This Week in Logistics News (February 5-9, 2018)

Our guinea pig Cow died this morning.

The kids named him Cow when he was born. He was a tiny little thing when he was born, smaller than the palm of your hand. I guess the kids envisioned him growing up big like his father Otis, but Cow ended up being the runt in the family, but with a cool, post punk hairstyle.

The kids said their goodbyes this morning before going to school. My youngest daughter took it the hardest, crying all through breakfast.

Now Cow rests in peace in a New Balance shoe box in our family room. What do you do with a deceased guinea pig?

While I think this through, here are the supply chain and logistics news that caught my attention this week:

Shipping with Amazon

This morning in the Wall Street Journal, Laura Stevens reports that “Amazon is preparing to launch a delivery service for businesses, positioning it to directly compete with United Parcel Service Inc. and FedEx Corp.” Here are some more details from the article:

Dubbed “Shipping with Amazon,” or SWA, the new service will entail the tech giant picking up packages from businesses and shipping them to consumers, according to people familiar with the matter.

Amazon expects to roll out the new delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website, according to the people. Amazon then aims to expand the service to more cities as soon as this year, some of the people say.

While the program is being piloted with the company’s third-party sellers, it is envisioned to eventually be opened to other businesses too, according to some of the people.

Is Amazon really attempting to compete directly with UPS and FedEx? It’s a question many in the industry have been debating for several years. I addressed this question a couple of years ago in Amazon: Disruptor or Distraction? and here’s my perspective on it:

Amazon wants to own and control the innovation cycle — from the front end of its operations (website) to its back end (order fulfillment, DC automation systems, and final delivery) — in a holistic and integrated manner. In essence, Amazon is taking the same “owning the ecosystem” strategy that Apple took in the computer industry. In short, I believe Amazon logistics strategy is a customer focused one: it’s not aiming to compete with entrenched players like UPS and FedEx (the capital costs required to match their networks would be too great); the company is investing in logistics not to deliver packages, but to keep raising the bar on delivering the best overall customer experience possible. (For related commentary, see Keeping Control: What 3PLs Must Convince Their Customers.)

As we saw again this year, the rapid growth of e-commerce is outpacing (and straining) the delivery networks of the incumbents. “This year, a cascade of online purchases the weekend after Thanksgiving swamped delivery companies,” reported The New York Times in December. “UPS had hired 95,000 seasonal workers, but that was not enough. Packages were delayed. Last Friday, thousands of workers around the country were told that they would have to work a sixth day.”

UPS announced a few weeks ago that it will spend “up to $7 billion this year to upgrade its delivery network, adding jumbo jets and automating facilities, as it tries to fix service issues that hurt profits during its latest quarter,” as reported by Paul Ziobro in the Wall Street Journal. “The network came under pressure during the past holiday season, as UPS delivered 762 million packages during the peak period, more than its initial forecast of 750 million.”

Can you imagine the pickle Amazon would be in today if it hadn’t invested in its own delivery capabilities years ago?

Simply put, “Shipping with Amazon” is less about competing with FedEx and UPS and more about Amazon continuing to take more direct control of the processes (and technologies) required to deliver the best customer experience possible.

P&G Redesigning Supply Chain Network

E-commerce coupled with more demanding delivery expectations from retailers — such as Walmart’s On-Time In-Full (OTIF) requirements — are forcing manufacturers to redesign their supply chain networks. P&G, for example, is undertaking “a multibillion-dollar effort to remake an antiquated and inefficient network of factories, warehouses and offices into a new model that gets goods to stores more quickly,” reports Sharon Terlep in the Wall Street Journal. According to the article:

P&G has consolidated hundreds of offices and warehouses across North America and set up six so-called mixing centers, where computer algorithms work with robots and humans to load trucks with the optimal mix of products to ship to retailers. Once complete, P&G said its new supply chain will enable 80% of U.S. production to reach stores within 24 hours.

As I wrote more than two years ago in Built for Yesterday’s Consumer: The Demise of Malls and Traditional Distribution Networks, “traditional distribution networks and facilities were originally designed to flow truckloads of products from large distribution centers to stores. Today, retailers and third-party logistics providers are changing their network designs and facilities to enable omni-channel fulfillment and faster delivery times.” Manufacturers like P&G are having to do the same too.

Can’t Get Enough of Blockchain?

Another week, another series of blockchain related news.

BNSF is the latest transportation (and first railroad) to join the Blockchain in Transportation Alliance (BiTA), an organization that is working on creating blockchain standards for the industry.

Meanwhile, as reported by BlockchainNews, “TBSx3, an Australian startup dedicated to combating the worldwide trade of life-threatening fake goods with blockchain-based technology, today announced partnerships with some of the largest names in the freight business, including DP World Australia and DB Schenker.” Here are some more details from the article:

Using blockchain architecture developed by TBSx3, the consortium aims to restore trust in global supply chains and protect the safety of consumers by combating the worldwide trade of harmful counterfeit goods, including food, wine and pharmaceuticals, said the statement. Through a mobile app that TBSx3 has developed, every link in the supply chain – manufacturers, distributors, transporters, customs officials, and consumers — can access the shared data on the blockchain-based platform, thus proving the authenticity of a product.

Unless, of course, the shared data is crappy, inaccurate data.

(See my recent comments on the dangers of viewing blockchain technology as a miracle cure for supply chain visibility.)

And with that, I’m out of space and time. Have a happy weekend!

Song of the Week: “Never Surrender” by Corey Hart