This Week in Logistics News (February 2-6, 2015)

By Adrian Gonzalez

Lots of news to get to this week, so let’s go straight to it.

Back in November 2013, Amazon kicked off the drone frenzy with its Amazon Prime Air announcement, and since then, Google, DHL, UPS, and others have launched their own research efforts and pilot tests. The latest entrant: Alibaba. According to Mashable, “Alibaba, the Chinese e-commerce giant, has begun testing drones for one-hour deliveries in several cities across China as part of a three-day-long promotional campaign.” Of course, you can’t make an announcement about drones without also making a video to go with it, and so here it is:

Although much more work is required on the technology side to make drone delivery a reality, it’s clear that the technology is far outpacing the regulatory changes required. But progress is being made on that front too, albeit slowly. The FAA announced this week that it granted “eight more regulatory exemptions for commercial use of unmanned aircraft systems (UAS) operations, bringing the total number of exemption grants to 24.” But Amazon and others focused on e-commerce applications are still waiting for the FAA to approve their petitions for exemptions, which likely won’t come until the end of this year at the earliest. Stay tuned.

Drones have a cousin on the ground — driverless cars — and developments are ongoing on that front too, with Uber announcing this week that it has formed a strategic partnership with Carnegie Mellon University (CMU) that includes “the creation of the Uber Advanced Technologies Center in Pittsburgh, near the CMU campus. The center will focus on the development of key long-term technologies [including autonomous driving technology] that advance Uber’s mission of bringing safe, reliable transportation to everyone, everywhere.”

Last year, Uber’s CEO Travis Kalanick said at a conference, “Look, [driverless cars] is the way the world is going. If Uber doesn’t go there, it’s not going to exist either way.” So Uber is moving into Google’s turf a bit (and that of the automakers, who are also investing heavily in driverless cars), and Google is apparently looking to move into Uber’s turf too, with reports the company is testing a ride-sharing app. It doesn’t take much for partners to quickly become competitors in this fast-paced market.

I’ll keep saying it: delivery is becoming a competitive weapon for companies, especially those aiming to provide same-day and local delivery services for customers. Another data point this week: GrubHub announced that it has acquired DiningIn and signed an agreement to acquire Restaurants on the Run. According to Fortune, “The two deals are worth approximately $80 million, and mean that GrubHub will be executing deliveries for nearly 3,000 restaurants in around one dozen U.S. metro markets…In short, GrubHub wants to corner the restaurant delivery business. It already offers infrastructure products that live inside the restaurant (OrderHub) and for delivery drivers (DeliveryHub), and believes that using its own drivers will make the automation easier, and make the customer experience better [emphasis mine].”

As I wrote last year, and again earlier this week, managing the end-customer experience is the most critical factor in last-mile delivery, which is a key reason why GrubHub made these acquisitions. But as Rob Howard from Grand Junction wrote in a recent guest commentary, maybe there’s an alternative approach: the use of driver networks that support multiple service providers. The bottom line is that we’re going to see a lot more activity in this space in the weeks and months ahead.

Finally, there are more than 20 cargo ships anchored at the ports of Los Angeles and Long Beach waiting to be unloaded. According to news reports, some ships have been anchored for more than two weeks, and once they get a berth, it is taking as much as 8 days to unload. Depending on who you believe, the ILWU and PMA are either very close to announcing an agreement or they’re nowhere near an agreement and the ports will shut down within days. While this labor dispute is certainly causing headaches for many supply chains today, the longer-term issue is even bigger: the lack of capacity in the entire system, which includes truck and rail capacity, to keep up with the growing volume of container imports. I’ll address this topic in a future post.

And with that, have a happy weekend!

Song of the Week: “Tired Pony” by Dead American Writers