The Friday Report: March 9th, 2018

Amazon, Whole Foods and Last Mile Delivery

Amazon’s strategic vision with respect to solving its last mile delivery challenges recently moved into greater focus with an announcement regarding Whole Foods deliveries.  When Amazon purchased Whole Foods, it provided the e-commerce industry leader with real estate and a base of operations closer to consumers, enabling expedited delivery opportunities. In February, Amazon announced that Amazon Prime members in Austin, Dallas, Cincinnati and Virginia will be able to have groceries from Whole Foods delivered within two hours of order placement for free.  Items will include fresh meat, seafood, flowers and “most” stocked items in local Whole Foods outlets.

Amazon continues to build its last mile logistics capabilities and has been increasing its service levels without relying exclusively on last mile delivery partners such as UPS.  According to reports in Fortune and the Wall Street Journal, the new “Shipping with Amazon” (SWA) service will provide service by picking up packages from businesses and shipping them directly to consumers.

Delivery service will start in Los Angeles and expand from that point.  In re-engineering last mile logistics, Amazon is working toward alleviating some of the expense and inefficiency of the last mile of its supply chain.

Targeting E-commerce and Same Day Delivery

After a strong holiday season fueled partially by online sales, Target announced new initiatives geared to increase competitiveness with Amazon and Walmart.   To encourage integration of brick and mortar stores with e-commerce, Target has begun to offer free two-day shipping to customers who order a minimum of $35 of goods or who are at least paying for the order with a store credit card.  No membership is required.

Within the past year, Target purchased two logistics companies.   The first, Grand Junction, is an information technology company that has developed software focused on improving the speed and efficiency of retail deliveries.   Grand Junction connects retailers and distributors with a network of over 700 carriers across North America.   The second, Shipt, is a delivery service with 20,000 “shoppers” who travel to stores, retrieve items and then make deliveries.

Supply Chain Disruption:  KFC’s Great Chicken Crisis

Fried chicken lovers, you can again flock to Kentucky Fried Chicken in the UK.  97% of the 900 UK Kentucky Fried Chicken (KFC) locations are open for business again after a major supply chain disruption caused a shutdown of hundreds of store locations.  Parcel service DHL, a unit of Germany’s Deutsche Post AG had been hired to handle the food deliveries after winning the tender in 2017.  The delivery contract was switched from Bidvest Logistics to DHL on February 14h and delivery problems began shortly thereafter.  The logistics debacle began with a difference in strategy.  DHL operates a single warehouse in Rugby as compared with six warehouses used by Bidvest Logistics.  On February 14th, a seven-vehicle collision near Rugby caused extensive traffic jams that prevented chicken deliveries.

KFC began to shut down restaurants on February 16th due to the chicken shortage.  By February 18th, only 266 of 870 restaurants in the UK and Ireland were open.  Unfortunately, the initial accident happened at an especially inauspicious moment.  Challenges in dealing with a new logistics provider, new warehouse, new IT system, new logistics arrangements, demand and other factors combined to create a “perfect storm”. An examination of the factors that combined to create the supply chain disruption revealed problems with sustainability, waste and lack of adequate contingency planning.