There would seem to be easier ways to build an empire than to launch an end-to-end e-commerce delivery company to compete with FedEx Corp. (NYSE:FDX), UPS Inc. (NYSE:UPS), Amazon.com, Inc. (NASDAQ:AMZN) and, to a degree, the U.S. Postal Service. But Scott Ruffin is ready to give it a try.
Working in Ruffin’s favor is massive e-commerce fulfillment and delivery growth that might bake a big enough pie for multiple folks to get fat from. Also on his side is significant delivery industry chops: Ruffin worked at Amazon for nearly five years, during which time he built the company’s air operation as part a long-term strategy to handle more of its customers’ orders. After a yearlong stint at J.W. Logistics Inc. in Seattle, Ruffin spent 18 months as head of Walmart Inc.’s (NYSE:WMT) e-commerce transportation unit. Ruffin left in June to launch Pandion, a Seattle-based firm that exited “stealth” company status on Tuesday to make its intentions publicly known for the first time.
Working against Ruffin and Pandion are the combined financial and operational might of four massive organizations. Of those, Amazon and the Postal Service have well-established business-to-consumer (B2C) delivery operations. FedEx and UPS, meanwhile, are spending billions of dollars in infrastructure and technology, as well as countless man-hours, to reengineer their networks from their business-to-business roots to B2C operations. UPS said Tuesday that B2C now accounts for 70% of its customer mix, a stunning directional shift that shows no signs of lessening.
Ruffin has set his sights high in terms of customer engagement as well. Pandion is not after the mom-and-pop e-tailer with a few shipments. Rather, it plans to offer one- to two-day deliveries to big shippers with equally big e-commerce footprints and very demanding requirements. Asked in a phone interview what Pandion’s target market will be, Ruffin replied: “From Walmart-size and smaller.”
Pandion, which actually launched last September, will work with $4.9 million in seed funding from venture capital firms Playground Global and Schematic Ventures, with participation from AME Cloud Ventures and Innovation Endeavors, two more VCs. Operations are set to start before the 2021 peak season.
Ruffin said Pandion will own and manage about a dozen sortation centers heading into peak. The first-, middle- and last-mile transportation components will be outsourced to a broad range of partners, none of which Ruffin would identify, citing nondisclosure agreements. Pandion’s initial footprint will comprise about 30% of the U.S. population, Ruffin said.
Ruffin is banking on the legacy providers — UPS and FedEx in particular — being too stepped in their B2B heritage to consistently manage the different demands of a much-larger marketplace like B2C. The impact of the companies’ huge investments in B2C is diluted by the fact that they are still built off of B2B networks that can’t scale quickly enough to manage huge spikes, he said. Ruffin argues that he has seen this phenomena firsthand during his years at Amazon and Walmart, especially during the peak holiday shipping seasons at each.
Pandion’s secret sauce, according to its statement, is next-generation delivery management software that will use “machine learning to avoid shipping delays and optimize delivery networks.” In the interview, Ruffin said Pandion’s technology will enable routing adjustments while a package is in transit. That stands in sharp contrast to today’s parcel-shipping technology, which establishes the routing at the time of shipping and doesn’t allow for changes to be made once the shipment is en route, he said.
Ruffin got a public glad-hand from e-commerce consultant Brittain Ladd, who in an e-mail called Ruffin, who worked with Ladd when both were at Amazon, “one of the most innovative and capable logistics experts that I know.”
According to Ladd, Ruffin is correct to claim that the “large parcel companies have operational baggage.” Ladd said he believes that Pandion can exploit that deficiency to gain market share.
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