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How Autonomous Delivery Vehicles Are Redefining Last-Mile Logistics

Artificial Intelligence | By Jim Frazer • 10/16/2024

Autonomous delivery vehicles (ADVs) are bringing significant changes to last-mile logistics, an essential component of the supply chain. With the rising demand for faster and more cost-effective deliveries, ADVs are becoming a viable solution to a variety of logistical challenges. For professionals in logistics and supply chain management, understanding the implications of this technology is crucial, as it has the potential to fundamentally change the way goods are transported and delivered.

The Technology Behind Autonomous Delivery Vehicles

Autonomous delivery vehicles rely on a number of technologies to operate effectively:

Artificial Intelligence and Machine Learning: These systems allow ADVs to navigate streets, assess obstacles, and optimize delivery routes. Machine learning improves the vehicle’s performance by analyzing data from past deliveries and refining its operations.
LIDAR and Sensors: LIDAR (Light Detection and Ranging) and other sensors, such as cameras and radar, help ADVs detect their surroundings in real time. These technologies ensure that the vehicle can avoid obstacles, follow traffic rules, and make decisions about its environment.
High-Precision GPS: Accurate navigation is essential for deliveries, and high-precision GPS systems ensure that ADVs reach the correct destination efficiently.
Cloud Computing: The data collected by ADVs is processed through cloud platforms, enabling real-time communication, route adjustments, and fleet management.
5G Connectivity: The speed and low latency of 5G networks allow ADVs to communicate with infrastructure and other vehicles in real time, improving safety and operational efficiency.
These technologies work together to create autonomous delivery systems that can manage the complexities of urban and suburban logistics.

Strategic Benefits

For companies that integrate autonomous delivery vehicles into their operations, benefits include:

Cost Savings: Autonomous vehicles reduce the reliance on human drivers, which can significantly lower labor costs. Additionally, many ADVs are battery powered, use of the electric vehicles leads to significantly lower fuel and maintenance expenses.
Operational Efficiency: ADVs can operate continuously, increasing the number of deliveries made in a shorter period. These vehicles also optimize routes, in near real-time, to minimize travel time and energy use, improving overall efficiency.
Environmental Impact: Many autonomous delivery vehicles are battery powered, thus reducing emissions compared to traditional fuel-powered vehicles. This contributes to a lower environmental footprint, particularly in urban areas where transportation-related air pollution is a concern.
Traffic and Congestion Management: ADVs, especially smaller models such as delivery robots, are better configured to navigate congested urban areas rather than traditional trucks. Drones, another form of ADVs, bypass road traffic entirely, further easing congestion.
Improved Delivery Accuracy and Customer Experience: Autonomous systems can provide accurate delivery windows and real-time tracking, which aligns with customer expectations for faster, more transparent delivery services.

Real-World Applications

Several companies have already started using autonomous delivery vehicles in practical scenarios:

Amazon has launched its “Amazon Scout” autonomous robot, which delivers packages to customers. Amazon is also testing drone-based deliveries through its “Prime Air” program.
Nuro has developed an autonomous vehicle designed for transporting groceries and small packages. Nuro’s vehicles are being evaluated by retailers such as Walmart and Kroger.
Starship Technologies operates fleets of delivery robots in various cities, handling deliveries for food, groceries, and parcels. These robots navigate sidewalks and make deliveries in short-radius urban areas.
FedEx and UPS are also exploring autonomous delivery technologies. FedEx has developed Roxo™, the FedEx SameDay Bot for local deliveries, while UPS has experimented with drone deliveries, particularly in rural locations.

These implementations demonstrate that autonomous delivery technology is not hypothetical but is being tested and used in real-world settings.

Challenges and Considerations

While the benefits of autonomous delivery vehicles are clear, several challenges must be addressed:

Regulatory Issues: Regulatory frameworks for autonomous vehicles vary across regions. There are continuing discussions around safety standards, liability, and operational guidelines. Companies need to work closely with regulators to navigate this evolving landscape.
Safety: Although the technology behind ADVs is improving, safety concerns remain, particularly in busy urban areas. Pedestrians, cyclists, and other road users need to be protected, and ADVs must be thoroughly assessed to ensure they can manage unexpected situations.
Workforce Impact: The deployment of ADVs may reduce the demand for human drivers, raising concerns about job displacement. Companies need to consider how to manage this transition, through workforce retraining or by creating new roles related to managing and maintaining autonomous fleets.

Future of Last-Mile Logistics

The use of autonomous delivery vehicles in last-mile logistics will continue to expand as the technology matures and regulatory barriers are addressed. Companies that adopt ADVs can expect reductions in operational costs, improvements in efficiency, and lower environmental impacts. However, integrating these systems will require careful planning, particularly regarding regulatory compliance and managing workforce changes.

As logistics companies assess long-term strategies, it is essential to consider how autonomous technology fits into their broader operations. In the future, ADVs will become an integral part of the logistics ecosystem, offering an interesting new way to address the challenges of last-mile delivery.

With the potential to reduce costs, improve efficiency, and mitigate environmental impacts, ADVs present a viable solution to many of the challenges currently facing the logistics industry. However, companies must also navigate regulatory hurdles and manage the impact on their workforce as they integrate this technology into their operations.

For industry professionals, the task is clear: understand the technology, assess the benefits, and plan for its implementation in a way that aligns with broader organizational goals. The future of logistics is increasingly automated, and companies that are prepared for this shift will be in a stronger position to compete and lead.

Watch Jim’s video on “How Autonomous Delivery Vehicles Are Redefining Last-Mile Logistics”, right here:

https://www.youtube.com/watch?v=jBgswAkxrM4

Amazon, FedEx, and UPS Prepare for the Post COVID World

Logistics Technologies | By Logistics Viewpoints Editorial Team • 05/20/2020

On Monday, my home state of Massachusetts announced the official details regarding the state’s four-phase plan to re-open the economy during the coronavirus pandemic. Phase 1 comes in a two-wave approach, with some business opening immediately and others opening on May 25. One group that found the approach disappointing is retailers. Many Massachusetts retailers see this plan as potentially too little too late. According to the new guidelines, nonessential retail stores will be allowed to open for curbside pickup, as well as remote fulfillment, on May 25. However, opening stores to the general public for browsing will be part of phase 2, which does not have a firm date as of now. With this announcement, e-commerce will continue to be vital for retailers looking to remain open. This will put added strain on Amazon, FedEx, and UPS to keep up with customer demands. But, the last two months, combined with the coming months will help each of these companies to succeed in the post COVID world.

E-Commerce and the Post COVID World

E-commerce is certainly booming right now as many brick and mortar retail locations remain shuttered. Nonessential retailers are beginning to open up across the country, but e-commerce is still seeing a surge. Amazon and Walmart have collectively hired nearly 500,000 employees to meet the growing needs of e-commerce fulfillment, notably in the warehouse and on the road. However, with the increase in e-commerce sales comes concerns over capacity constraints. In turn, many customers have seen long delays in order fulfillment.

These delays can also be attributed to supply chain networks being overwhelmed. The demand is outpacing the supply right now for capacity and picking volumes. Plus, for many retailers, there were planned delays for those items that were considered nonessential. However, now that the country has had a few months to adjust to the new normal, nonessential items are making their way back to the forefront of ordering queues. And companies are preparing for the reality of the post COVID world.

Amazon and the Post COVID World

Amazon saw an uptick in business from the beginning of the coronavirus pandemic. One of the biggest surges for Amazon was in online grocery orders. The demand became so extreme that the company was forced to stop accepting new Whole Foods delivery customers as it simply did not have the capacity to meet the demand.

Over the years Amazon has been building out its private logistics network, with a keen eye on moving past a reliance on FedEx and UPS for home deliveries. The coronavirus pandemic has seen the company’s private fleet grow. In fact, it seems that until recently, most of my Amazon orders were delivered by either FedEx or UPS. Now however, every order I get is delivered by an Amazon branded delivery truck, and I see them rolling through my neighborhood all day every day. By comparison, FedEx and UPS trucks have been seen less frequently, at least in my neighborhood that is. One of the concerns with ordering packages has been the social distancing aspect. And for delivery drivers, this is certainly a concern. Rather than collecting a signature or even knocking on my door to give me my package, Amazon drivers have been taking a picture of the item on my doorstep, which is then emailed to me as proof of delivery. For Amazon, and the rest of home deliveries, this seems like it will be a staple of the post COVID world.

One area of concern for Amazon was the long delivery timeframes customers were experiencing for nonessential items. This stemmed from the demand surge at the beginning of the coronavirus outbreak. However, the company has seen the light at the end of the tunnel in terms of delivery timeframes. Amazon has said that customers can expect the usual one and two-day delivery timeframes to return imminently and service levels will get back to normal. This is good news for both consumers and the company, as more and more consumers were beginning to look elsewhere for items they would normally order from Amazon. The company lifted restrictions on the amount of inventory that suppliers can send to its warehouses indicating that it is back to business as usual.

As part of its long-term post COVID world plans, Amazon showed a glimpse of a virus killing robot it is developing that would roll through grocery stores and distribution centers, using banks of ultraviolet light to kill viruses on surfaces. While the company has indicated that this is something they are working on for the future, it is safe to say that the product would be a welcome one for most retailers and manufacturers. And while the technology already exists, it is not surprising that Amazon is working on its own model.

FedEx and the Post COVID World

FedEx is also making plans to succeed in the post COVID world. One way to ensure delivery timeframes is to make sure that the logistics network is not overwhelmed. And sometimes to do this, companies need to pump the brakes. That is exactly what FedEx did recently to make sure it could deliver on customer expectations. As e-commerce demand surged, the company limited the number of items that retailers could ship from certain locations such as stores. These limits were only a temporary order, but they were specifically designed to make sure that the network did not get overwhelmed. It is this type of transparency that can go a long way.

The biggest news for FedEx for the post COVID world is its announcement of a new partnership with Microsoft. Just a few months ago FedEx canceled its partnership with Amazon, Microsoft’s biggest competitor when it comes to cloud services. Now, FedEx is teaming up with Microsoft on a multi-year partnership that combines FedEx’s logistics network with Microsoft’s cloud. The first service, FedEx Surround, will give real-time analytics into the supply chain and delivery. The offering will be available later this year and will collect data through FedEx’s IoT platform. This data will be analyzed using Microsoft’s technology services to help predict potential delivery disruptions due to weather, congestion, or other issues. This enables companies to re-route items and alert customers of potential delays.

FedEx is also hiring drivers to keep with the growing demand of e-commerce. According to FedEx CEO Frederick W. Smith, the company has been hiring about 4,000 drivers per week for its FedEx Ground unit. Assuming that e-commerce does not see a significant drop as brick and mortar retailers re-open, this is a step towards making sure that delivery timeframes can be met in a post COVID world. The bigger question is whether FedEx will have the warehouse capacity to keep up.

UPS and the POST COVID World

UPS has taken some steps recently that will align well with the post COVID world as well. As the interest and use cases grow for drone deliveries, UPS set up a program to deliver essential items during the pandemic. UPS will use drones to fill prescriptions for residents of The Villages in Florida, one of the country’s biggest retirement communities. The deliveries will come from a CVS store about a half mile away and will mark the first paid residential deliveries by UPS’s drone unit Flight Forward. The drones will drop the prescriptions to a central location, where a Flight Forward employee will ferry them by golf cart to homes. This program could be a model for future drone deliveries of essential items to at risk communities.

During the current pandemic, UPS has also expanded the use of its UPS My Choice program. UPS My Choice allows business and residential users to manage their delivery schedules by rerouting or rescheduling deliveries, get estimated and confirmed delivery windows, tracking and managing multiple packages at once, receiving real-time alerts, following deliveries on a map, leaving instructions for the driver, and routing packages to a UPS Access Point instead of home delivery. This program helps the consumer to get the package when and how they want in the most socially responsible manner possible.

On top of the My Choice program, UPS has also made changes to its signature requirements, which could certainly be the method of the future as well. The company has eased guidelines on the types of packages that need a signature. However, for those deliveries that do still require a signature, UPS is taking a novel approach. Drivers will leave a sticky note on the door before moving back a safe distance. Once the customer has signed the form, the driver will wait for the customer to leave and then retrieve the form. This could certainly be how signatures are handled in the new post COVID world.

Final Thought

The post COVID world will likely look a lot different than what we experienced just a few short months ago. As economies begin to open, restrictions abound and are likely to remain in place until a vaccine is created and administered across the country. In this post COVID world, the supply chain will continue to be a key cog in ensuring that the economy can function, and home deliveries will be the new normal for more and more of our retail needs. To that end, Amazon, FedEx, and UPS have put changes in place to deal with the changing nature of customer demands and interactions. These changes, which include drones, virus killing robots, private fleets, logistics partnerships, and more choices for customers have put each of these companies in a position to continue to thrive in the post COVID world. We will have to wait and see just what that world looks like though.

Amazon to Take On FedEx and UPS

Logistics Service Providers | By Steve Banker • 02/13/2017

The flying warehouse patent that Amazon recently announced is pie in the sky. Nor does much progress appear to being made toward drone deliveries. But the news that Amazon plans to build its first air cargo hub at Cincinnati/Northern Kentucky Airport is based on sound economics. When the 2-million-square-foot facility opens, it will reduce the company’s dependence on UPS and FedEx. But Amazon was already moving away from reliance on the parcel giants by giving an increasing share of its parcel business to lower cost regional providers. And many e-commerce shoppers have seen their orders delivered by the company’s fleet of private trucks.

Amazon has moved into the ocean freight business for similar reasons. Now, Amazon is taking greater control over shipments from China. Specifically, Amazon has started handling the shipment of goods from Chinese retailers that sell on its platform. For this line of business Amazon is acting as its own freight forwarder by reserving space on ships and clearing customs itself. This also reduced the fees it pays to outside logistics providers. So far, Amazon has helped ship 150 containers from China to the US.

The company plans to use this new air hub to house its current and future fleet of planes. It’s expected to cost Amazon over $1.5 billion which means this will be a highly automated facility, just as UPS’s and FedEx’s are. It is reported the company will initially employ 2,000 people, which means this hub will work at scale.

The Wall Street Journal reports that Amazon’s end goal is to deliver packages for itself and other retailers. When it comes to doing this for large retailers like Walmart or Target, this will never happen. Those companies see Amazon as their toughest competitor and will do nothing to help them achieve additional logistic efficiencies. But my ARC colleague Chris Cunnane has speculated that small retailers could find this an interesting service, “I feel like a lot of retailers sell through the Amazon marketplace. It could be an agreement where retailers get a prominent spot on Amazon’s search results in exchange for partnering around shipping. Who knows? At this point, every time I think Amazon can’t do something, they find a way to do it.”

UPS and Additive Manufacturing: Managing a Megatrend

Logistics Outsourcing | By Steve Banker • 11/21/2016

UPS Invests in a 3D Printing Firm to Learn

UPS actively monitors emerging technologies including 3D Printing. 3D Printing, also known as additive manufacturing, was not that interesting to UPS initially. But as industrial manufacturers began making components, not prototypes for R&D, but direct material components used in finished products, UPS began to become interested. In time, they realized that this could be a megatrend that could reshape the face of the logistics industry.

Alan Amling, a VP of Corporate Strategy at UPS, spoke about their journey to provide 3D Printing services at a SAP event for industry analysts in Atlanta on November 9th. UPS is a global leader in logistics, offering a broad range of solutions including transporting packages and freight; facilitating international trade, and various types of warehousing, consulting, and value added services. SAP, a leading provider of enterprise software, is an active partner with UPS in making this an economically viable service offering, in part by leveraging their Ariba sourcing network to make these types of suppliers easier for prospective customers to find and onboard.

The third party logistics (3PL) business is changing. There are a wider set of competitors than just other providers of logistics services. For example, IT companies like Uber have emerged; these are crowdsourcing companies that don’t actually own assets. When it comes to package delivery, density drives the parcel business. UPS looks at companies like Uber and wonders whether crowdsourcing could change the economics of their business.

UPS also sees a world in which cities are becoming increasingly dense. When ecommerce goes from 9 percent of retail to 30 percent, how feasible will it be to deliver all those packages? “If we want to be around another 100 years, Mr. Amling stated, “drones, crowdsourcing, and 3D printing are the megatrends we have to stay on top of.”

UPS is good at managing risks. But when it comes to these megatrends “it is not about managing risks, it is about managing uncertainties” according to Mr. Amling. Risk has known outcomes with attached probabilities. Uncertainties have unknown outcomes and thus there can be no knowledge of the probabilities associated with a particular outcome.

UPS’s strategic investment arm, the UPS Strategic Enterprise Fund, took a stake in a company called Fast Radius that provides 3D printing, CNC, and rapid injection molding services for industrial companies. “We did this,” Mr. Amling said, “just to learn about the potential of this technology.” Fast Radius is located in a facility owned by UPS in their Louisville air hub. A second Fast Radius production cell within a UPS facility will open in Singapore by the end of the year.

This sort of investment is not unusual for UPS. In order to learn about crowdsourcing, they made investments in the same day delivery startups Deliv and Shutl; and to learn about drones they invested in CyPhy Works.

This is a journey for UPS.

Additive manufacturing will certainly cut down on the warehousing space a company needs and frequently it will reduce their transportation spend as well. But UPS’s perspective is that this will happen, someone will bring this to market. “You don’t want to be the bug on the windshield,” Mr. Amling said, you want to be the windshield.” While this service line may reduce revenues in some areas, it adds and other solution to the set of logistics solutions they can provide.

Selling existing customers on an additive manufacturing service has been a challenge. Many of their customers expressed interest but did not want to be a pilot customer. Everyone UPS talked to was concerned about quality. As opposed to prototypes, where there is not an extensive certification process, the opposite is true for direct materials. One of SAP’s key contributions to this partnership is process knowledge around quality and supplier certification.

A printed component has different structural characteristics. A printed part might, in some cases, have a longer lifespan or superior performance, but it can never be considered an exact duplicate of a part produced by traditional manufacturing processes. Because of this, most of their initial eight beta customers are focused on less critical parts. An aerospace company, for example, is printing parts for the interior of the airplane.

These quality concerns mean that industrial manufacturers will never look to go with the 3D printing company that provides the lowest bid. “There will always be vigorous vetting,” Mr. Amling averred. And there will, for the foreseeable future, be limits on the production runs. “A company that needs a 1,000 parts” of some SKU “will not produce them with 3D printing.”

Because they are looking at smaller volume SKUs, this will in large part become part of their service parts logistics offering. For UPS’s customers this will allow them to print smaller quantities, more often, and closer to the point of use. Mr. Amling pointed out this will take “time, cost, and carbon” out of the customer’s supply chains. Customers that already use UPS to help manage their service network may find this service will reduce their costs. For UPS, it is another tool in their tool kit that they can use to provide value. “Today,” Mr. Amling said, there is not good solution for slow moving parts. There is now.”

Once an industrial manufacturer decides to do a pilot with UPS and Fast Radius, they send over a CAD file of the product. After that, an additional 2 to 3 hours of further engineering work are required to produce a more detailed CAD capable of driving a 3D Printer. The warehouse then needs to store the right materials to print the component.

UPS today is a key service parts logistics supplier to many customers. Mr. Amling pointed out that the new offering is “allowing us to have broader supply chain conversations” with customers and prospects and “to learn by doing.”

Is Amazon Building a First Mover Advantage in Logistics?

Logistics Service Providers | By Steve Banker • 06/06/2016

Amazon.com undoubtedly reaped first mover advantages in e-commerce. Amazon continues to steal market share from traditional retailers year after year. Many in the logistics and financial industries have noted with wonder that Amazon is not expected to be profitable. Financial analysts seem to reward them as a first mover that has created the kind of scale and network and technology platform that will create huge profits whenever Amazon decides to scale back the aggressive pace at which they make capital investments.

In recent years we have seen Amazon make giant investments in logistics assets. Are those investments aimed at making their traditional business more “profitable” or are they designed to turn Amazon into a leading logistics company? According to Jeff Bezos, who spoke at a technology conference last week, Amazon isn’t aiming to take over the last mile of delivery from UPS, FedEx, or the U.S. Postal Service. The goal is to “supplement it heavily,” to support peak season fulfillment.

Should teke Mr. Bezos at his word? If we didn’t know this already, one thing we’ve learned this election cycle is that CEOs (or politicians for that matter) don’t always speak the truth.

Does Amazon intend to compete as a last mile carrier?

Amazon launched an air cargo network from an air hub in Wilmington, Ohio that used to be the hub for DHL parcel before DHL exited the U.S. market.
It became public in December that Amazon had purchased thousands of 53 foot trailers.
The company is leasing 20 Boeing 767s at a cost of about $300,000 per month.

The sortation centers and the domestic transportation assets can help Amazon reduce its shipping losses, which are huge. Amazon reported $11 billion in shipping costs, but only garnered 6 and a half billion dollars in shipping fees from customers. In terms of their shipping costs, analysts from Cowen & Company estimate half of those costs are paid to UPS and FedEx. Amazon is creating its own hub and spoke parcel network to defer those costs.

When UPS and FedEx are used, their rules require a customer signature before packages can be delivered. This results in large numbers of failed deliveries, which are hugely expensive. Further, UPS and FedEx sortation centers tend to be located further outside of metro areas than the new Amazon fulfillment centers, which also increases costs.

Amazon’s investments in sortation centers, a hub and spoke plane network, and the enablement of long haul shipments between consolidation centers creates a miniature parcel network for the giant retailer. But this parcel network is nowhere close to the scale necessary to compete with FedEx or UPS. Finally, in the 2013 holiday season there were widespread reports of delivery failures. Beginning to build their own parcel network puts more control in Amazon’s own hands.

This should also make investors happy. Cowen & Company believes it would cost at least $20 billion to compete with a FedEx or UPS in last mile.

OK, so we should probably take Bezos at his word that he does not intend to compete in the last mile game. But what about as a 3PL providing warehousing and fulfillment services? Let’s review Amazon’s warehousing investments:

In 2009 Amazon had about 30 global fulfillment centers, they built over 100 more by the end of 2015. The company now has 125 million square feet of global warehousing.
Amazon has made huge investments in automation. The company spent $775 million to acquire Kiva Robots in 2012, now called Amazon Robotics. Amazon then sucked up all the production internally; Amazon has 30,000 of these robots in their fulfillment centers. They also have more traditional stationary robots for loading cases onto conveyors. And miles of conveyors in each fulfillment center.
While 90 percent of warehousing space is in their fulfillment centers, about 10 percent is in sortation centers and small metropolitan warehouses. There was one sortation center in 2013, by the end of the year there will be 23 accounting for 8 million square feet. Sortation centers don’t store inventory. Rather goods come in, are sorted by zip code, and then go out the same day. Similarly, Amazon had 7 small format warehouse in North America in 2013. Today there are 58.

Amazon has invested in Warehouse Automation

Is Amazon looking to compete with leading 3PLs? Well in a sense they already are. The company offers a service called Fulfillment by Amazon. However, this segment is small enough that it fits in the “Other” category in their financial reports. That makes the revenues of Fulfillment by Amazon $1 billion at most (and probably significantly smaller than that) last year out of total revenues of over $107 billion.

It is probable that the warehouse investments have little to do with a push into logistics and everything to do with growth. The rule of thumb is that ecommerce warehouses require three times more square feet to do the same volume of shipments as a traditional warehouses, so it’s not surprising that most of Amazon’s giant fulfillment centers are larger than a million square feet. Further, according to John Blackledge, an investment analyst at Cowen & Company, it takes three years for an Amazon warehouse to reach peak output.

Let’s take a quick look at their growth. From 2009 to 2015 they grew from $13 billion to $107 billion, a factor of 13. But the number of large warehouses increased only by a factor of four. It appears the large investment in Kiva has paid off. The increased productivity of their mega warehouses is amazing.

The large warehouse investments were needed largely to support growth, but partially to support improved service levels. In contrast, investments in smaller warehouses – Prime Now Warehouses – are all about improved service. These warehouses are being used to support quicker deliveries to Amazon customers. Prime Now is a service for Amazon Prime members that allows for one hour deliveries of daily essentials using a mobile app in select metro regions. Such quick deliveries would not be possible without inner city warehousing.

Finally, Amazon is dipping its toes into international freight brokerage. But without going into too much analysis, this also from our point of view is aimed at reducing costs of bringing goods over from Asia that they intend to sell on their web site, not at making them a competitor to the freight forwarding industry.

In conclusion, while Amazons investments in logistics assets have stoked fears among 3PLs and carriers that they may be seeking to compete with them, this seems unlikely. That does not mean Amazon is not affecting the logistics industry. There are certainly reports that Amazon is driving up wages for warehouse workers in the markets where they build warehouses; and bringing parcel shipping in-house will effect last mile carriers’ revenues to a certain degree (but less than you might think). But for now it is really brick and mortar retailers who continue to have the most to fear from Amazon’s ongoing logistics investments.

This Week in Logistics News (October 24 – 30)

This Week in News | By Logistics Viewpoints Editorial Team • 10/30/2015

Tomorrow is Halloween. Pumpkins have been carved, pumpkin seeds have been roasted, candy has been bought (and opened, eaten, and more has been bought), and costumes have been purchased or made. And tomorrow, children across the land will go door to door asking for candy, while dressed in these scary, funny, cute, or ridiculous costumes. It’s certainly one of my favorite holidays of the year. But there is so much planning that goes into the holiday, especially when you look at the supply chain implications of pop-up Halloween stores. They run for a month and a half at most, and disappear on November 1. So many costumes and accessories to ship around the country, with anything leftover to be put in storage or sold at discount prices. It’s actually mind boggling to think of all the effort and planning that goes into a theme store like this. That’s why I prefer to sit back and just enjoy the day.

And now, on to the news.

Wal-Mart is jumping on the drone craze, becoming the latest retailer to ask permission to use drones for customer deliveries. The retailer applied to the Federal Aviation Administration (FAA) for an exemption from current regulations to make deliveries to customers in its parking lots and at customers’ homes. Wal-Mart is also hoping to use drones to check on buildings, warehouses, and DC’s. This aspect of the request makes sense as surveillance equipment cannot see these buildings from all angles, which is something a drone could fix.

UPS announced rate increases will take effect January 2, including the second boost this year to its fuel surcharge and a near-doubling—to $110 from $57.50—of the fee to deliver oversize items, such as mattresses and patio furniture. The company’s new round of rate increases includes a fee to help make up for cybershopping sites and big-box retailers’ sharing of generous shipping discounts with vendors. This will be done through a move that charges for third-party billing. This new fee also will affect retailers that allow vendors to use the discounts to ship directly to consumers—skipping the middleman—or direct goods to their own shelves for restocking.

Best Buy has announced that it will offer free shipping on online orders from November 1 through January 2. This means the company is waiving the $35 minimum threshold to receive free shipping. For many consumers, this sounds like great news. However, how many orders will this truly affect? The home electronics retailer sells a wide array of goods, but the majority of those items, especially big ticket items, would already qualify for free shipping. The company is betting on the fact that a perceived discount will bring in customers.

The carrier handling Amazon’s same-day delivery services has been hit with a lawsuit by California truckers who claim the company has misclassified them as contractors. By not classifying them as employees, the suit claims they are thereby denying them wages and benefits. Four truck operators filed the class action litigation earlier this month on behalf of themselves and hundreds of other delivery drivers employed as part of Amazon’s Prime Now service. With Prime Now set to expand and put the pressure on competing retailers to meet same day delivery expectations, this lawsuit could potentially derail plans.

Doorman is coming to Chicago. The startup is aiming to eliminate the problem of consumers missing deliveries. Basically, the company allows consumers to schedule their own deliveries, as late as midnight. Instead of taking delivery whenever the shipper arrives, Doorman users provide an online retailer with their personal “Doorman address” (a location in the Doorman warehouse). The company then signs for you and holds the package until you’re ready to receive it. Users are alerted through a notification in the Doorman app, and can schedule their delivery from 6 PM to midnight, 7 days a week. The company is now live in Chicago and will be live in New York soon. It is certainly an interesting business plan for congested cities, allowing consumers to schedule a pick-up time instead of having packages left on their doorsteps.

The country’s average at-pump diesel price dropped another 3.3 cents during the week ending Monday, Oct. 26, according to the Department of Energy’s weekly report. The average price of a gallon of on-highway diesel is now $2.498. Prices dropped in all regions across the nation except California, which saw a slight increase of five-tenths of a cent. The most expensive diesel in the U.S. can be found in California at $2.813 per gallon, followed by the Central Atlantic region at $2.62 per gallon. The cheapest fuel can be found in the Gulf Coast region at $2.299 per gallon, followed by the Lower Atlantic at $2.396 per gallon.

As I wrote about in last Wednesday’s column, both UPS and FedEx are getting ready for the holiday rush by hiring a combined 150,000 seasonal employees. This week, both companies released their holiday forecasts. UPS expects 630 million packages during the holiday season, with its busiest day expected to be December 22, when it will deliver an estimated 36 million packages. FedEx expects to handle 317 million, an increase of 12.4 percent over the previous year. Between the two companies, that is almost 1 billion packages to be delivered during the holiday season – or about a quarter of the packages that Santa will deliver on Christmas Eve alone.

That’s all for this week. Enjoy the weekend, trick or treating, and the song of the week, Thriller by Michael Jackson.

A complete analysis of logistics trends, technologies, and services

E-Commerce and the Post COVID World

Amazon and the Post COVID World

FedEx and the Post COVID World

UPS and the POST COVID World

Final Thought

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