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.
Attention entrepreneurs: Uncle Jeff wants you. Or, perhaps more accurately, he needs you.
Amazon.com, Inc.'s plan to team with partners who want to launch their own delivery businesses is Chairman and CEO Jeff Bezos' latest attempt to bridge the gap between the Seattle-based company's breathtaking volume growth—estimated at 20 percent per quarter--and the delivery infrastructure it requires to hit its ever-demanding service commitments.
The concept itself is not foreign to Amazon; it already uses local couriers as well as stopgap citizen drivers that fill a temporary delivery void under its "Flex" service. Today's step expands and formalizes the existing concept, according to Mark S. Schoeman, president and CEO of The Colography Group, Inc., a consultancy.
James Thomson, a former top Amazon executive and now a partner at Buy Box Experts, a marketing firm that helps companies work with Amazon, lauded the move, saying it will efficiently funnel local delivery operations through one partner who can supply 20-40 drivers, rather than Amazon having to deal individually with dozens of one-person operators in each market.
Thomson said the service that stands to benefit the most from the initiative is "Prime Now," which promises deliveries to Amazon "Prime" subscription members within 2 to 4 hours of ordering. Currently, a small percentage of Amazon's volumes move under Prime Now. However, Amazon sees the program as a "category killer," Thomson said.
Memphis-based FedEx Corp. and Atlanta-based UPS Inc. move most Prime Now traffic. However, Amazon isn't satisfied with the status quo, according to Thomson. The alternative, until now, was working with one-person operators, which Amazon found unwieldy, Thomson said. The new initiative will give Amazon to quickly scale up the Prime Now network, Thomson said.
The Amazon program resembles the independent contractor structure currently used by FedEx to support its fast-growing ground parcel service, known as "FedEx Ground." In the 20 years since FedEx began domestic ground deliveries, the operation has transitioned from a relationship between the company and independent drivers to an "Independent Service Provider" (ISP) model where a third-party is layered between FedEx and the drivers. Because of multi-year contractual commitments between FedEx and its ISPs, it is doubtful Amazon's initiative will lead to the poaching of FedEx's partners, said Bascome Majors, transport analyst for Susquehanna Capital Partners, an investment firm.
One key difference is that FedEx does not provide the type of support to its contractors that Amazon has promised to its fledgling partners. Amazon said it will provide training, technology, discounts on fuel, insurance, leases of Amazon-branded equipment, and most importantly, a stable flow of packages. The individuals, in turn, would be incented to hire thousands of drivers across the U.S. to augment Amazon's established delivery network.
Starting Gun Sounds
The initiative, which officially began today and is available nationwide, focuses on last-mile delivery services, the segment showing the fastest growth, as well as strong profitability, due to the continued surge in e-commerce ordering and fulfillment. Commercial drivers' licenses will not be required as long as the vehicles in use fall under the 10,000-pound gross vehicle weight threshold. Gross vehicle weight is the sum of cargo, cab and trailer. Those who sign up for the program can work with other delivery concerns as long as they don't use Amazon-branded trucks or wear company uniforms.
In the medium-term, Amazon wants the new network as finely tuned as possible by the time the peak holiday delivery season rolls around.
Amazon said it is seeking partners who could manage 20 to 40 daily routes with between 40 to 100 employees. The payment structure consists of a fixed monthly fee based on the number of vehicles operated, a rate based on a route's length, and a per-package fee for each successfully delivered package. Based on Amazon's assumptions of a $10,000 start-up fee and annual revenue potential of $1 to $4.5 million, a partner could pocket between $75,000 and 300,000 a year.
Amazon said it has earmarked $1 million in start-up funding to military veterans, and it will offer $10,000 reimbursements to qualified veterans.
Amazon said the program is aimed at supplementing the work of its existing delivery partners, not to replace them. Dave Clark, the company's senior vice president, worldwide operations, said in a statement that the company has "great partners" in FedEx, UPS and the U.S. Postal Service, among others. Amazon has said its logistics buildout is designed to stay ahead of its internal growth and not take volumes away from its partners, whom it currently needs. Amazon, which currently moves 5 to 7 percent of its own traffic, is anxious to gain more control over its shipping both to meet customer requirements and to drive down its shipping costs, which continue to spiral upward as volumes surge.
However, Amazon's customers are its priorities, not its carriers. If operators in the new network can deliver goods cheaper than its established partners, it could shift existing business, and direct fresh volumes, to the newbies. Should that happen, the pain could be felt most by USPS, which, according to consultancy MWPVL International, handled about 62 percent of Amazon's parcels last year. According to Majors of Susquehanna, USPS stands to lose about $550 million in annual revenue should Amazon divert one-third of its last-mile packages now moving under the USPS' "Parcel Select" direct-to-residence service.
Majors estimated the Amazon operation is realistically capable of shipping about 400,000 packages a day.
The analyst said the threat of shipment diversion is likely to place a cap on rate increases for Parcel Select. At the same time, President Donald Trump has ratcheted up the rhetoric about USPS' unprofitability, arguing that it loses money on every package tendered by Amazon. The claim is widely believed to be untrue.
UPS and FedEx could be hurt as well because the last mile is a highly profitable part of each enterprise, said Thomson of Buy Box. The price of UPS shares fell $2.50 a share today, while shares of FedEx dropped more than $3 a share. Amazon shares jumped nearly $41 a share to close at more than $1,701 a share.
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.