This Week in Logistics News (September 25-29, 2017)

By Adrian Gonzalez

You know what might be more complex than supply chain management? The college application and financial aid process. We’re wading through it now with my oldest daughter who is a senior in high school. If you have to schedule multiple information sessions and webcasts to explain how this whole process works, like our high school has done, then I think it’s a clear sign that there are too many crooks, I mean cooks, in the kitchen.

(Public service announcement: If you’re in the same boat as I am, a reminder that the Free Application for Federal Student Aid – FAFSA becomes available this Sunday, October 1.)

I’m not there yet, but I’m wondering if adding a “College Tuition Surcharge” to my fees is common practice.

Moving on, here’s the supply chain and logistics news that caught my attention this week:

While Amazon gets the lion’s share of attention here in the United States — and it’s own branded trend (“The Amazon Effect”) — it’s important to recognize that Alibaba is another giant disruptive force in the industry. The company announced this week that it “has agreed to make an additional investment of RMB5.3 billion (US$807 million) to increase its ownership of Cainiao Smart Logistics Network Limited (“Cainiao”), the logistics affiliate of Alibaba.” But here’s the even bigger news, from the company’s press release:

Alibaba also announced its intention to invest RMB100 billion (US$15.2 billion) over the next five years to further strengthen its global logistics network that aims to realize its mission of fulfilling orders in China within 24 hours and within 72 hours anywhere in the world.

The additional investment of RMB100 billion (US$15.2 billion) over the next five years will be used to increase R&D in logistics data technology, as well as for development of smart warehousing, smart delivery and global logistics infrastructure, all of which are core to building the global logistics network of the future.

How many other companies have the ability to invest $15 billion in 5 years to enhance their logistics operations? Answer: very, very few.

I recently heard about a retailer that went to its board requesting several hundred million dollars to build out its distribution network in order to enable next-day delivery. The execs were laughed out of the room.

The main frustration I hear from many executives, especially from public companies, is that Amazon can do “whatever the hell it wants” (and lose a ton of money in the process) and Wall Street barely blinks. But if other retailers and companies were to make similar investments and miss analyst expectations for growth and profitability, their stock would get hammered. Simply put, they are damned if they do and damned if they don’t.

That said, delivery remains a competitive weapon and retailers like Target and Walmart continue to sharpen their swords. As reported by the Star Tribune:

Target is extending its next-day delivery of household essentials to eight more major markets, including New York, Los Angeles and Atlanta. In mid-October, when Target Restock expands to the San Francisco metro, the service will reach more than 70 million people in 11 major markets, or about one-fifth of the U.S. population, the company said Thursday.

Target Restock leverages Target’s store network to get digital orders packed and shipped swiftly. [It] allows online customers to pick from a list of 15,000 household items to fill a box, which is delivered the next day for $4.99. The products range from personal care and baby items to cleaning supplies. The weight limit is 45 pounds.

Meanwhile, as reported by the Chicago Tribune, Walmart is testing a delivery program in Silicon Valley “that would allow customers to use smart-home technology to remotely open the door for delivery workers and watch a livestream of the delivery by linking their phones with home security cameras.” I doubt many people will sign up for this service, but hey, what do I know, and if you’re Walmart, it doesn’t hurt to keep throwing stuff at the wall and see what sticks.

In related news, Daimler announced that “Mercedes-Benz Vans, US drone systems developer Matternet and Swiss online marketplace siroop have started a pilot project in Zurich to test an efficient van and drone-based system for on-demand delivery of e-commerce goods.” Here are some details from the press release:

During the course of the three-week pilot project, customers will be able to order selected products from online marketplace siroop that are suitable for transport by a Matternet drone, such as consumer electronics and other e-commerce items weighing up to two kilograms. Delivery will be made on the same day. The drones are loaded directly at the merchant and fly to one of two Mercedes-Benz Vito vans equipped with a precision landing technology. The van stops at one of four pre-defined points, called “rendezvous points”, within the city of Zurich, where the van driver takes possession of the product and delivers it to the customer, while the drone returns to the retailer. The entire logistics chain from order receipt to delivery to the customer will be timed and compared against conventional delivery methods to gain insights into the efficiency of the solution.

Add this to the list of drone delivery models being tested in the industry by Amazon, DHL, UPS, Google, and others. I believe drones will ultimately play a role in delivery — the open question is which drone delivery models and processes will succeed and which ones will fail.

Daimler also announced that it is “testing connected trucks in so called platooning operations on public roads in the US.” Here are more details from the press release:

Having started with successful trials on Daimler Trucks North America’s proving ground in Madras, Oregon, DTNA has received the appropriate permission from the regional regulatory body Oregon Department of Transportation (ODOT). In a first step called “pairing”, Daimler Trucks North America (DTNA) tests its platooning technology in two connected Freightliner New Cascadia truck trailer combinations.

With this initiative Daimler Trucks North America is reacting to an increasing customer interest in solutions for automated and connected driving in commercial transport. In a joint effort with fleet customers DTNA is working to understand how platooning technology may impact fleet operations (e.g. dispatch, logistics, driver training). In a joint effort with large fleet customers DTNA will test digitally connected trucks in everyday transport business.

For related commentary on platooning, see Driverless Trucks: Heading Somewhere or Nowhere Quickly?

And with that, I’m out of time and space today. I have some financial aid forms to fill out.

Have a happy weekend!

Song of the Week: “Until She Comes” by the Psychedelic Furs