“Amazon is pushing further onto the turf of its shipping partners UPS and FedEx, enabling small businesses to carry its overflowing supply of packages in the all- important last-delivery leg to the consumer’s door,” writes The Wall Street Journal (June 28, 2018). The online retail giant is inviting entrepreneurs to form small delivery companies employing up to 100 drivers and leasing 20-40 Amazon-emblazoned vans, an initiative that should help it rapidly build out its own delivery network across the country. It has also contracted with many small delivery companies to drop off its packages in major metro areas, many in unmarked white vans.
It is yet another major push by Amazon to gain more control over its own deliveries in a continued quest to build a vast freight and parcel shipping network. Amazon says it has to build out its own services simply to handle the surging number of online orders that UPS, FedEx and the U.S. Postal Service can’t. More than $4 of every $10 spent online in the U.S. is on Amazon, and the number of its deliveries topped more than a billion last year.
Still, Amazon has taken broad steps in recent years to poach some of the most desirable deliveries from its partners and could be on a collision course to one day compete directly with the shipping giants. Amazon expects that hundreds of entrepreneurs could sign up to help the company deliver packages the “last mile,” which is typically the most expensive piece of an online order’s journey.
The number of packages Amazon needs to ship in the U.S. has more than doubled over the past five years to roughly 1.2 billion packages last year. Projected growth is too much for existing delivery companies to handle. Amazon has advanced deeply into logistics over that same period, building out more than 70 delivery stations, buying more than 7,500 truck trailers, leasing 35 aircraft to fly its wares around the country and expanding into ocean freight. Amazon spent $21.72 billion on shipping world-wide last year, or about 12% of overall revenue.
Classroom discussion questions:
- How does Amazon handle the “last mile?”
- What are the advantages and disadvantages of Amazon’s logistics strategy?