Amazon shipping costs outpace sales growth due to soaring pandemic operating expenses
Amazon’s shipping costs increased by 57% Year on Year in the third quarter to reach $15 billion. Shipping costs have grown faster than online sales (up 38% YoY) in the same period. Operational costs related to the COVID-19 pandemic have added up to $7.5 billion for the year so far. The expenses include new procedures to facilitate social distancing rules in fulfillment centers, ramp-up costs for new facilities, an influx of around 250,000 new staff training as well as onboarding costs, enhanced cleaning, and personal equipment.
The company is expected to spend $4.5 billion on incremental COVID-19 related operational costs in Q4. Amazon have pulled forward some spending on logistics capacity building which is planned for next year to Q4, to meet the seemingly endless demand.
According to a report, the company is on track to grow fulfillment and logistics infrastructure 50% this year. Transportation capacity for internal use could be a major target for investment in the future for Amazon. Over the last few years, Amazon began hiring out its logistics capacity in direct competition with carriers such as UPS and FedEx, but was paused in April 2020.
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Royal Mail acquire two new temporary parcel sort centers to ease pressure on Christmas deliveries
Royal Mail in the UK has acquired two new temporary parcel sort centers in order to help ease the pressure on Christmas deliveries, as more and more festive shoppers are expected to move online this year.
The move will help the company to manage the traditional increase in deliveries over the festive period, as well as cater for the UK’s e-commerce boom, which is being accelerated by the COVID-19 pandemic and lockdown restrictions.
The new sites will form part of a nation-wide network of centers that are dedicated to sorting parcels to meet the demand that the Christmas period brings, which is expected to outstrip prior years‘ festive peaks for parcel deliveries.
In the first five months of the year, Royal Mail reported a 34% year-on-year increase in parcel volumes (177 million more parcels). The company has used temporary parcel sort centers for the past 10 years to process a significant proportion of seasonal parcels and to help manage volumes. But this year the company has decided to expand its existing portfolio of seasonal sites. The use of these temporary centers are an integral part of Royal Mail’s substantial investment in providing additional resources at Christmas and to ensure that customers up and down the country can send and receive gifts and cards on time.
Approximately 4,600 seasonal workers will be based in the eight temporary parcel sort centers, and Royal Mail are set to recruit a total of 33,000 temporary seasonal workers across its UK operations this Christmas.
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US-Mexico cross-border operators brace for peak holiday season
Freight deliveries from Mexico to the United States are soaring as the transportation industry enters the peak holiday season.
With an increase in freight demand and higher trucking rates, which are already affecting volumes along the US-Mexico border, logistics professionals expect capacity to be tight for the rest of the year, perhaps even in the early part of next year too.
The demand for exports has increased, and the consumer packaged goods, apparel and automotive sectors are a big driving factor of cross-border volume at the moment. Heading into the peak holiday season, 2020 volumes and tender rejections are already well above levels recorded at this time in 2018 and 2019.
The imbalance of northbound freight out of Mexico compared to southbound freight is one of the largest contributors to the current lack of capacity at the border, which has caused the price of getting products shipped out of Mexico to increase significantly.
The COVID-19 pandemic has caused this network issue and for supply chains to slow down. There have always been regulations and security challenges for trucks in Mexico carrying loads north to the border, especially loads for the automotive production industry. But the coronavirus pandemic is adding to the time it takes for cross-border shipments.
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