Above the Fold: Supply Chain Logistics News (December 6, 2019)

It’s one of those mornings where I look out the window, see the snow, the barren trees, the colorless sky and…


So I move on.

Here’s the supply chain and logistics news that caught my attention this week:

Who Needs Drones When We Have Bikes

My family’s bodega in Brooklyn had a bicycle with a large metal compartment in the front. My cousins and I would deliver groceries around the neighborhood using that bike (we would also give each other rides in it). This was back in the 1970s.

It’s back to the future now, as bikes make a comeback as an ideal transportation mode for making deliveries in congested cities. As reported by the New York Times, “New York will allow Amazon, DHL and UPS to park cargo bikes in commercial loading zones as a way to get some trucks off the city’s gridlocked streets.” Here are some details from the article:

As many as 100 pedal-assisted cargo bikes operated by Amazon, UPS and DHL will be allowed to park in hundreds of existing commercial loading areas that are typically reserved for trucks and vans. Unlike those vehicles, the bikes will not have to pay meters.

Smaller cargo bikes will also be allowed to park on wider sidewalks, and all the bikes can travel along the city’s growing network of more than 1,400 miles of bike lanes. The bikes will be concentrated in the most congested parts of Manhattan, from 60th Street south to the Battery.

Peter Harris, UPS’s international director of sustainability, said cargo bikes had worked best in densely packed city centers with lots of deliveries, when there is a well-developed bike network and a close partnership with city officials. “If you have all those things together, then there’s a very good chance a cycle operation will be successful,” he said.

Will cars, trucks, cargo bikes, cyclists, and pedestrians (as well as dogs, construction scaffolding, hot dog vendors, and garbage bags) be able coexist in harmony on NYC’s roads and sidewalks?

We might need drones after all.

Amazon’s Storage and Replenishment Service

As reported by Bloomberg, Amazon is testing a new inventory storage service “to help meet holiday demand and its next-day shipping pledge without overcrowding its warehouses or running out of products.” Here are some excerpts from the article:

The new service, Amazon Storage and Replenishment, lets its merchants stage inventory close to Amazon’s delivery operation so products can be quickly replenished, according to documents reviewed by Bloomberg. Amazon is trying out the program in Ontario, California, about 20 miles from its closest facilities and has plans to expand the program to other locations around the country, according to the documents.

Having spent billions of dollars building a sophisticated network of highly automated warehouses that use robots, conveyor belts and thousands of people to quickly pack and ship products, the company is now turning to a decidedly 20th-Century innovation: cheap warehouse space.

There is no “one-size-fits-all” approach to enabling next-day delivery, especially when doing so profitably remains a challenge. While other retailers can leverage their large network of stores as warehouses and fulfillment centers (see comment below about Target), Amazon has to explore other avenues beyond its own highly-automated distribution facilities to balance its service commitments and costs. Will leveraging existing third-party warehousing space be a short-term or long-term solution for Amazon?  Like all companies, what Amazon chooses to outsource versus keep/bring in-house will continue to evolve. 

In somewhat related news, “Target says it now sources 80% of its online orders from stores, not warehouses,” according to a Wall Street Journal article this week. “At the Brooklyn store around 80 workers handle internet orders, collecting products from shelves or putting items into boxes in the backroom for delivery.”

This raises a question for me: What does this trend of retailers fulfilling a majority of online orders from their stores, along with click-and-collect, mean for third-party logistics providers that offer e-commerce fulfillment services? I’m not sure, except that future growth will probably not come from the large brick-and-mortar retailers; it will come from small and mid-sized retailers, those that are online only or don’t have a large network of brick-and-mortar stores. 

 And with that, have a happy weekend!

Song of the Week: “One of Us” by Liam Gallagher