This Week in Logistics News (July 18-22, 2016)

1981: the year that Duran Duran, Depeche Mode, New Order, and R.E.M. all released their first singles. You can say 1981 was the year that New Wave/Alternative music had it’s coming out party, and I’ve been partying along ever since.

This past Sunday, I scratched “seeing Duran Duran in concert” off my bucket list. It was an awesome show and I’ve been hungry like the wolf ever since.

Now, if only The Smiths would get back together.

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

You have to give Amazon credit: the company kicked off all the hype and discussion about drone delivery more than 2.5 years ago with a segment on 60 Minutes right before the Christmas holidays, and it continues to push the envelope with its vision. Amazon was issued a patent for a “Multi-use unmanned aerial vehicle docking station system,” which as summarized in a USA Today article:

Instead of flying all the way to the customer’s home, the drones would instead wing their way towards the final destination but then stop at the nearest docking station along that path as they get low on charge.

These docking stations will be able to accommodate multiple drones and be located high up and out of the way on cell towers, light and power poles, church steeples, office buildings, parking decks and other vertical structures. They could also come with solar panels so they generate their own power.

There, a drone might tether itself down to flash charge and get the latest weather report and network update before continuing on. The package could also be handed off to a fully-charged drone that would would fly it a little closer to its final destination, performing the same hand-off in leaps of several miles, just as Pony Express riders at stations along the east-west route handed off mail and packages to a fresh rider and horse so there was no down time along the way.

The most interesting part of the patent description, however, is this section:

In still other examples, the system can comprise a package transfer system and/or a package locker storage system. As the name implies, the package transfer system can transfer packages from the UAV, to the platform, and then to a lower level (e.g., the ground level). In some examples, this can enable the UAV to deliver items to a user or a delivery person on the ground. In other words, in some examples, the UAV can deliver packages to the docking station and the package either can be picked-up there by the addressee or can be delivered to its final destination by a delivery person in a truck, car, on a scooter, or using other transportation means. The package transfer system can comprise, for example, a vacuum tube, dumbwaiter, elevator, or conveyor to transfer the package from the platform to the ground level without damage.  

Simply put, the vision that Amazon originally put forth of drones landing on your doorstep is being augmented (or replaced) by what I consider to be a more realistic operating model: drones delivering packages to stations where consumers can pick them up themselves (which is similar to DHL’s recent Parcelcopter demonstration) or where local couriers can pick them up for final mile delivery.

Again, I believe drones will become a transportation mode in the future, but when and how exactly remains to be seen.

On the technology front, yet another “Uber for trucking” startup has launched, this time in Brazil with backing from Goldman Sachs, Oscar Salazar (who was involved with Uber’s launch), and Valor Capital Group LLC. As reported in TechCrunch:

Brazil reportedly has an excess of between 300,000 and 350,000 vehicles, with trucks running empty 40 percent of the time, so the goal here is to reduce the number of empty trucks on the highway, increasing revenue for truckers and reducing costs for freight owners.

[CEO Federico Vega] explained that CargoX “operates as a transportation company with no assets”…He added that CargoX has a network of 150,000 trucks. In some cases, truckers only contact the company if, say, they’ve made a delivery and are looking for freight to take on their return trip. Other truckers get all their freight from the company — “in an ideal world,” he said, CargoX would work with more and more truckers in that exclusive capacity.

In other words, CargoX is aiming to be…a broker.

Finally, in case you missed the memo, more news this week underscoring the “softness” of the transportation market. Werner Enterprises and Swift Transportation both reported declines in net profit in Q2 2016 compared to the same period last year (43 percent and 15.8 percent, respectively). In a letter to shareholders, Werner wrote:

“Customers began to push harder for contractual rate decreases [in the second quarter]…During the recent contractual bid season, we chose to exit from certain contractual business that would have required significant contractual rate decreases for the next year, since we believe that this pricing is not sustainable and that freight market conditions will begin to show improvement during the next year.”

Based on Werner’s comments, it seems like some shippers have opted to squeeze carriers for better rates, and at least in Werner’s case, smart carriers are responding by walking away from unprofitable shippers.

And with that, have a happy weekend!

Song of the Week: “Planet Earth” by Duran Duran (their first single from 1981)