Chinese e-commerce firm Alibaba Group announced it will invest 100 billion yuan ($15.12 billion) over five years to build a global logistics network and also take control of a $20 billion unit, underpinning an aggressive overseas expansion.
Alibaba is investing 5.3 billion yuan in Cainiao Smart Logistics Network to boost its stake to 51% from 47%. The investment would value Cainiao, a joint venture of top Chinese logistics firms, at around $20 billion.
"Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba's commitment to building the most-efficient logistic network in China and around the world," Alibaba CEO Daniel Zhang said in a statement on Tuesday.
The announcement comes as Alibaba is rapidly expanding its e-commerce and logistics network abroad, including newly announced direct sales channels in Indonesia, Thailand and the Philippines, facilitated by a $2 billion investment in Southeast Asian online retailer Lazada Group.
Alibaba's latest investment in Cainiao also signals its intention to boost control over the domestic warehousing and delivery market, which has become increasingly competitive as firms seek to capitalize on logistics data assets.
In June top logistics firm SF Holding Co cut ties with the Cainiao coalition, which provides logistics support directly to Alibaba's top e-commerce platform Taobao, claiming Alibaba had requested data unrelated to the existing partnership agreement. Alibaba denied the claims.
Alibaba said on Tuesday the $15 billion investment will be used to develop its data technology and improve its warehousing and delivery development.
Alibaba subscribed to new shares of Cainiao to boost its stake to a majority, according to a person close to the e-commerce firm. Alibaba will gain a new board seat in Cainiao, and will represent four out of a total seven seats.
For more on Alibaba, watch Fortune's video:
Jack Ma Talks Great Ambitions for Alibaba
Fortune recently caught up with the man behind Wall Street’s largest IPO
Despite attracting billions of dollars from equity investors, Chinese logistic firms haven't fared well in recent public listings.
Shares of ZTO Express Inc, which raised $1.4 billion from its New York IPO last October in the largest U.S. offering by any Chinese company since Alibaba in 2014, are down 22 percent from the listing price.
And Best Inc, a Chinese delivery firm backed by Alibaba, raised $450 million in a U.S. IPO last week, nearly half of what it had initially intended to raise.
Cainiao is not currently considering any IPO, the person said.
Alibaba did not immediately respond to a request for comment.
Alibaba co-founded Cainiao in 2013, with partners including department store owner Intime Group, conglomerate Fosun Group and a few logistics companies. It oversees roughly 57 million deliveries a day.
Tuesday, September 26, 2017
Walmart and Nestlé are spearheading a massive change in food expiration dates
When you pick up a box of cereal or a carton of eggs, it might say any one of these: “Sell by,” “Display until,” “Best before,” or “Use by.”
The actual expiration date — when the food is no longer safe to eat — is often difficult to figure out.
To clear that up, 50 of the world’s biggest food and retail companies — including Campbell, Walmart, Kellogg, and Nestlé — are changing their expiration labels exclusively to “Use by” by 2020. The food retailers, which are part of the Consumer Goods Forum Board (CGFB), voted unanimously on the change September 20.
The board determined that confusing labeling is one of the leading causes of food waste around the world, since consumers might be unsure if a particular item still okay to eat. In the US, an estimated 40% of food that is bought is thrown out. Globally, about 1.3 billion tons of food are wasted, which contributes to 8% of annual greenhouse gases.
“Standardizing food date labels is a simple and effective way to reduce the amount of edible food thrown out by households, saving them money and reducing their environmental footprint,” The Consumer Goods Forum said in a press release.
Beyond the environmental benefits, the board notes that simplifying labels could save consumers money. The average American family tosses out $1,500 worth of groceries annually, according to the forum. In the UK, that figure is $947.
In addition to the label change, the companies have devised a plan to educate consumers about food waste by partnering with manufacturers, government agencies, and NGOs.
There’s a growing movement to reduce food waste at nearly every point in the supply chain, from the farm to the fridge. Some organizations are visiting farms to collect non-harvested crops for food banks. And s tartups, like Imperfect, are selling “ugly” fruits and veggies at lower prices that traditionally “beautiful” produce. The switch to “Use by” could be a simple change that builds on the fight against food waste.
The giant is coming: the true cost of Amazon to retailers and workers
Amazon’s arrival in Australia is imminent and, while the big guns are bullish, many smaller retailers aren’t aware of the threat
Citibank analysts predict Amazon will hit Australia in October, although the business itself won’t say. Photograph: Bloomberg via Getty Images
Down Dandenong way, on the outskirts of Melbourne, Amazon is staking out a beachhead for the invasion.
Strategically located near freeway connections to Australia’s busiest cargo seaport, the US$465bn retail superpower’s cavernous new fulfilment centre is gearing up to house hundreds of thousands of products shipped in from all over the world.
Citibank analysts predict Amazon will hit Australia in October, although the business itself is tight-lipped about the details. In the lead-up this 24,000 square metre warehouse is shedding the red-and-green branding of former tenant Bunnings for Amazon yellow, as it gears up to serve as a staging ground for a highly automated online retail operation that has deftly outmanoeuvred competitors, unions and tax authorities all over the globe – and promises to unleash the biggest disruption to the Australian market since the rise of department stores.
The incoming arrival of Amazon has seen the share value of major Australian retailers plunge, with local business leaders only helping fuel the panic. Amazon this year has been variously described as “the worst possible corporate citizen”, “Attila the Hun”, “a parasite” that “pays no tax” and threatens to “send everyone broke” – and that’s just by Gerry Harvey, the chairman of the electrical retail chain Harvey Norman, which in May had its profit forecasts downgraded by 30% by Citibank after analysis of Amazon’s impact in the US.
The colourful entrepreneur’s rhetoric has struck some as a little rich: the Retail Global founder, Phil Leahy, observed that Harvey’s “contradictions are breathtaking, given he has beaten competitors in building his own empire”.
Formerly the backbone of the Australian economy, small businesses were eaten up during the latter half of the 20th century by franchise-packed shopping centres and towering superstores like those of Harvey Norman that offered lower prices and greater range in a single location.
The arrival of Amazon is likely to have a direct impact on Australia’s fashion retail model. Photograph: Bloomberg via Getty Images
Back then it was a matter of profits being sucked from communities out to Sydney head offices. Harvey’s warning is that Amazon might just whisk the earnings out of Australia entirely as it undercuts local rivals by producing at greater scale – just as Australia’s big retailers once did to independent stores. The e-commerce giant generates nearly as much revenue as Australia’s supermarket duopoly of Wesfarmers-owned Coles and Woolworths combined, and Morgan Stanley estimates the company will generate $12bn of Australian sales by 2026.
Just as a single superstore visit suited consumers more than visiting a medley of small businesses, Amazon’s all-encompassing product range and rapid response time represents another level of convenience again: the company guarantees delivery in some areas of the US within two hours of customers clicking through to the online checkout.
Harvey says his company is up for the fight and that Amazon’s roll out cannot be as quick as expected but many Australian retailers aren’t aware there is going to be a fight in the first place. In March a Commonwealth Bank survey of more than 600 retailers found only 41% thought Amazon would be a threat to their business.
The consumer behaviour analyst Barry Urquhart, the Perth-based managing director of Marketing Focus, is embarking on a speaking tour about the scale of the Amazon challenge. He says: “Australian retailers are unprepared, ill-informed and don’t know what they are going to address. I don’t think they appreciate what Amazon is. A lot of people are confused. They think, ‘I’m protected, I don’t sell books and CDs.’ But Amazon is a platform, like Uber, and we saw what Uber did to taxis.”
The complacency might be to do with Amazon’s existing presence in Australia, where it has sold a limited range of entertainment-related products since 2012. Amazon’s full suite of offerings cover just about any product imaginable, from auto parts to furniture to sports gear. In June the company even committed to the bricks-and-mortar supermarket world with the US$13.7bn purchase of organic food chain Whole Foods – a sign that it will be ready to take part in the supermarket wars of Coles v Woolworths v Aldi.
Amazon took on half of all e-commerce sales growth in the US last year and has piled huge pressure on American retailers, which are closing at record pace: 2017 is on track for over 8,500 store closures, dwarfing the 6,200 that shut their doors during the recession-hit turbulence of 2008.
With American brands such as Sears and Macy’s shuttering hundreds of shopfronts alone, malls are struggling to find tenants. In a sign of the times, an Ohio mall that was the largest in the world is being transformed into an Amazon fulfilment centre.
An Institute of Local Self-Reliance report – published late last year before the 2017 retail apocalypse – calculated that Amazon has eliminated about 149,000 more jobs in retail than it has created in its warehouses. The company’s embrace of automation is anticipated to further increase that gap, including the roll out of cashier-free physical stores where customers can walk out with their shopping while the payment is taken care of automatically through their Amazon account.
A UBS survey found that Amazon’s arrival in Australia is predicted to eat up 16% of retailers’ discretionary earnings within five years, including 31% of department store giant Myer.
The company is undertaking new measures as Amazon arrives, including the trial of a new yellow-branded clearance section in stores and enhancing its online marketing by leveraging data collected on shoppers via its loyalty program.
In June the Myer chief executive, Richard Umbers, revealed the company would focus on offering unique brands. “I reckon that really dialling up the newness, the uniqueness of our range and in particular products that aren’t available on Amazon anyway … is the right way to defend ourselves against Amazon,” he told the Australian.
Union hostility
Amazon says it will create hundreds of jobs in the Melbourne fulfilment centre and thousands of jobs across Australia nationwide but what kind of jobs will they be?
The National Union of Workers’ national secretary, Tim Kennedy, says the union wrote to Amazon in mid-August seeking a meeting to discuss plans for Australia but never heard back.
He says a failure to engage will fit with Amazon’s record of poor labour practices.
“These include the electronic monitoring of workers and harassment to the detriment of safety,” he says. “There is a well known case of the warehouse in Allentown, Pennsylvania, where workers are forced to work in extreme heat and when people drop they are whisked into ambulances that are stationed in the car park to remove them and replace the worker with standby workers on site ready to fill the hole. Quite shocking really. No respect for the essential humanity of people.”
The scandal, which was reported in 2011, came about because the facility did not have air conditioning and Amazon did not want to leave the doors open for fear of merchandise being stolen. The company has since invested in air conditioning across a number of fulfilment centres, including at the planned Melbourne facility.
Asked to respond to Kennedy’s concerns, Amazon spokesman James Lewis told the Guardian in an email that Amazon’s fulfilment centres are “a great place to learn skills to start and further develop a career”.
Lewis said the safety of workers was the company’s top priority and that “as with most companies, we have certain expectations regarding the performance of associates. Productivity targets are set objectively, based on previous performance levels achieved by our workforce and evaluated over a long period of time. The vast majority of our fulfilment centre associates perform very well. If an associate is not meeting these performance levels, managers will work in consultation with associates in an endeavour to find a solution.”
Amazon has a long and successful track record of pressuring employees to avoid unions, going right back to the year 2000 when leaked company documents detailed strategies to warn workers that unions are an expensive waste of time and telling supervisors to watch out for union activity signs such as “hushed conversations” among workers and “dawdling in the lunchroom and restrooms”.
Lewis did not respond to the Guardian’s question about whether Amazon would meet with the NUW. Asked if Amazon would allow employees the option to join unions – as required by Australian law – Lewis said: “We respect the individual rights of our associates and have an open-door policy that encourages associates to bring their comments, questions and concerns directly to their management team. We firmly believe this direct connection is the most effective way to understand and respond to the needs of our workforce.”
Employees are discouraged from using the bathroom and allocated demerit points for taking too long. They also lose points for taking sick days – examples include a worker penalised for being hospitalised with a kidney infection and another who was put on performance review for allowing breast cancer treatment to impede her work.
At the corporate end, white-collar workers are pitted against each other and encouraged to rat on their peers via an anonymous assessment tool that ranks employees for the purposes of an annual cull. Workers have reported receiving midnight emails immediately followed by text messages asking why there hasn’t been a reply.
Aside from the issue of fewer retail workers meaning fewer people paying taxes, Amazon itself has been questioned over its own tax contributions around the world.
The multinational tax avoidance expert Antony Ting, an associate professor at the University of Sydney Business School, says: “This kind of structure is common among e-commerce multinational enterprises such as Google, Facebook, Uber and Airbnb. The core of these tax arrangements is to locate intellectual properties (eg the digital platforms) to a low-tax jurisdiction (eg Bermuda), thus justifying shifting profits to that country. For these digital companies, these intangible assets, which are extremely mobile, are often their most important and valuable assets.”
Ting notes Amazon will be encountering some specific challenges to its business model in Australia in the shape of the multinational anti-avoidance tax law (MAAL), introduced in January 2016, and the diverted profits tax (DPT), which came into force in July. He says the MAAL has had some success in securing tax revenues out of Facebook and Google, with the former increasing Australian profits by a factor of 10 and Google more than doubling local profit.
Ting notes the MAAL appears to still fall a significant way short of securing tax revenues in line with the global profit margins of these companies – Facebook Australia’s net profit margin was 1% compared with a global net profit margin of 37%.
As for the DPT, he says it might further improve tax intakes from multinationals like Amazon but, as it has only just been introduced, it is difficult to predict the outcome.
“As the MAAL has been in place for over a year, it is likely that the corporate structure of Amazon in Australia will be designed in accordance with MAAL,” he says.
In response Lewis said: “Amazon pays all the taxes we are required to pay in every country where we operate. Corporate tax is based on profits, not revenues, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low-margin business.”
Opportunities for consumers and small businesses
Gigi Foster, an associate professor at the University of New South Wales business school, says she is “broadly optimistic” about the impact Amazon will have on Australia.
“There is the potential for positive effects on Australian consumers, who have languished because of restrictions on imports,” she says. “I think it’s great you will have the option to buy a lot more stuff, people will be happier because of that. The more you can buy, the happier you can make yourself and your family.”
Foster acknowledges there could be problems for Australian retailers, suggesting that small enterprises need to make sure they stock niche products not available on Amazon.
Boxes and parcels sit stacked in bays ahead of shipping from the warehouse of an Amazon.com Inc fulfilment centre in Koblenz, Germany. Photograph: Bloomberg via Getty Images
Independent retailers that have survived through the era of big department stores are now bracing themselves for this new challenge. That includes Warren’s Menswear, an independent store in Fremantle that has been trading since 1931.
The manager of Warren’s Menswear, Teresa Serafini, says: “Competition is great but not when Amazon can undercut you so you can’t compete. But we offer service that Amazon can’t and people remember that. We’ve survived through the great depression, a world war, the rise of retail chains. We get people who come in and say, ‘Oh my dad and before him my grandfather used to come here’.”
Back at Marketing Focus, Urquhart says that kind of community relationship could see small businesses cope better with Amazon than the very retail chains that used to threaten their future.
“You look at a big retailer like Officeworks where people are buying consumables,” he says. “If customers can go on to Amazon and get something functional for cheaper, they will start buying their USBs, calculators and pens from there. Small businesses, however, can easily live with and beat Amazon simply by providing personal interactive experiences – loyalty to the individual rather than the product.”
Analysts have also noted that small enterprises offering unique products could benefit by selling their products through Amazon, using its formidable logistics capability to deliver to a huge global user base.
The lack of awareness among Australian retailers about what Amazon actually represents is a major obstacle to this happening, however, as seen by the case of the 175-year-old Oliver’s Taranga Vineyards in South Australia, one of the country’s oldest family businesses.
The Oliver’s Taranga Vineyards sales manager, Nicky Connolly, recently attended a marketing industry seminar in Sydney where Amazon was a hot topic but she left the conference still unaware that the American giant sells wine, with all the competition and potential supply opportunities that represents.
“Oh, I didn’t know Amazon do wine now,” she tells the Guardian, pausing for a moment. “They’re not just books anymore, are they?”
This 1 Crafty Underdog Could Dethrone Amazon and Whole Foods in the Grocery War–Before It Even Starts
There’s one grocery chain you shouldn’t discount when it comes to winning the grocery wars.
By Rebecca Hinds
CREDIT: Getty Images
Amazon’s acquisition of Whole Foods has rattled the grocery industry. Already, price adjustments have taken effect, with Whole Foods slashing the price of store staples like avocados, coconut water, and farmed salmon. Shoppers are rejoicing, celebrating what seems to be the end of the company’s “whole paycheck” epithet.
But, while many experts expect the bombshell $13.7 billion acquisition to put Amazon on the key path to gaining supremacy in the “grocery wars,” there’s an underdog that may prove victorious.
This morning, I could just as easily have ventured in an opposite direction to my neighborhood Whole Foods. Instead, I opted for Trader Joe’s. And it seems I’m not alone. Consumers young and old consistently give Trader Joe’s top marks against Whole Foods. Why these accolades?
1. Limited Offerings
In 1995, Columbia University professor Sheena Iyengar performed an experiment that involved exposing shoppers to displays of jams, ranging in number from six to 24 different varieties. When presented with only six jam options, consumers were more likely to make a purchase, compared to when they were presented with 24 options. Why? When we’re presented with more options, we tend to question ourselves. Our cognitive load increases, with the result that we feel overwhelmed and are less likely to make any decision at all.
Trader Joe’s minimizes the cognitive load associated with a typical grocery shopping experience. The chain carries only about 4,000 products (typical grocers stock roughly 50,000 products). And 80 percent of products don the Trader Joe’s private label. This morning I might have been stymied by the 10-plus varieties of almond butter stocked by my neighborhood Whole Foods. Instead, I was quick to select Trader Joe’s tried and true Raw Creamy Almond Butter.
Not only does Trader Joe’s offer less product, it also limits options according to season. Loyal shoppers attest to eagerly awaiting Trader Joe’s “Fearless Flyer” to keep in the know about when their favorite products will return to shelves. With its seasonal offerings, Trader Joe’s strategically leverages the power of scarcity, one of Robert Cialdini’s six influence tactics. Scarcity is based on the notion that humans feel taxed emotionally when they believe their freedom has been infringed upon. If consumers think their coveted boxes of Candy Cane Joe-Joe’s won’t be available next month, they’re more likely to buy today. Trader Joe’s website explains:
[Candy Cane Joe Joe’s are] a holiday-only item. We know there are those of you who’d like to find them every time you shop at Trader Joe’s. We sympathize. But we also know exactly how happy you are when the holiday season rolls around and you encounter your first box of the season. It’s your joy, ultimately, that convinces us to offer these only seasonally.
The fear of missing out is powerful–and something you’re unlikely to experience at a grocer now owned by the Everything Store.
2. First-Rate Customer Service
Contrary to popular belief, first-rate customer service is becoming more–not less–important. Roughly 40 percent of customers decide to purchase from a competitor due to a reputation for superior customer service.
As I meandered through Trader Joe’s this morning, I couldn’t help but notice the ambience. There was no PA system distracting me as I sampled Trader Joe’s new Organic Nicaragua Coffee. Instead, I heard periodic ringing of bells. The nautical-like bells are part of a highly strategic Morse code-like system. One bell signifies to the “crew” the need to open another register, whereas three bells commands a manager to action. The system makes for a more enjoyable consumer experience. The company’s website explains, “Those blustery PA systems just didn’t feel right to us, so we came up with a simple system to communicate.” The bells are not only less encumbering than the typical PA systems you find at Whole Foods and its grocery brethren, they also increase efficiency by immediately alerting workers as to specific needs. They help explain why Trader Joe’s sells twice as much per square foot as Whole Foods.
Customer service is further enhanced by a generous return policy. Customers can purchase anything and, if unsatisfied, return it for a full refund. I’m much more likely to experience a series of questions and a snide glance or two–or even an outright “no”–if I attempt to return a grocery item to any other grocer. Trader Joe’s policy cleverly leads to increased spending and impulse buying because it minimizes the chances of feeling buyer’s remorse.
3. Storytelling
In contrast to Amazon and Whole Foods, Trader Joe’s is bereft of a mammoth marketing budget. Instead of spending millions of dollars on advertisements, Trader Joe’s casts its products using a medium that humans are hardwired to enjoy–storytelling. Consider the company’s description of its Quiche Lorraine:
While we already sell a variety of frozen quiche, we’ve yet to provide our customers with the classic from Lorraine, France. The reason for our delay has had to do with…ham. You see, Quiche Lorraine must not only have a perfectly flaky, buttery crust–it must also have plenty of ham…. After a diligent search, our developers finally found the right supplier in San Francisco.
Contrast this with Whole Food’s description of its Quiche Lorraine:
Start the day with style! Our Lorraine quiche features bacon and cheese with silken custard in a flaky pastry shell.
Instead of relying on generic labeling and ingredient lists, Trader Joe’s brings its products to life, even giving shoppers suggestions in terms of how to enjoy the product:
Serve it for breakfast with fresh fruit, or for lunch with fresh greens. It feeds four, unless you cut it into smaller pieces and serve it as an hors d’oeuvre. So versatile! So quiche-able.
Research shows that consumers primarily use emotions as opposed to features and facts when evaluating brands. For Trader Joe’s, it’s all about giving a life and voice to its products and this gives it a key advantage.
Though many have written off Trader Joe’s as a viable contender in the grocery store wars, I wouldn’t be surprised if we see the unfolding of a David and Goliath tale. Whole Foods will need to take a page or two from Trader Joe’s “Fearless Flyer” if it hopes to reign superior and whet the appetites of the masses.
We need action, not slogans, to tackle slavery in supply chains
09/22/2017 06:37 am ETUpdated 1 day ago
NICK GRONO, FREEDOM FUND
Thai fishing boat
Tackling forced labour in corporate supply chains is difficult, particularly when those supply chains span continents and extend down multiple tiers. To do so successfully requires real commitment from companies, and robust and sophisticated policies rigorously applied, with transparency and vigilance. It is encouraging to see some big corporates leading the way on this front – most notably on the issue of recruitment fees – and we applaud the commitments of companies such as Nestle and Walmart and Mars, and look forward to their effective implementation. But while some corporates are showing leadership, many are failing woefully to meet their obligations, and thereby condemning workers in their supply chains to ongoing exploitation. Some will claim that we shouldn’t call out these corporate failures, and that “naming and shaming” amounts to “beating up” on business. But such claims are simplistic, naive, and counterproductive. They are also disrespectful to courageous anti-slavery activists who, often at significant personal risk, investigate and expose abuses in supply chains.
To take just one example, hundreds of thousands of migrants from Myanmar and Cambodia are currently enslaved in the Thai seafood industry and have been for far too many years. This has been powerfully and extensively documented by the Guardian, Associated Press, the New York Times and other reputable media outlets. In their reporting, these outlets identified that big Western companies were routinely importing seafood from Thailand that was likely produced by slave labour. And what was the impact of this media “naming and shaming”? For a start, some of the companies named in the reports said they weren’t aware of the scale of exploitation until these investigations – so at very least it put them on notice of the extreme exploitation of workers producing products they were selling. But it’s also notable that some of the big companies now at the forefront of tackling global supply chain abuses, such as illegal recruitment fees, are those who were publicly identified in this reporting.
The reality is that the complexity of tackling forced labour in supply chains requires that a range of tools need to be applied applied to the task. Sometimes that requires publicly identifying systemic failures – as with the Thai seafood industry – and holding key actors to account. Sometimes it requires benchmarking of performance – as done so diligently by the KnowTheChain and the Business and Human Rights Resource Centre, drawing on data from the Modern Slavery Registry and other credible sources. And sometimes it means applauding leadership in the field as an example to others, as with the Thomson Reuters Foundation’s Stop Slavery Awards. What it certainly doesn’t need is simplistic slogans.
Taking stock of the freight brokering business
Vic Lance, president, Lance Surety Bond Associates | Sep 26, 2017 9:31AM ED
As October and November roll in and many freight brokers apply for their yearly bond renewal, it is time to look back to what has happened in this past year. The new US administration, challenges by Uber Freight and Convoy, and the recent catastrophic hurricanes are just a few of the changes, challenges, and disruptions the trucking and freight industries have faced.
So what is the overall pulse of the freight brokering industry, and where may it be headed?
Even as the trucker shortage still looms large, freight brokers are increasing at a steady pace. A total of 17,723 active licensed brokers were registered at the end of August, based on data by My Carrier Resources.
This marks an increase of about 1,000 freight brokers per year. Based on this trend, by the end of 2017, there should be close to 18,000 registered freight brokers in the United States.
The reason for the increase in brokers is, of course, the increase in freight to be moved. According to the American Trucking Associations, the freight industry is set to grow 2.8 percent this year, and another 3.4 percent per year on average through 2023.
Its Freight Transportation Forecast 2017-2028 predicts that trucking will continue to own the largest share of the freight market, although it may decline slightly with pipelines and rail intermodal chipping off a few small bits.
While truckload tonnage is also expected to grow steadily over the next several years, less-than-truckload will be ahead of it — even if marginally. According to the ATA, this indicates the continuing trend of shorter lengths of haul, which have dropped from 800 miles on average in 2000 to 530 miles in 2016.
There have been few highly important legislative changes for freight brokers over the past few months, but one does warrant attention.
The new food safety rules, part of the US Food and Drug Administration’s Food Safety Modernization Act (FSMA), came into effect earlier this year. It is important that freight brokers know these rules apply to them in many ways. Brokers are considered equivalent to shippers and need to comply with the same requirements shippers are subject to.
Although the Final Rule on Sanitary Transportation of Human and Animal Food came into effect on April 6, 2017, for most brokers, shippers, and carriers it will come into effect a year later on April 6, 2018. Only the largest shippers, carriers, and brokers in the industry are currently required to comply with the rule, whereas smaller businesses still have time to align themselves with the rule’s requirements.
Generally, the rule addresses four areas of the food transportation market that need to improve to guarantee better sanitary conditions of food shipments and, ultimately, greater safety for the final recipients of such food.
These areas include:
the improvement and compliance with new conditions of the equipment used to transport foods
the transportation operations themselves, including the handling and storage
the proper training of staff to uphold certain sanitary conditions when handling food
the keeping of records showing the implementation of the requirements
URS still not fully operational
Despite the initial push of the Federal Motor Carrier Safety Administration (FMCSA) to make the Unified Registration System (URS) available to all applicants for a broker, forwarder, or carrier license this year, this has been postponed indefinitely. Some progress has been made, however, as since the beginning of the year, new applicants for licenses have been able to go through the licensing process entirely by using the URS.
For current holders of a broker license who need to renew the required freight broker bond and license, this means following the standard procedure known to them already. Unfortunately, whether the URS will become available for all license holders, whether new or old, anytime soon is not clear.
Uber issues a challenge to brokers … or does it?
Uber made headlines when it launched its service Uber Freight in May. Talk of Uber “disrupting” the industry immediately surged, although this may not be as simple as it sounds to some. While Uber may truly present new and unique challenges to the market — thanks to its technological know-how and competitive pricing — freight brokers will hardly go down without a fight.
Yet, the appearance of Uber Freight and Convoy, another on-demand trucking company, certainly raises questions for the future of the freight brokering industry. What freight brokers are now called to do is to team up with their partners, look for, and adopt solutions that help them improve their operations, and possibly even automate some.
Instead of Uber taking the industry by a storm, what seems more likely to happen is for the i
