Business & Investment

Does Amazon Need Another Network to Open Courtrooms to External Shippers?

In April 2020, Inc. suspended a pilot program in the United States designed to deliver non-Amazon packages, already struggling to deliver unexpectedly large e-commerce volumes. I announced that. The program, which closed in June, has not resumed, and the company has not publicly announced that it will.

According to various experts, Amazon’s shipping arm, Amazon Logistics, has dramatically expanded its aerial and terrestrial networks to balance with companies that may want to deliver goods to their customers and delivery options. It is said that a reboot will occur in the next 1-2 years to improve it. Do not sell on Amazon’s site or use the fulfillment service. However, e-commerce traffic is expected to surge over the next few years, and there is also demand from Amazon. (NASDAQ: AMZN) Sales and fulfillment services remain very high. The question is, does the company have a desire or need to move out of the ecosystem if they want to expand their shipping business and gain market share from competitors in the process?

When announced in 2017, this concept seemed to represent a crucial point in the history of the parcel industry. Amazon will pursue FedEx Corp. (NYSE: FDX) And UPS Inc. (NYSE: UPS) A carrier that uses a pickup and delivery service that bypasses Amazon’s fulfillment and delivery networks. This move will create a third national courier with resources comparable to FedEx and UPS.

The initiative will work. Amazon needs to handle the pickups in their original location, a service that hasn’t been offered yet. You need to decide how to manage the long-distance portion of your trip. In effect, Amazon will build the network within 10 years of UPS’s 114 years and FedEx’s 50 years.

Pilots have been on track for several years, but seemed to be heading towards a sustainable launch in early 2020, when the pandemic broke out. It was never available beyond a small group of US cities. This model is gaining more attention in the United Kingdom, where Amazon operates a logistics program as a service.

Flexe Inc, a warehouse operator who has worked for Amazon Logistics for many years. The program will resume within the next two years, said David Glick, chief technology officer of the program. By then, Amazon Logistics is another way to increase the density of last mile deliveries by expanding its business sufficiently to reliably support its customers, reducing fixed costs per mile and driving time between stops. Will track the shipper.

Others consider Amazon Logistics to have limited prospects as a domestic third-party carrier because it does not provide national coverage. It currently covers about 70% of the U.S. population and has large coverage gaps within the states, but most states are sparsely populated and Amazon will significantly expand its footprint over the next three years. Please note. Amazon Logistics is also required to find enough backhaul capacity to fill vans and trucks with parcels after unloading items at the headhole without interrupting the flow of existing cargo.

Nate Skiver, founder of parcel consultancy LPFSpend Management, said the service is limited to specific lanes where Amazon has a comfortable type of volume characteristics. Dean Maciuba, managing partner of consultancy Last Mile Experts LLC in North America, said Amazon Logistics could only make a small profit by extending its distribution services beyond its ecosystem. “They are not integrated carriers and lack the ability of middle miles to move cargo locally and nationally,” said Masiuva. “They still source almost all cargo from fulfillment centers, not from individual shippers.”

Satish Jindel, founder and CEO of consultancy ShipMatrix, has a different perspective. According to Jindel, Amazon can reach its goals through a wealth of data about current sellers, such as the ever-efficient size of its current network and product locations, so it can reach outside customers in court. There is no reason to build a delivery service. Transit time and delivery destination, and detailed supply and demand data. If your customers’ packages are already heading to Amazon’s existing routes, it’s a good idea to insert external packages into those routes.

According to Jindel, as Amazon’s business becomes more scalable, it will further increase its density and last mile shipping costs, which are already superior to FedEx and UPS.

Amazon has three shipping channels. Products sold on the website, products sold on the site and shipped by Amazon from their facilities, and seller shipping where the seller sells the goods on Amazon but can use other shipping vendors according to Amazon’s terms. .. Performance requirements have become higher in recent years.

This is the third category that Amazon can flag for external delivery. ShipMatrix estimates that 55% of Amazon Logistics volume is for customers who use fulfillment services, and 45% is for products sold on the website. According to ShipMatrix, of the latter, seller-filled volumes make up 15% to 20% of the units sold on

“In the third group, they have full visibility,” Jindel said. “They are at the top of the food chain.” Amazon offers a level of service that is cheaper and more reliable than the vendors they are currently using, with deep intelligence on every aspect of the seller’s business. Jindel says he can build a strong example of how to do this.

Jindel ridicules the idea that Amazon doesn’t have a strong middle-mile network to support the external delivery model. As it used to be, today 10 of the top 15 LTL carriers have a powerful system of self-reliance and support.

Amazon Logistics can fall into a virtuous cycle of acquiring “external” businesses simply by leveraging its own network. It continues to win more merchants, many of whom may be using other carriers. Recognizing the value of Amazon’s low-cost and efficient transportation network, these companies may abandon their legacy providers. This scenario respects the belief of founder and executive chairman Jeff Bezos, who once famously said, “Your margin is my chance.”

Does Amazon Need Another Network to Open Courtrooms to External Shippers? Does Amazon Need Another Network to Open Courtrooms to External Shippers?

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