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Sent Items #106: Sunday, November 15, 2020

Hi All!

With the election now (mostly) in our rear-view mirror, Q4 focus returns to the Triple C: Cyber Week, Christmas, Coronavirus. 

11 days to Thanksgiving

40 days to Christmas

Relatedly, a reminder for those of you who ship UPS, effective today, Nov 15, peak season surcharges are increasing further. You can find more info in this one-pager as well as below:

UPS Ground Residential and SurePost Peak Surcharge increases from $0.30/pkg to $1-$3/pkg, and UPS Air Residential Peak Surcharge becomes effective on November 15 and will range from $2-$4 during the Peak Period (both subject to weekly volume thresholds and qualifying criteria).

As a reminder, you can find my suggested holiday cutoffs in this google doc and screenshot below:

I should have another issue sent right before Thanksgiving so I’ll hold my wishes until then.

- Matt

Smaller Is Big in New E-Commerce Warehouses - WSJ

  • Micro-fulfillment is aimed at speeding up the delivery of goods to consumers in cities through operations that pack large numbers of products into tight, urban spaces. The sites are far smaller than the typical sprawling, labor-intensive distribution centers in remote industrial parks, and they are becoming a new focus for retailers adjusting to the changes in consumer markets. 

  • By squeezing those operations into urban warehouses and the backs of stores, businesses hope to pare delivery times so online orders reach their destinations in hours, not days.

  • The site in Brooklyn, a former depot for New York City street vendors, is dominated by the 7,500-square-foot automated storage and retrieval system from U.S.-Israeli robotics provider Fabric, which also will run the facility when it goes live next year. Fabric said companies storing goods at the site should be able to get orders picked and packed in five minutes or less with only a handful of workers.

  • The market for automated grocery micro-fulfillment centers is estimated to be worth $1.2 billion by 2024. Texas-based grocer H-E-B is working with warehouse technology provider Swisslog Holding AG to install several automated micro-fulfillment systems that will support the chain’s curbside pickup and delivery business

  • The micro-fulfillment structures, from robotics company AutoStore, are essentially giant cubes packed with bins that sit on atop one another, with the most commonly selected items on top for faster access. Robots travel across the top of the cube, digging out bins and delivering them to stations where workers assemble the orders.

  • Non-grocery retailers have been slower to embrace the concept, industry experts say. One exception is Nordstrom who, last fall, installed robotics systems at two California warehouses to sort outbound parcels and store and retrieve inventory vertically. The automation takes up less space than traditional distribution and reduces the number of steps human workers take.

Amazon could launch third-party delivery service in U.S. by 2021, Morgan Stanley says - DC Velocity

  • Amazon's in-house parcel delivery arm is on track to be roughly the same size as FedEx in the U.S. by 2020 and as big as UPS by 2022.

  • The Amazon Logistics division is riding a wave of huge parcel sector growth, compressing three years of predicted growth into a six-month period.

  • Amazon is currently stocking that network purely with its own packages, handling increasing volumes of deliveries through its in-house capabilities as opposed to paying FedEx, UPS, or the U.S. Postal Service to carry them. But as its internal logistics capabilities grow, analysts predict that Amazon will likely launch a third-party delivery service as soon as 2021.

  • Amazon already launched a “logistics as a service” arm in the UK back in May, and will likely follow a similar pattern in the U.S. once the country begins to emerge from pandemic restrictions.

  • Analysts believe that back in December of last year, Amazon was moving about half its own packages in-house. That was double a year before that and there are a bunch of industry reports pointing to Amazon moving about two-thirds of its own volume in-house by July/August of this year.

  • Amazon’s expansion comes as parcel volumes have surpassed 100 billion worldwide and carriers such as UPS, FedEx, and USPS are straining to find enough capacity to keep up. 

  • In 2020, Morgan Stanley’s Internet team expects e-commerce volumes to be up over 40% [year-over-year] coming off a mid-teens steady growth rate over the past 4 years,” Shanker said. That growth rate will subside as people emerge from pandemic lockdowns and return to work, school, and brick and mortar stores. But a softer growth rate in business-to-consumer shipments will likely be supplemented by a return to higher business-to-business volumes as stores re-stock, so total volumes may remain about the same.

  • You can find the video here.

DHL executives offer up peak season plans and prospects - Logistics Management

  • DHL Express has already experienced unprecedented demand this year—with growth numbers in the 50% range. Heading in to peak season again, they’re predicting 50% growth on inbound, 30% on outbound.

  • DHL expects December 21 to be DHL’s peak delivery day, stating that it will represent a 30% increase in pick-up and delivery compared to a typical peak, with Black Friday and Cyber Monday pegged to be up 45% annually.

  • As for how DHL Express is prepared for peak season, in addition to owning its own fleet, facilities, and resources, it also has brought in four additional Boeing 777’s, with plans for two more, coupled with changes to its network to continue to provide service to the 220 countries and territories, in which it has operations.

  • Meanwhile, DHL eCommerce has seen more than 50% growth annually while expecting a surge of more than 50% during the busiest peak week. They have opened six annex facilities to give spillover capacity in Dallas Fort Worth, Atlanta, LA, NYC Chicago and Phoenix.

Walmart Adding ‘Pop-Up’ Centers for Online Holiday Sales - WSJ

  • Walmart is placing “pop-up” e-commerce fulfillment centers inside dozens of its regional distribution facilities.

  • The 42 sites will hold fast-moving items in sections of warehouses that are traditionally used to ship pallets of goods to Walmart stores. The network of pop-up sites will ship up to 30% of Walmart’s online holiday volume.

  • Walmart can use its trucks to move online orders from the pop-up sites to stores before handing them off for last-mile delivery, instead of shipping parcels from its big fulfillment centers through UPS and FedEx.

  • Walmart is hiring more than 20,000 seasonal workers at e-commerce facilities. Those numbers include workers at the pop-up sites, which will also use existing regional distribution center staff.

  • Walmart developed software to synchronize logistics systems for the stores with e-commerce systems and to integrate with the third-party carriers picking up loads from the sites. It also pushed out a warehouse management app that employees can use on their smartphones to pick orders.

What’s Next by Rick Watson: Five Reasons Why Amazon Logistics is on the Rise in North America - RMW Commerce

  • Here’s a really great piece by a friend detailing what he thinks to be Amazon’s true ambitions in logistics. He spells out the following.

  • Amazon has already launched as an independent shipping carrier in the UK.

  • Amazon has recently purchased a $1.5B air hub in Northern Kentucky, set to launch in 2021.

  • USPS is especially vulnerable in the next 2-3 years, and UPS in the next 5-10 years.

  • Amazon Logistics detractors don’t understand the power of marginal cost.

  • Amazon has a huge stick and booster in its own growth — it controls the seller performance standards as well.

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© 2020 Second Marathon Consulting, LLC
Matthew Hertz is the founder of Second Marathon.

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