Wednesday, November 25, 2015

Amazon might operate air-freight service from Wilmington, Ohio

Could Amazon be working on yet another giant project for Ohio?

Media reports have emerged that the Internet giant is taking steps to operate its own freight service to compete with the likes of FedEx and UPS, with tests taking place out of the massive air park in Wilmington.

Amazon has begun flights out of the Wilmington Air Park through a contractor based in the city, Air Transport Services Group, according to Motherboard.vice.com, which covers technology news.

Wilmington would make sense for Amazon considering the city has the infrastructure in place that used to serve DHL, in terms of workers and buildings, said Mike Knemeyer, professor of logistics at Ohio State.

“You've got people who worked in that industry before,” he said.

If Amazon does plan to begin its operate its own freight business, it would be a significant shift for the e-commerce giant.

But the key players are saying very little about possible plans for more expansion in Wilmington.

Paul Cunningham, spokesman for Air Transport Services Group, said the company is in “a test period” with a new customer that involves four flights per day out of Wilmington.

“We can’t comment on our operations or customers,” Cunningham said, citing a non-disclosure agreement with the customer.

His company has a fleet of Boeing 767s, and 2,000 employees worldwide, including about 800 in Wilmington, he said.

The Wilmington Air Park is a large, cargo-based operation that is close to Cincinnati, Dayton and Columbus. It has two long runways capable of handling the biggest airplanes.

It also has about 1.5 million square feet of warehouse space available around the park, said Brad Kitchen, president of Alterra Real Estate Advisors in Columbus. “That’s a lot of infrastructure that I’m sure they can make use of,” he said.

Wilmington was devastated in 2009 when DHL U.S. Express closed its air-freight distribution hub, throwing nearly 8,000 people out of work and escalating the county’s unemployment rate to 14.4 percent. State officials have been working since to attract businesses to Wilmington, which is the county seat of Clinton County, even as the unemployment rate has fallen to 5.2 percent.

Speculation about the air park comes amid a flurry of activity by Amazon in Ohio.

In just the past few months, Amazon has announced plans three data centers in central Ohio, two massive distribution centers in central Ohio and a wind farm in northwest Ohio. The investments total more than $1 billion and will employ more than 2,000 workers.

“This is just the beginning,” Paul Misener, Amazon’s vice president of global public policy, said back in May when Amazon’s plans for the data centers were officially announced.

In addition to central Ohio, Amazon has distribution operations in Indianapolis and Louisville, Ky., both of which would be about a two-and-a-half hour drive from Wilmington.

There also have been reports that Amazon wants to have more direct control over its shipping after the debacle two years ago when not all orders were delivered in time for Christmas.

As has been the case with Amazon Web Services, which is developing the data centers in central Ohio and provides cloud computing, storage, analytics and other services for corporate customers, Amazon could roll out a competitive transportation and logistics service over time in similar fashion, said Colin Sebastian, an analyst with Baird Equity Research, in a research note this week.

“Amazon may be the only company with the fulfillment/distribution sophistication and scale to compete effectively with incumbent service providers (UPS, FedEx),” he wrote.

“Similar to the gradual rollout of (Amazon Web Services) we would expect Amazon to introduce competitive transportation and logistics services on an incremental basis, with a long-term focus."

The global fulfillment market represents a $400 billion to $450 billion market opportunity, he said.

It would make sense for Amazon to want more control over its air shipments, Ohio State’s Knemeyer said.

“They really view their competition as the Wal Marts and Targets of the world where you can walk in and get something today,” he said. “They need to make sure they have adequate capacity and control to get the product to the customer at the right time.”

If this involves operating their own air shipments, it would be the latest example of Amazon doing things in a different way and on a larger scale than other e-commerce businesses. “You can’t look at them through those traditional lenses,” Knemeyer said.

Amazon did not respond to a request for comment. Neither did the Clinton County Port Authority, which operates the air park.

Source:  http://www.dispatch.com

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