Increasing speculation and reports indicate that Amazon may well be piloting its own air freight transportation services to accommodate needs for timely customer fulfillment.
Supply Chain Matters introduced the possibility of parcel delivery alternatives in our earlier September-October commentaries reflecting on the implications of parcel carriers FedEx and UPS again increasing rates and surcharges for both this year and for 2016.
An initial report of Amazon’s involvement in secretive air freight services came from a posting by Motherboard which referred to operation “Aerosmith” launched in September from an unknown corporation and run by Ohio-based aviation services provider Air Transport Services Group (ATSG). The report indicated that the unnamed company had leased four Boeing 767 air freight aircraft and was operating out of the Wilmington Air Park near Columbus Ohio, a former DHL air freight hub. According to the Motherboard commentary: “the airport has two large runways that can land aircraft as large as a 747, and hosts eight industrial facilities ranging from 74,000 square feet to 1.1 million square feet. An on-site administrative facility has 104,000 square feet of office space.”
Parcel carriers DHL, FedEx and UPS all denied to Motherboard that they were involved in “Aerosmith”.
Amazon provided the following statement to the online site: “We’ve long utilized air capacity through a variety of great partners to transport packages and we expect that to continue.” That statement was interpreted as not denying that the online e-tailer could be the unnamed ATSG customer.
The report was subsequently echoed by Business Insider and most recently, a published report from the Columbus Dispatch. Amazon founder and CEO Jeff Bezos is also an investor in Business Insider, and the fact that this online publisher echoed the Motherboard report without denial is an important data point. The latter Dispatch posting provides even more perspective by pointing out that in the past few months, Amazon has announced capital projects across Ohio amounting to more than $1 billion in capital investment. That includes two large-scale distribution centers in central Ohio, a wind farm in northwestern Ohio and three data centers in central Ohio. The global retailer already has existing customer fulfillment centers in Louisville Kentucky and Indianapolis Indiana, both of which are about a 3 hour drive from the Wilmington Air Park air freight facility.
Upon reading all of these reports and connecting the dots, Supply Chain Matters is of the view that there may well be substance to this building speculation that Amazon is piloting its own air freight capabilities. If this effort does come to fruition, it is far more meaningful than the currently hyped Amazon drone delivery effort. Several fully loaded 767 air freighters dedicated to Amazon customer delivery needs is significant and meaningful scale especially when considering the current hub to be located in close flying distance to major regions of U.S. population concentration. The UPS Worldport air hub is located near Louisville, adding more significance to potential strategic selection by Amazon.
This development will be important for retail industry supply chain teams to monitor over the coming weeks and months. Alibaba’s business model already includes the need for owned parcel logistics and transportation services across China removing the need for dependence on public carriers. Amazon has already invested in large-scale, high-volume package pre-sorting centers and an extension into dedicated air freight is a logical extension. If these investments turn out to provide far more cost-effective services than existing parcel carriers, then it’s a whole new ballgame.