#INTHEAIREVERYWHERE

Amazon’s ambitious supply chain infrastructure investments, which have seen it build up a formidable global network of warehouses, forwarding, delivery, and air freight capacity at breakneck pace are, to say the least, showing no signs of slowing.

Hub Cincinnati
     
     At the end of January the company announced it would build a $1.49bn “centralized air hub” at Cincinnati/Northern Kentucky Airport (CVG) in Hebron, Kentucky, to “support its growing fleet of Prime Air cargo planes” and help the company meet customer demand for fast, reliable deliveries.
     “As we considered places for the long-term home for our air hub operations, Hebron quickly rose to the top of the list with a large, skilled workforce, centralized location with great connectivity to our nearby fulfillment locations, and an excellent quality of living for employees,” said Dave Clark, (right) Amazon Senior Vice President of Worldwide Operations.

Opening Not Set

     Amazon, which has not revealed when the hub will open, went on to claim that Kentucky was an ideal location given its already extensive shipping and logistics industry.
     The new hub will support its lease agreements for 40 dedicated cargo airplanes that, in turn, support its Prime delivery services.


Sweet Sixteen Up & Away
    
     “Today, 16 of those planes are in service for Amazon customers with more planes rolling out over time,” said a statement. “Amazon’s Prime Air hub at CVG will support Amazon’s dedicated fleet of Prime Air cargo planes by loading, unloading, and sorting packages.”


Air Road Everywhere

     As Amazon noted, the company is rapidly building out its U.S. transport portfolio and capability, not least via Amazon Flex, the company’s mobile application that allows individuals to sign-up, be vetted, and begin delivering for Amazon.
     The company also operates a dedicated network of 4,000 trailers, the aforementioned fleet or freighters and, amongst other ventures, is now a licensed forwarder in the U.S. and China.
     “These efforts join Amazon’s robust worldwide network of 149 fulfillment centers and over 20 sortation centers where the company uses algorithms, robotics, machine learning, and other technological innovations to increase delivery speeds for customers,” said the company.
     “Amazon is now bringing the same technological expertise to efforts in the transportation space to increase shipping capacity for its customers.”

What Is The End Game?

     In a series of award-winning articles last year, FlyingTypers tracked the range of possible strategies one of the world’s most innovative companies could be deploying as it expands its global supply chain capabilities while it simultaneously fills in its existing infrastructure.
     We questioned whether Amazon was attempting to reduce its exposure to transport costs levied by its integrator partners, especially during peak season, or whether it was in fact becoming a rival to transport incumbents with a long-term plan of establishing new supply chain profit centers using its existing volumes to attract third-party business.

Ambition & Money

     Amazon’s ambition and willingness to put hard cash into fixed assets remains undimmed, but its end-game is still hazy. Although Amazon has said it aspires to supplement, not replace, cargo carriers, many are not convinced.
     Indeed, most analysts now believe that it will eventually become a rival to 3PLs, integrators, airlines, shipping lines, and forwarders in multiple retail supply chain markets.
     “We estimate a $400 billion-plus market opportunity for Amazon in delivery, freight forwarding, and contract logistics,” Colin Sebastian, an analyst for Baird Equity Research, said in a note to clients.
     “The 50 year lease to build its first major air hub can certainly be viewed as Amazon parking its tanks on the respective lawns of the world’s largest integrators.”

Size Matters

     At 900 acres, the Ohio Amazon site makes it close in size to equivalent hubs UPS operates at Louisville and FedEx operates at Memphis.
     Cathy Roberson (right), Founder and Head Analyst for Logistics Trends & Insights, predicts further expansion in the U.S.
     “Amazon's investment in an air hub is a clear indication that they plan to not only handle their own parcels but also compete head to head with FedEx, UPS, and DHL,” she told FlyingTypers.
     “There will be an impact on FedEx and UPS in particular within the U.S. domestic market in terms of volume loss and profits.
     “Amazon's pick of CVG as a hub will likely create a stir as they will be in close proximity to DHL (at the same airport), FDX, and UPS hubs and all will have to compete to attract local talent for positions.”
     She suggested additional hubs would most likely be in the Dallas area, with LA “if there’s space” and Seattle suitable as West Coast locations.
     Watch this space for further news.
Sky King