Supply Chain by the Numbers

- June 13, 2019 -

  Supply Chain by the Numbers for June 13, 2019

Amazon Expanding Its Distribution Robot Portfolio; China Makes more Moves on Arctic Silk Road; FedEx Express Says Goodbye to Amazon; China is Cooking Its Economic Books, Research Firm Says



That's about how many new "Pegasus" mobile robots Amazon has deployed at a Denver area sortation center (postal sorting), as announced by Amazon Robotics VP Brad Porter at a new Amazon conference in Las Vegas last week. The robot is a smart AGV that has a short piece of conveyor belt on its top. Cartons or envelopes that have been packed and are ready for shipping are placed onto the belt. The robots then travel a significant distance, along what a worker in an accompanying video calls the "robot highway," to a chute, at which point the belt is activated to move the carton or envelop into the chute and then on to a shipping trailer. The Amazon robot is similar in design to a robot from India-based GreyOrange that was on display at the ProMat conference in Chicago in April. GreyOrange told SCDigest at the show that it's version of this robot had been deployed at a few hubs of major parcel carriers. Pegasus deployment started in the Denver facility in October 2018, and Amazon plans to continue rolling out the program in other US sortation centers in 2019. The robotic process is monitored by an Amazon employees in a new job position called the "flow control specialist."



That's how many ice-breaking liquefied natural gas tankers that will be operated soon by Russian tanker carrier PAO Sovcomflot to move natural gas from Siberia to Western and Asian markets across the Arctic Sea, in a new deal just announced by China and Russia. The LNG will be shipped from Russia's massive Yamal complex along the northern coast of central Siberia to destinations in Northern Europe, Japan, South Korea and China. China Shipping LNG Investment Co, part of state-owned Cosco shipping, will operate another nine such vessels. The agreement comes a year after Beijing released its first Arctic policy white paper in which it said it said it would encourage investment across the northern sea route and conduct commercial sailings that would be part of a "Polar Silk Road." Although the Arctic Sea is thousands of miles from China's northernmost port, the country wants the northern sea route to be part of its Belt and Road Initiative, an investment program worth trillions of dollars and intended to connect China and Europe through sea, rail and road networks.


$850 Million

That's about how much in annual revenue FedEx will be giving up, when end its relationship with Amazon for express deliveries when the contact expires at the end of June. FedEx will however continue to handle some international and regular ground shipments for Amazon. In a press release, FedEx noted is not FedEx's largest customer, representing less than 1.3% of total FedEx revenue in 2018. However, one UBS analyst estimates Amazon is a much larger 5.4% of its US Express business. FedEx appears to be focus on serving the broader ecommerce market beyond Amazon. Conversely, Morgan Stanley estimates Amazon makes up about 10% of revenue and 15% to 20% of volume at UPS. The relationship between the two companies supposedly soured about three years ago when Amazon demanded improved discounts from both UPS and FedEx. UPS said OK, FedEx said no. "We believe Amazon is one of FedEx's least profitable customers on a margin basis and that the decision implies that Amazon would not agree to financial terms that would meet FedEx's needs," said analyst Jonathon Root of Moody's. Kevin Sterling, an analyst at Seaport Global, said FedEx will ultimately benefit from ending the contract as it can grow its market share with smaller ecommerce operations and "not be beholden to Amazon." A brave move by FedEx indeed.



That was the level of real Q1 economic growth in China, according to estimates from Enodo Economics. That compares to the much higher 5.6% number officially reported by the central government. The US Federal Reserve recently warned that since China supposedly transitioned from a communist command economy in 1993, "Cooking the Books" by falsifying provincial level data continues to be a common problem due to a lack of "political independence." China's official Xinhua News reported the supposed 5.6% growth was "propelled by the country's fiscal stimulus as well as energetic reform and opening-up." But Diana Choyleva of Enodo Economics says plunging Chinese exports are now threatening jobs and the economy – partly the result of US tariffs. Enodo calculates that China has seen virtually zero real growth of exports since President Trump took office and exports suffered a -2% decline in the first quarter. To offset stagnant exports since 2016, China has been spiking domestic consumption with what Enodo calls "old-style stimulus to prop up the economy."

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