This Week in Logistics News (April 22-26, 2019)

Have you seen the video of the chimpanzee using Instagram? Here it is in case you missed it:

Honestly, this depressed the heck out of me.

All of us, with smartphones in hand, swipe and click, swipe and click, mindlessly
turning into chimpanzees.


Swipe, click, this week’s supply chain and logistics news…

The First Drone Airline

Wing Aviation, LLC, a subsidiary of Google, became the first drone airline this week. As reported by Bloomberg:

[Wing Aviation became] the first drone operator to receive government approval as an airline, an important step that gives it the legal authority to begin dropping products to actual customers.

The subsidiary…now has the same certifications that smaller airlines receive from the U.S. Federal Aviation Administration and the Department of Transportation. It plans to begin routine deliveries of small consumer items in two rural communities in Virginia within months, the company said.

In order for Wing to operate over longer ranges and actually charge for the service, it needed to become a full-fledged air carrier.

Here’s a video of the drone in action:

This news follows last month’s announcement by UPS that it is collaborating with Matternet to deliver medical samples via unmanned drones at WakeMed’s flagship hospital and campus in the Raleigh, N.C.. Here are some details from the press release:

The program will utilize Matternet’s M2 quadcopter, which is powered by a rechargeable lithium-ion battery, and can carry medical payloads weighing up to about 5 lbs. over distances of up to 12.5 miles.

Throughout the WakeMed program, a medical professional will load a secure drone container with a medical sample or specimen – such as a blood sample – at one of WakeMed’s nearby facilities. The drone will fly along a predetermined flight path, monitored by a specially trained Remote Pilot-in-Command (RPIC), to a fixed landing pad at WakeMed’s main hospital and central pathology lab.

When it comes to drone deliveries, there’s still a lot of red tape to break through, as well as technological and social acceptance hurdles to overcome, but progress is being made nonetheless. And even though Amazon arguably kicked off the whole drone race with Jeff Bezos’ appearance on 60 Minutes back in November 2013, it’s companies like Wing Aviation and Matternet that are in the pole position today.  

For related commentary, see Drones – The Birth of a New Transportation Mode and Netflix Developing Original Series About Logistics Called “D is for Drones”.

One-day delivery for $800 million

Speaking of Amazon, the company reported a record $3.56 billion in quarterly profit this week. But it also warned that spending will pick up again this quarter, especially as it raises the bar yet again on delivery. As reported by the Wall Street Journal:

One of the coming costs is the $800 million the company has earmarked in the second quarter to shift its Prime free two-day shipping program into a free one-day delivery as it faces competition from big-box retailers. Mr. Olsavsky said Amazon would build out most of the logistical and fulfillment capacity through the year, but didn’t specify when the company plans to roll out the faster shipping.

Amazon offers one-day and two-hour shipping to Prime members for some products for a fee. The move would extend one-day shipping to far more products and ZIP Codes world-wide. Amazon has more than 100 million Prime members.

Amazon is going to spend about $8 per Prime member to make one-day delivery more broadly available. According to data from Consumer Intelligence Research Partners, Prime members spend $1,400 a year on Amazon vs. $600 for non-members. At least from that perspective, the math makes sense if the investment yields more Prime members.

Prime, with its free (and getting faster) delivery, remains one of Amazon’s biggest competitive weapons and the company continues to sharpen it. Walmart, Target, and the other big retailers are all responding in different ways, leveraging their existing stores as shipping or pick-up locations to reach customers faster. It’s the smaller and mid-sized retailers that are struggling to keep up, but that’s where third-party logistics providers are stepping up to help with services to help the “level the playing field” with Amazon, Walmart, and Target.

How long until the bar is raised again and same-day delivery becomes the standard? And how much will it cost?

For related commentary, see Amazon: Disruptor or Distraction?

And with that, have a happy weekend!

Song of the Week: “Missed Connection” by The Head and the Heart