Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Amazon.com Inc. has begun the process of assembling a high-level executive team to lead the company's push to develop its own transportation network, according to a person familiar with its strategy and planned execution.
The person, who asked to remain anonymous, said Seattle-based Amazon will announce plans to launch its shipping infrastructure sometime in 2016, though no firm time period has been discussed. Amazon has retained one of the world's leading recruitment firms to identify senior executives within the small-package industry, the person said. The individual declined to disclose the name of the firm, saying it does not want its identity revealed at this time.
The individual was told that Amazon will do "whatever it takes to serve every community" in the United States. The online retailer and fulfillment provider's objective is to guarantee delivery within a 90-minute to two-hour window, the individual was told by top executives at the recruiting firm.
Amazon plans to operate the service with its own equipment and will supplement it with purchased transportation services. It currently uses the U.S. Postal Service, UPS Inc., and FedEx Corp., as well as regional parcel carriers when they are needed.
The individual said that Amazon plans to continue using Atlanta-based UPS, though UPS may be reluctant to continue handling large volumes, given that the two may soon be going head to head. Amazon's relationship with Memphis-based FedEx has lessened in recent years; in its fiscal year 2015 annual report, FedEx reported that average daily volume for its "SmartPost" product, where it aggregates large-scale volumes for customers and inducts the shipments deep into the USPS network for "last-mile" delivery to residences, declined 6 percent "due to the reduction in volume from a major customer." FedEx didn't identify the customer, but those following the industry believed it to be Amazon.
Kelly Cheeseman, an Amazon spokeswoman, declined comment.
Amazon's desire to penetrate the transportation sector is not new. In early 2014, DC Velocity reported that Amazon was looking at ways it could fulfill and distribute orders through its own network rather than continue to rely on FedEx and UPS. At the time, it was reported that Amazon had divided the nation into three segments based on population size: The top 40 markets, which comprise about half of the U.S. population; the next 60 largest areas, which account for about 17 percent of the population; and the remaining areas, which account for about one-third of the population. The story indicated that Amazon was moving rapidly to develop the network, but gave no timetable.
In 2014, Amazon generated nearly $89 billion in net sales, defined as sales after deducting the costs of returns, allowances for damaged and missing goods, and any other allowable discounts. Of the total, $55.4 billion was generated in North America and the balance from sales across the rest of the world. Amazon, which launched in July 1994 as an online bookseller, has built a massive business selling a multitude of merchandise on its website, and providing fulfillment services to small and midsize merchants that lack the size and resources to manage those functions in house. Much of Amazon's shipping revenue comes from businesses that use it as an online storefront and a de facto third-party logistics provider.
In a research note yesterday, Colin Sebastian, Internet analyst at investment firm Robert W. Baird and Co. Inc., estimated the global fulfillment market presents a $400- to $450-billion opportunity for Amazon. In the note, Sebastian said Amazon might be the only company with the density and scale to compete globally against established transport and logistics providers. It also has an investor base that is "historically tolerant of large-scale investment and low-margin revenues," Sebastian said, a reference to Amazon's inability to become sustainably profitable despite significant year-over-year increases in revenue.
Sebastian said that Amazon, which currently operates 165 fulfillment centers worldwide, is testing "last mile" deliveries of products that are not sold on its own website.
One reason that Amazon may want to take more control of its logistics is that its escalating shipping costs continue to outstrip its shipping revenue. Shipping costs exceeded $8.7 billion in 2014, up from $6.6 billion in 2013. Meanwhile, shipping revenue in 2014 did not quite reach $4.48 billion—which nevertheless was a 45-percent increase over 2013 levels, according to information in Amazon's 2014 annual report. Increases in Amazon's shipping costs and revenues are seen as byproducts of the growing demand for its services.
From 2012 to 2014, the company's shipping revenue nearly doubled, while net shipping costs—the ratio of revenue to expenses—rose $1.4 billion over that time. Shipping costs as a percentage of net sales hit 9.8 percent in 2014, up from 8.9 percent in 2013, according to the annual report. (The figures exclude shipping revenue from third-party sellers that do not use Amazon for fulfillment.)
Another factor may be Amazon's desire to control its own distribution. It was critical of UPS' and FedEx's performance during the 2013 critical peak holiday shipping period, when an avalanche of Amazon packages hit both carriers' air networks two and three days before Christmas, resulting in late deliveries of millions of holiday packages. UPS' system was considerably more impacted than FedEx's.
In early 2014, Amazon told UPS and FedEx that it would re-evaluate its shipping options following the 2013 holiday fiasco, even though several observers blamed the snafus on Amazon's unrealistic fulfillment expectations given its acceptance of so many last-minute orders from customers. Terrible mid-December weather in the important Dallas-Fort Worth market added to the mess by creating bottlenecks across UPS' network that took weeks to completely resolve.
In response, Amazon has deepened its relationship with USPS, considered the low-cost delivery provider in the U.S. USPS provides Amazon with Sunday deliveries, among other things. Amazon has begun erecting fulfillment centers closer to its end-delivery markets to cut transportation expenses and speed time in transit. It also has been inducting more of its own parcels into the USPS network for last-mile deliveries and to lessen its reliance on UPS and FedEx to aggregate its parcels and perform the same service in conjunction with the postal service.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.