This Week in Logistics News (July 27-31, 2015)

“I can’t believe I have a 45 year old son,” my mom says to me yesterday. It’s my birthday on Sunday and she came from Connecticut to spend a few days with me and the family. “I can’t believe I have a 67 year old mother,” was my response back, and I kissed her cheek and brought her overnight bag upstairs.

I’m taking the day off from work today, heading to Boston with my mom and my wife and kids, and we’re just going to pass the day in the city. I’m sure we’ll get some ice cream along the way, maybe ride the Swan Boats. We’ll walk, and walk some more, pretend we’re tourists for the day, and when night falls and we’re back at home, tired and in bed, “I’ll fall asleep counting my blessings (instead of sheep).”

Moving on to this week’s supply chain and logistics news…

Well, it’s official: UPS is acquiring Coyote Logistics for $1.8 billion. Here are some details from the press release:

“The brokered full-truckload freight segment is a high growth market and we expect it will continue to outpace other transportation segments,” said David Abney, UPS Chief Executive Officer. “This high quality acquisition significantly increases UPS full-truckload scale and we are uniquely positioned to take advantage of exciting new revenue growth and synergy opportunities.”

Coyote arranges customers’ freight shipments on available trucking capacity contracted to members of its large carrier network, numbering more than 35,000 trucking companies.  Coyote has experienced very rapid revenue growth since inception and has built extensive relationships with a broad customer base.  The company enjoys strong market positions among food and beverage, and consumer goods customers, as well as paper and packaging, industrial and retail segments.  Following the acquisition and integration of Access America Transport to its network last year, Coyote added industry leading strength in flatbed serviced segments such as heavy equipment and construction.

During the peak holiday shipping season, UPS often supplements its fleet with contract transportation providers to meet customer demand.  Coyote has played a growing role in supporting UPS peak operations over the past few years and the company expects to leverage Coyote’s carrier network even further for this purpose in the future.

As I said last week when news of this pending deal first broke, this acquisition demonstrates that there is plenty of money and interest swirling in the 3PL industry for more $1B+ transactions in the weeks and months ahead. For related commentary, see Is the 3PL Industry Becoming Barbell Shaped? and Convergence is the Word for 3PLs.

I commented earlier this week about the Descartes-SAP partnership, so check out the post if you missed it: Software is Not Enough: SAP and Descartes Partner on TMS Connectivity.

With so many consumers buying drones (the two leading makers have sold more than three million units), and commercial use of drones inching closer to reality, how do you prevent chaos in the skies? That is the question on the minds of many, and this week, Amazon presented a white paper outlining its “position on the design, management and operations of the airspace for the safe and efficient integration of low-altitude small unmanned aircraft systems.”

Source: Amazon
Source: Amazon

Here is an excerpt from the paper:

In this proposed model:

  • Airspace below 200 feet, or the ‘Low-Speed Localized Traffic’ area, will be reserved for (1) terminal non-transit operations such as surveying, videography and inspection, and (2) operations for lesser-equipped vehicles, e.g. ones without sophisticated sense-and avoid (SAA) technology. Those lesser-equipped vehicles will not have access to certain airspace in this zone, such as over heavily-populated areas.
  • A ‘High-Speed Transit’ space, between 200 and 400 feet, will be designated for well equipped vehicles as determined by the relevant performance standards and rules.
  • The airspace between 400 and 500 feet will serve as a permanent ‘No Fly Zone’ in which sUAS operators will not be permitted to fly, except in emergencies.
  • Finally, this airspace model will also encompass ‘Predefined Low Risk Locations. Altitude and equipage restrictions in these locations will be established in advance by aviation authorities. These Predefined Low Risk Locations will include areas like designated Academy of Model Aeronautics airfields, where members will meet pre established parameters for altitude and equipage.

Amazon believes this segregated airspace model will enable safer overall operations by providing a framework where airspace access is tied to vehicle capability, and by buffering sUAS operations from current aviation operations.

Amazon also anticipates this model “will be refined over time, and will work in close collaboration with public and private industry on the development of an approach that is safe and efficient for all types of operations.” And that collaboration is already taking place. According to the Wall Street Journal article, “The Amazon vision incorporates much of a NASA plan for an automated drone-traffic management system, a project that has more than 100 other collaborators, including Google Inc. and Verizon Communications Inc.”

In short, while there are many hurdles to overcome to make drone delivery a reality, there is a lot of work going on right now to get over those hurdles as quickly as possible. For related commentary, see A Kitty Hawk Moment in Drone Delivery?

Well, one of the same-day delivery experiments is over. eBay shut down its eBay Now delivery service this week. As reported in CNET:

An eBay spokeswoman said in an interview that the company walked away from the delivery services after finding that same-day deliveries made more sense for items that customers would need quickly — like groceries or diapers — than for many of eBay’s primary offerings, such as collectibles, antiques and vintage clothing. Also, she added, these same-day delivery networks tended to exclude eBay’s core of smaller merchants, since many don’t have storefronts or warehouses. The move also allows eBay to step away from the highly competitive fast-delivery market, where Amazon, Google, Uber and startups including Deliv, Instacart and Postmates are fighting for retail partners and customers.

I’m sure there was another reason why eBay shut the service down: it was almost certainly losing money doing it, and now that PayPal has been split off, the company has to focus on driving profitable growth in its core products and services.

Solving the same-day delivery puzzle is a challenge for many retailers, as I discussed in a recent webcast presented by Quintiq (a Talking Logistics sponsor). I will share my takeaways from the webcast in a future post, but you can watch the archive on demand. Also, for related commentary, see Why Wait for a Future of Drones and Driverless Cars? How to Solve the Same-day Delivery Puzzle Today and Debunking the Myths of Same-Day Delivery (Or What Amazon Learned from a 90-Year-Old Distributor).

Finally, don’t be fooled by the headline. Yes, the Senate passed a long-term highway plan, but it likely won’t pass the House in its current form. And although it’s a 10 year plan, funding is only guaranteed for 3 years, using various funding gimmicks (see WSJ opinion article). The real news is that Congress kicked the can again, passing a 3-month funding bill, which President Obama is expected to sign today. Three more months of dysfunction, which will lead to another short-term fix, followed by more dysfunction…will this madness ever end?

And with that, have a happy weekend!

Song of the Week: “Can’t Keep Checking My Phone” by Unknown Mortal Orchestra