Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Amazon.com. Inc. is moving quickly to revamp its delivery network to gain more control over its fulfillment
infrastructure while reining in spiraling transportation costs, according to a supply chain consultant with close
ties to the e-tailing giant.
James Tompkins, who runs Tompkins International, a Raleigh, N.C.-based consultancy, said Amazon has divided the
nation into three segments based on population size: The top 40 markets, which comprise about half of the U.S. population;
the next 60 largest population areas that account for about 17 percent, and the remaining areas, which account for about
one-third.
The top 40 markets will be served by a private fleet being built by Amazon to support an expansion of its online grocery
business, called "Amazon Fresh," according to Tompkins. The next 60 will be served by an array of regional parcel delivery
carriers, he said. The remainder will be served mostly by the U.S. Postal Service, he said.
UPS Inc., which today handles much of Seattle-based Amazon's current deliveries, will not play a prominent role in the network
realignment, Tompkins said. Nor will FedEx Corp., which manages a lesser portion of Amazon's delivery business. An Amazon
spokeswoman was unavailable to comment.
Orders will be routed through Amazon's 55 fulfillment centers, with deliveries made the same day, the next day or, at most,
in two days, Tompkins said. Inventory will be positioned to exclusively support local deliveries. A national delivery network as
operated by providers like FedEx and UPS will be rendered irrelevant because they will be considered too slow to suit the typical
Amazon customer, he said.
Tompkins said that Amazon has a timeline for its rollout, but that he is unaware of the details. "They are moving on this very
aggressively," he said.
Amazon two years ago seriously considered a bid for FedEx as a means of buying into an existing delivery operation, according
to Tompkins. However, Jeffrey P. Bezos, Amazon's founder and CEO, backed away after determining FedEx's network structure was too
national in scope to fit Amazon's strategy of local fulfillment and delivery, Tompkins said. A FedEx spokesman declined comment.
Tompkins has worked in the supply chain management field for decades and is considered one of the nation's leading authorities
on its role in e-commerce. His relationship with Amazon is not clearly defined, a status seemingly more by design than coincidence.
When asked to describe the nature of his involvement with Amazon, Tompkins replied that he was contractually obligated not to
comment.
A "FRESH" EXPANSION
Though Amazon Fresh has been operating for five years, it is today only available in Seattle, San Francisco, and Los Angeles.
However, Amazon plans to expand the grocery business to between 30 and 40 U.S. markets in 2014, according to Tompkins.
Tompkins said the private fleet network would commingle groceries with general merchandise, thus building the scale needed to
make ground shipping cost-effective and to offer a compelling value to customers, Tompkins said. It would also set in motion a
chain of events that would result in Amazon competing with FedEx and UPS.
The online grocery business, which is plagued with high fulfillment costs, is not considered a particularly attractive
enterprise on its own. However, Bezos has used Amazon Fresh as a proving ground to test a more ambitious delivery model rather
than as a way to build a national grocery footprint, according to Tompkins. By using his own vehicles to deliver groceries, Bezos
has been able to fine-tune his own delivery network and understand the pros and cons of leveraging his own infrastructure than
those of the incumbents, Tompkins said. Now Bezos is poised to apply that knowledge on a broader scale, Tompkins said.
Transportation costs remain a thorny issue for Amazon. Its shipping expenses in 2012, the most recent period that full-year
figures were publicly available as of this writing, rose to more than $5.1 billion, up from nearly $4 billion in 2011, according
to the company's 10-K filing with the Securities and Exchange Commission.
Shipping costs in 2012 exceeded shipping revenue by nearly $3 billion, according to the filing. Amazon generates much of its
shipping revenue from third-party merchants who sell products through the company's site and use its fulfillment services for
storing inventory, picking and packing, and shipping.
In the filing, Amazon said it expected its "net cost of shipping"—the ratio of shipping costs to revenue—to continue rising as
parcel rates increase and more customers take advantage of the company's delivery offerings such as "Prime," which charges a $79
annual fee for unlimited two-day deliveries. Amazon has said it is considering a $40 annual price hike for Prime subscriptions.
Not everyone believes Amazon will migrate from FedEx and UPS so quickly. Scott Devitt, Internet analyst for investment firm
Morgan Stanley & Co., said during a late February webcast that Amazon will continue to leverage the established delivery
infrastructure and will not become a disruptive force in the delivery market. Amazon will continue to use its enormous buying
power to extract favorable rates from its delivery partners and will see that as a more attractive alternative to building out its
own network, Devitt said.
Frederick W. Smith, FedEx's founder, chairman, and CEO, told analysts recently that only FedEx and UPS have the delivery
networks capable of efficiently handling the demands of Amazon and other e-commerce providers. Smith said his company, UPS,
and the U.S. Postal Service would remain at the forefront of e-commerce shipping for the foreseeable future.
Tompkins said that Amazon has been planning its strategy long before the well-publicized delivery problems that occurred during
the 2013 holiday season, when about five million of its shipments were not delivered in time for Christmas. Much of the fallout
was laid at the feet of UPS, though some have argued that Amazon erred by understating how many packages were coming UPS' way
toward Christmas day, thus overwhelming the Atlanta-based carrier's air network and triggering the backlog.
Amazon is still smarting from the fiasco, however. The company's fulfillment executives believe UPS and FedEx are not investing
enough in equipment, infrastructure, and other resources to keep up with Amazon's growth, according to a person familiar with the
matter.
These days, every move in the e-commerce space is significant because of its enormous potential. E-commerce has penetrated just
10 percent of the U.S. market, and between 6 and 7 percent of the global market, according to Morgan Stanley estimates. Based on
projected annualized growth rates of 15 percent, e-commerce could be a $1 trillion worldwide business by 2016, according to the
firm.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.