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Do Amazon’s Disruptions Know No Bounds?

Charting own course with new Kentucky air hub

Just before announcing its profit had grown 55 percent in Q4, Amazon harevealed plans to build a centralized air hub in northern Kentucky for its Prime Air fleet of 16 leased cargo jets.

The infrastructure, to be situated near DHL’s global hub at Cincinnati/Northern Kentucky Airport (CVG) in Hebron, Ky., “will help the company meet demand from Amazon Prime members for fast, reliable delivery,” the e-tailer said.

The move will further lesson Amazon’s dependence on traditional carriers (UPS and FedEx also maintain hubs in nearby Louisville and Indianapolis), and continues a logistical buildout that extends to trucking and ocean freight.

For its part, Amazon has said it’s looking to supplement rather than replace its carrier partners, although in making the announcement Kentucky Gov. Matt Bevin appeared to suggest otherwise.

“Amazon’s Prime Air hub promises to revolutionize the fulfillment industry worldwide, and Kentucky is excited to partner with them as they embark on this disruptive, transformative and exciting venture,” he said.

The e-tailer similarly acknowledged that after streamlining the fulfillment process with “algorithms, robotics, machine learning and other technological innovations … Amazon is now bringing the same technological expertise to efforts in the transportation space to increase shipping capacity for its customers.”

Those efforts include last year’s leasing of 40 cargo jets to speed Prime deliveries; a dedicated network of 4,000 trailers to increase trucking capacity; and the introduction of Amazon Flex, a mobile app that that allows individuals to sign-up, be vetted and begin making local deliveries.

As for the choice of CVG, Dave Clark, Amazon’s worldwide operations senior VP, cited Hebron’s skilled workforce and “centralized location with great connectivity to our nearby fulfillment locations.”

Amazon operates 11 distribution centers in the state.

Meantime, Amazon reported a 55 percent increase in fourth-quarter profits, to $749 million for the three months ended Dec. 31, 2016.

But its stock still took a hammering from investors due to lower-than-expected sales, after the company previously described the period as its best holiday season ever.

Still, net sales increased 22 percent to $43.7 billion, and would have rose 24 percent save for the impact of unfavorable foreign exchange rates.

The gains came amid continued investments in technology, original video content, logistics and marketing.

In North America, net sales rose 22 percent to $26.2 billion, compared with last year’s 24 percent increase. Of that, the e-tailer sold $21.6 billion of electronics and other general merchandise, a 25 percent increase, and $4.2 billion in media, up 7 percent year over year.

In prepared remarks, founder and CEO Jeff Bezos touted his Amazon Prime membership program, perhaps as a rejoinder to a two-day, fee-free shipping program just launched by Walmart.

Prime, Bezos said, now provides two-day shipping on more than 50 million items, a 73 percent increase over last year; is offering one- and two-hour Prime Now deliveries in 18 more cities than in 2015; introduced new benefits like a lending library of e- and spoken-word books and magazines; and added “tens of millions of new paid members.”