Supply Chain by the Numbers

- April 25, 2019 -

  Supply Chain by the Numbers for April 25, 2019

Google Parent Gets Jump on Amazon on Drones; UPS Spending Big on Parcel Network; Elon Musk Says Autonomous Taxis Here Soon; Kohl's Cozies Up to Amazon



That's about how many pounds of payload a delivery drone from Wing Aviation, a division of Alphabet Co., Google's parent, can carry. Why is that in the news? Because this week, the Federal Aviation Administration named Wing as officially the first operator to receive FAA approval to start delivering packages via drones. The company plans to begin routine deliveries of small consumer items in two rural communities in Virginia. Wing has been testing its delivery drone delivery system in Australia after first beginning testing back in 2014. Wave was part of the FAA's commercial drone testing program launched last year. Under the program, operators will not have to maintain line of site with the drones, required under current FAA rules. One operator can also only "fly" up to five drones at once. However, the drones can only fly in the daytime, and extensive process documentation will be needed, the FAA says. But it's a start.



That is how many parcels per hour can be sorted a new automated shipment hub opened in Salt Lake City by UPS. That according to an interview last week with UPS CEO David Abney. The facility was just opened this past November, and the throughput at the new facility is 10 times greater than a traditional mostly manual sorting facility, UPS says. A similar facility in the Atlanta is capable of processing 100,000 parcels per hour. By at least one measure, the automation is paying off. "[2018] was the best peak I've been involved in 10-plus years," Amazon manager Nate Branch says. "I've never seen a UPS facility run so clean and efficient during peak season." The new automated hub is just part of a massive $20 billion in investments the parcel giant is making to reduce costs and speed deliveries. UPS is also spending big on improving its Orion routing software, investing in software that forecasts and optimizes volumes across its huge network, and purchasing new Boeing 747 and 767 freighters to add air cargo capacity. UPS says it the investments will pay off – but one analyst says shareholders are expecting lots of savings. "When this capital plan is largely done, investors are expecting to be paid back in terms of a significant increase in share buybacks and/or dividends," Loop Capital Markets analyst Rick Paterson told Transport Topics magazine.



That's the percent of the fare electric car maker Tesla intends to take from what CEO Elon Musk says will be a new generation of autonomous cars providing taxi services – as soon as next year. In fact, Musk expects to start converting the company's electric cars into fully self-driving vehicles next year as part of an audacious plan to create a network of robotic taxis to compete against Uber and other ride-hailing services. Key to getting there, Musk says, is the company's development of a new computer chip that has 6 billion transistors and which Musk claims offers 21 times the performance of the Nvidia chips it was using before. Unlike most of those other companies, Tesla's cars won't come with the light beam sensors called Lidar that many industry experts consider to be essential equipment for robotic vehicles to navigate the road. Musk trashed Lidar as a "fool's errand" in a putdown of companies such as Google spin-off Waymo and General Motors' Cruise Automation that are including the light beam sensors in their systems. "They are going to dump Lidar," Musk assured investors and analysts gathered at Tesla's Palo Alto, Calif., office. Many in the auto industry, however, strongly disagree, while others say regulatory approvals for any self-driving car will take years.



That was the jump in the stock price of department store chain Kohl's after news it was expanding its test of accepting returns of products bought on to all 1150 of its US stores. Why were investors so bullish on the report? The arrangement drives foot traffic through Kohl's doors – and customers just might take some of their refund money and buy something else in store. In addition, Kohl's is likely getting fees from Amazon for the service. Amazon gains too, as it gets customers to bring returns to a limited number of known Kohl's addresses, instead of picking up returns at an endless number of home or office addresses, said Pete Madden, a director in the AlixPartners retail practice. "This likely saves Amazon money because customers are absorbing Amazon's transportation cost by doing the driving and Kohl's would be acting as Amazon's consolidator." The move may also give a kick to Amazon sales, as customers become more likely to buy due to the improved returns process. Kohl's stock price fell about 2% on the next day, but the 10% net jump certainly made shareholders happy.

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