Amazon Fulfills Kentucky’s Goal to Be World’s Logistics Leader

Amazon Fulfills Kentucky’s Goal to Be World’s Logistics Leader

Fulfillment kingpin’s decision to put $1.5 billion Prime Air hub at CVG could shift retail industry’s center of gravity.

By Greg Paeth – http://www.lanereport.com

In the iconic, now 50-year-old film “The Graduate,” Dustin Hoffman’s Benjamin Braddock character gets one word of seemingly profound career advice from a well-meaning family friend in a man-to-man poolside chat: “Plastics.”

Today, that thoughtful, potentially life-altering guidance from Mr. McGuire probably would be a term that didn’t exist in 1967: “E-commerce.”

Especially in Kentucky. Especially in 2017. Especially when that E-commerce is being driven by Amazon.com, the explosively growing online retail behemoth that seems capable of delivering anything to the front door before your PayPal deduction clears.

And especially when there’s a wealth of speculation the $1.5 billion Prime Air hub project at Cincinnati-Northern Kentucky International Airport that Amazon announced in January, deeply delighting the business community and public officials, might actually turn out to be far more than what the company describes as its first “centralized air hub to support its growing fleet of Prime Air cargo planes.”

Amazon’s project cements Kentucky’s status as THE center of distribution-delivery logistics for North America, the world’s most important economic market. The Prime Air hub will join the massive UPS Worldport package sorting and air-freight operation adjoining Louisville International Airport and the DHL Americas Hub for air freight already at CVG. Memphis-based FedEx, the other major U.S. logistics-distribution giant, last year added a 303,000-s.f. center in Louisville.

Some perspective on Seattle-based Amazon: For just the fourth quarter 2016 the company reported revenues of $43.7 billion, which is more than double Kentucky state government’s $21.5 billion budget for the biennium running through June 30, 2018; full-year 2016 sales were $136 billon, an increase of 28 percent over 2015. The world’s largest online retailer said it ended 2016 with 180,000 employees, a six-fold increase over 2011, and that it would create 100,000 more full-time U.S. jobs by mid-2018.

Amazon is the third most valuable brand in U.S business, only fractionally behind Google and Apple, according to a March 30 news release from Brand Finance, a British brand-worth rating operation.

“As it continues to both reshape the retail market and to capture an ever larger share of it,” Brand Finance said, “Amazon could easily become the most valuable brand in the U.S. and the rest of the world in 2018.”

The company in January revealed its intention to establish a hub that will employ up to 2,700 people in a 3 million-s.f. building. However, knowledgeable people who get paid to scrutinize the company say Amazon may build a facility in Hebron that goes far beyond that – and could have far-reaching, long-term and global significance not only for the company but the package-delivery industry and retailing itself.

One theory is Amazon intends to use CVG as the launch point for its own full-scale package-delivery operations that could rival FedEx and UPS, to whom it now subcontracts much of that business. Another theory is that the Hebron airport will become the core of international shipping operations for the company.

When Amazon made its big Kentucky project announcement Jan. 31, the presumption was Prime Air hub functions couldn’t begin until its massive building is completed. But sources familiar with company plans said Amazon will begin flying Prime Air craft at CVG in weeks rather than years, perhaps before there’s even a groundbreaking.

Amazon will start operations in May, said well-positioned business insiders, through an agreement with DHL, the Bonn, Germany-based shipping and logistics company that operates one of its three world hubs literally across the street from Amazon’s new CVG site.

“DHL can confirm that it has been contracted to provide a range of services to Amazon at the DHL Cincinnati Hub, including sorting operations and ground handling for the Amazon air network. We look forward to providing further support to this global customer,” said Bea Garcia, DHL media relations director for the Americas, who declined further comment.

Amazon, which is often tight-lipped about its business plans, said it would not provide any details beyond those in the January press release. It has not announced a start date or construction timetable for the $1.5 billion project.

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