2018, Target began offering free two-day shipping to all of its credit card holders. It also offers this service to other customers on orders over $35 dollars. Target also acquired the shipping company Shipt to allow customers to enjoy same-day delivery in larger cities. Target also offers a variety of services to make shopping easier for customers, including its Drive Up or Pick Up services provided at 8,500 brick-and-mortar stores. To date, Target has not announced any new tactics to compete with Amazon, but simply reminded consumers in a statement about the services they already offer.
How Will Same-Day Shipping Affect the Trucking Industry?
Just like big box retailers must rethink their business models to keep pace with Amazon, the trucking industry must innovate to meet the demand of nationwide same-day shipping. For example, as retail analysts have opened, it may be in the interests of big box retailers like Home Depot and Walmart to combine one-day shipping volumes to provide faster logistics at lower cost. The trucking industry may need to develop new programs and services to help retailers maximize their logistics speed and timing to compete with Amazon’s logistics capabilities. Truckers will need to act as trusted advisors to recommend to shippers the program or service that best meets their needs.
The new, higher demand for fast shipping will cause some growing pains for multiple industries. However, it equates to high job security for truckers and potentially more demand for qualified drivers, freight owners, and logistics managers. That means now is a great time to invest in your business or truck. And for all your commercial financing needs, trust the experts at Mission Financial Services. Apply today and get approved for a semi-truck loan in no time.
At the beginning of 2019, there was a wide range of speculation as to how new tariffs against China would affect the U.S. economy, the price of goods, and trucking demands. Now that the year is half over, tensions are heating up even more. As a trade war between the U.S. and China wages on, other countries are becoming concerned of the possible implications to their own economies. Additionally, in the U.S., the trade war may have an effect on the commercial trucking industry. Here is what you need to know about the trade war between the U.S. and China.
Tariffs Against China and Mexico
In 2018, three rounds of tariffs against China were put in place by the U.S. These tariffs covered more than $250 billion worth of Chinese exports, including technology, tires, purses, and railway equipment. Accusing the U.S. of starting “the largest trade war in economic history,” Beijing retaliated with over $110 billion in tariffs against U.S. goods. This included tariffs on medical equipment, coal paraphernalia, chemicals, and soybeans.
The U.S. is not only aiming tariffs at China. In fact, The World Trade Organization (WTO) has stated this may be the worst global trade crisis since 1947. On May 30, the president shocked the financial markets by increasing tariffs to Mexico. In addition, threats were made that taxes would only continue to rise until Mexico began to work with the U.S. to minimize illegal immigration at the border. Analysts stated that these heightened tariffs could send both the U.S. and their closest ally into “economic and diplomatic crisis.”
Fortunately, just nine days after announcing these tariffs, the president tweeted that Mexico and the U.S. had come to an agreement, and the higher taxes would not go into effect. While Mexico has agreed to limit immigration at the southwest border, the results of this have yet to be seen. Only time will tell if this agreement will stand. However, for now, it seems the tariffs that would have resulted in increased prices on goods exported from Mexico, including a possible extra $15 million in taxes for the U.S. food chain Chipotle, will not be put into effect.
Understanding the Tariffs
The president’s tariffs have been placed on billions of dollars’ worth of goods in a variety of countries, with China receiving the brunt of the taxes. He has held the stance since before the 2016 election that he believes China has unfair trade tactics in place. In the case of Mexico, many tariffs are being used as a means to get them to cooperate with his plans. Additionally, President Trump believes that placing higher tariffs on imported goods will encourage more manufacturing to come to the U.S. This will, in turn, boost the U.S. economy and create jobs for Americans.
Will the Trade War Affect the Trucking Industry?
In regard to how the trade war may affect the U.S. trucking industry, Vice President of Trucking Research for FTR Transportation Intelligence Avery Vise, has a positive outlook. Vise states he does not expect the president’s new tariffs to have much of an effect on American trucking. It is projected that many price increases will be absorbed by the original manufacturer of the goods for competitive reasons. This means the higher prices will not transfer to the consumer.
Vise also mentions that if tariffs are applied to Mexico after all, it could mean consumers would seek products from other areas due to the considerable price increase. This, in turn, could result in declined freight volumes. However, there are no longer plans to increase Mexican tariffs currently.
An Uncertain Future
When it comes to the U.S.-China trade war, there is no projected end in sight. Trucking is the primary form of transportation for foreign goods arriving in West Coast ports from China. The trade war has caused a dramatic drop in the number of ocean shipments coming from China, meaning less trucks are needed to haul freight. This has caused a drop in the demand for truckers at these ports.
While West Coast demand may continue to fall, trucking needs could increase on the East Coast. With products from China becoming too expensive, it is projected that businesses will find new sources for the goods they need. This could mean ports in Savannah, New Jersey, and New York could see a rise in demand for truckers as goods start coming in from other places. Therefore, the need for truckers will not diminish. It may simply transfer to a new location.
Despite trade tensions and threats of higher tariffs, the future of the trucking industry is still looking bright. Trucking will continue to remain a vital component of the U.S. economy, which means owner operators will always be needed. At Mission Financial, we are always keeping up with the latest industry news, so visit our blog today.
Trucking: A Supply Chain Workhorse
What image comes to mind when almost anyone thinks about moving palettes of product from a manufacturer to a distribution center or to a store for purchase? Trucks, and rightly so. The American Trucking Association reported that trucks moved 70.2 percent of all domestic freight tonnage in the United States. It took 3.6 million heavy-duty Class 8 trucks moving 10.5 billion tons of freight and burning 39 billion tons of diesel fuel to accomplish that feat.
Clearly, the trucking industry is a huge part of the supply chain. That’s quite a load of trucks, drivers, and freight to manage. How in the world can anyone or any company manage all of their drivers and trucks, not to mention all the freight they move? Can a company know all their trucks’ locations at any point on their routes in real time? Is a truck’s tire or engine about to fail while on its route, possibly impacting delivery time? Could anyone have foreseen that truck’s issues and taken it out of service for repair? If a company has multiple drivers delivering to a company, how can it know they are all taking the most economical and timely route or perhaps a route that can damage trailer contents? Is the environment in each trailer suitable for the type of freight it’s carrying? Are your drivers driving as safely as they could or should?
Attorneys say you should never ask a question to which you don’t know the answer; all these questions have answers that may surprise you. Briefly, the answer to all these questions is yes. Let’s explore a little.
What is The Internet of Things?
Almost everyone has an idea of what the Internet is. It began as a network of hardware and software technologies that allowed computers to connect to it and talk to each other so people in government, scientific, and academic circles could find information and share it with each other.
Now all kinds of devices connect and communicate through the Internet – smart TVs, smartphones, vending machines, refrigerators, and more recently, small devices called sensors. Hence the name The Internet of Things, or IoT for short. The Internet of Everything Under the Sun doesn’t quite have the same ring and the acronym is even worse.
Sensors communicate among themselves, meaning they send information to and from one another and with an asset tracking system or fleet management system (depending upon the type of asset you’re managing), all in real time, to help businesses solve many types of difficult business problems and save significant money that otherwise would have been lost.
Profound Benefits of IoT to the Supply Chain
The IoT will impact the supply chain in ways never seen before, creating sweeping revenue opportunities and operational efficiencies heretofore unseen. Asset tracking, vendor relations, forecasting and inventory, connected fleets, and maintenance are all areas within supply chain management that will see unprecedented boons. Here are some examples of the use of and the benefits from the IoT:
1. Asset Tracking and Supply Chain Visibility
A case study by Sierra Wireless discusses how one of their customers, Tive, helped a washing machine manufacturer identify and resolve washing machine damage that occurred during shipping by employing IoT asset tracking to improve supply chain visibility.
In another example, real time asset tracking saved $1.5 million of medication from ruin because trackers placed inside the shipping container alerted the pharmaceutical company that the container temperature was too low. The pharmaceutical company immediately was able to reach someone at the port where the container was and fix the temperature issue.
2. Proactive and Preventive Maintenance
Who hasn’t seen a fleet truck stopped on a highway shoulder with its cab up and the driver trying to determine what needs repair? In the meantime, the scheduled delivery time looks less likely by the minute.
That situation never would have occurred had the fleet owner installed sensors that talked to a fleet management system. The sensors would have alerted the fleet management system about the problem before the truck was even loaded with its freight. The system would have taken the truck out of service and scheduled it for repair for whatever component the sensor indicated was about to malfunction or was malfunctioning. Additionally, the fleet management system would only schedule a technician certified to work on that make and model of truck; problem solved even before it began.
Think of the headaches the IoT averted in that hypothetical scenario:
- A truck destined to break down was not dispatched.
- Towing fees were avoided.
- The driver was able to do what he did best – be productive driving and not be sidelined on a shoulder somewhere.
- Foreknowledge about a defective truck avoided a late delivery, keeping original delivery time commitments intact.
- The truck technician could repair the truck faster because the truck sensor identified the problem, saving diagnosis time, and scheduled the right person to do the work.
Platooning, which groups trucks on a journey, employs artificial intelligence and other IoT technologies to allow legal, digital tailgating among a fleet of trucks. It can improve truck safety using technology already available on trucks – lane-keep assist, adaptive cruise control, and air brakes. It also promises to reduce fuel consumption from 5-20 percent by meticulously and automatically managing the distances among fleets of trucks through wireless communication among sensors, allowing trucks to take advantage of an aerodynamic effect, known as drafting.
Platooning also improves road capacity and road safety. Because of the near instantaneous communication of these state-of-the-art driving support systems, trucks simultaneously can accelerate or brake, which supports better traffic flow. They also can follow each other more closely because platooned trucks react orders of magnitude faster than human drivers. They don’t require the same amount of distance between them to compensate for the slower reaction time.
Looking Forward and Forward-Looking
These are incredibly exciting times in the transportation industry with many positive changes in the near future. With change comes opportunity and all of us at Mission Financial Services look forward to helping you take advantage of those opportunities. Contact us today to get started with your commercial vehicle loan.