E-Commerce and Small Package Shipments in Los Angeles Randolph Hall Manish Bansal, Kapil Kumra University of Southern California.

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Presentation transcript:

E-Commerce and Small Package Shipments in Los Angeles Randolph Hall Manish Bansal, Kapil Kumra University of Southern California

Statistics b Air Shipments grew (93-97): 43% in tons43% in tons 56% in ton-miles56% in ton-miles 51% in value51% in value b Parcel Shipments grew (93-97] 25% in tons25% in tons 37% in ton-miles37% in ton-miles 40% in value40% in value

But … b Air Shipments Account for.2% of all ton- miles b Parcel Accounts for.7% of all ton-miles b Traditional rail and truck account for 38% of ton-miles each Segment is Important Because of Value and Criticality of Shipments + Growth

HomeGrocer.com

Traditional Grocery Shopping b Product Information: Advertisements (TV,direct-mail,inserts,in-store]Advertisements (TV,direct-mail,inserts,in-store] Inspection at the StoreInspection at the Store b Selection Integrated with PickingIntegrated with Picking b Warehousing At store + distribution centersAt store + distribution centers

Traditional (continued) b Picking/Packaging Customer at StoreCustomer at Store Bagger at CounterBagger at Counter b Payment At Counter (cash,charge,debit)At Counter (cash,charge,debit) b Transportation Customer (usually by car)Customer (usually by car)

E-Commerce Grocery Shopping b Product Information: Advertisements (TV,direct-mail,inserts,in-store]Advertisements (TV,direct-mail,inserts,in-store] Generic Images on Site/DescriptionsGeneric Images on Site/Descriptions b Selection Fill-out Forms/Download from HistoryFill-out Forms/Download from History b Warehousing Distribution Center OnlyDistribution Center Only

E-Commerce (continued) b Picking/Packaging Employees at Distribution CenterEmployees at Distribution Center b Payment Internet ChargeInternet Charge b Transportation Employees by TruckEmployees by Truck

What’s Good and Bad? b The Good Real Estate SavingsReal Estate Savings Delivery Efficiencies from Combined LoadsDelivery Efficiencies from Combined Loads b The Bad Customer Cannot Inspect ProductCustomer Cannot Inspect Product Picking/Selection Become DecoupledPicking/Selection Become Decoupled Trips to Market Not Very Costly to CustomersTrips to Market Not Very Costly to Customers Lacks ImmediacyLacks Immediacy

Industry Segments b Integrated Providers SameDay, Kozmo, WebVan, HomeGrocer,SameDay, Kozmo, WebVan, HomeGrocer, Streamline,UrbanFetchStreamline,UrbanFetch b Fulfillment Amazon, eToys, Various Catalogue CosAmazon, eToys, Various Catalogue Cos b Sales.Match-making Automobile selling, price quotingAutomobile selling, price quoting b Transportation Services+Logistics FedEx,UPS,USPS,Airborne,Emery,DHLFedEx,UPS,USPS,Airborne,Emery,DHL

Integrated Providers b Grocery Services (WebVan,PeaPod) Many SKUsMany SKUs Specialized VehiclesSpecialized Vehicles Sophisticad WarehousingSophisticad Warehousing Route in Advance with Time WindowsRoute in Advance with Time Windows b Immediate Gratification (Kozmo) Simple Operation, Few SKUsSimple Operation, Few SKUs Quick ResponseQuick Response Orientation: meals, videos, etc.Orientation: meals, videos, etc.

Integrated (continued) b Business Oriented (SameDay) 3rd Party Logistics Provider3rd Party Logistics Provider Contracted Warehousing, DistributionContracted Warehousing, Distribution

Fulfillment Model b Consumer web interface b Integrated with warehouse picking/packaging operations b Centralized warehousing (national or large region] b Reliance on for-hire package carriers for delivery to customer b Sometimes Very Small Operations

Sales/Match-making b Customer Interface to Product Information b Specification of Product b Instant Price Quote, or hand-off to dealer b Variety of delivery mechanisms, often negotiated (sometimes pick-up]

Transportation Services b Multi-layered Network b Integrated Ground/Air Operations b Variety of Service Levels b Negotiated Price Agreements b Logistics Services Provided to Some Customers (fulfillment, warehousing, etc.]

Network Layers b Pickups (drop,on-call,scheduled,drop box] Local Terminal; Sort ConsolidateLocal Terminal; Sort Consolidate –Shuttle to Airport –Airport Terminal: Sort, Consolidate »Transport to Hub » Sort, Consolidate

UPS Hubs b Louisville: 215,000/hour b Ontario,Hartford,Columbia,Rockford,Dallas, Philadelphia: 303,000/hour Combined b All Major Airports in SoCal Utilized b Combinations: 36 pairings b Cannot Generate Enough Traffic: Smaller airports through Louisville

Challenges b Short Time Window: About 14.5 hours, west-cost pickup (5:00) to east coast delivery cut-off (10:30]About 14.5 hours, west-cost pickup (5:00) to east coast delivery cut-off (10:30] b Handling Steps Up to five sorts, processingUp to five sorts, processing b Transport Steps Up to six vehiclesUp to six vehicles

Transportation Alternatives b Scheduled Carrier Sometimes faster, cheaperSometimes faster, cheaper Sometimes more flexible on sizeSometimes more flexible on size b Ground Package Carrier b Ground LTL,TL Services b Courier (typically short distance] b Freight Forwarder/Consolidator

LAX Cargo Statistics b 2nd Largest in Country (behind Memphis) b 2.1 Million Tons in 1999 b 78% of Regions Air Cargo b 194 Acres/2.1 Million Sq. Feet on-site b Additional 4 million Sq. Feet off-site b 50% of Traffic is International (Japan is largest partner)

LAX Cargo Trends b b Year AirMail Tons Air Freight Tons Total Tons b b ,946 1,049,974 1,245,920 b b ,254 1,130,119 1,284,373 b b ,840 1,095,580 1,258,209 b b ,840 1,202,317 1,365,157 b b ,827 1,288,503 1,462,330 b b ,878 1,516,567 1,703,445 b b ,747 1,567,248 1,760,995 b b ,091 1,696,663 1,895,754 b b ,410 1,852,487 2,064,897 b b ,473 1,787,400 2,051,873 b b ,708 1,912,147 2,165,885

Largest LAX Cargo Carriers b b 1. Federal Express 346, % b b 2. United Airlines 155, % b b 3. Korean Air 120, % b b 4. American International 95, % b b 5. American Airlines 73, % b b 6. Delta Air Lines 71, % b b 7. Northwest Airlines 62, % b b 8. Lufthansa German Airlines 58, % b b 9. Japan Airlines 49, % b b 10. Eva Airways Corporation 49, % b b SUBTOTAL 1,084, % b b ALL OTHER AIRLINES 827, % b b TOTAL 1,912, %

Other Regional Airports b Ontario b John Wayne/Orange County b Burbank b Long Beach b San Diego b Palmdale b Others

Why Do Carriers Use LAX? b Central for Region b Infrastructure for Cargo Handling (forwarders,warehousing,etc.] b Ability to Handle Large Aircraft b Customs Facilities b Integration with Passenger Operations

Regional Planning Issues b Can LAX and Ontario Absorb Growth? (flights and real-estate] b Congestion in Vicinity of LAX; Meeting Connections for Overnight b Would Sending Freight to Palmdale, Help or Hurt? b Neighborhood Effects

Ongoing Work b Surveys with Freight Forwarders, Ground Transport Providers, AirCargo Carriers b Modeling Sorting, Regional Transport Processes b TAD Air Cargo Web Site

Conclusions b Web Enables New Types of Companies b Substantial Growth in Package Shipments, Due to Bypassing Retailer in Supply Chain b Package Growth Leads to Greater Demands on Air Cargo System b Significant Regional Planning Issues