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E-commerce giant Amazon is building a warehouse facility and parcel sorting center in the United States. Amazon’s logistics department not only allows trucks carrying parcels to spread throughout the streets of the United States, but also expands its air cargo business and uses innovative express delivery methods such as robotics and delivery to automobiles to create an emerging empire in the logistics industry.

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For a long time, traditional American logistics companies such as FedEx have been close partners of e-commerce platform Amazon. However, in early August this year, FedEx announced in a statement that it would terminate its land express delivery contract with Amazon at the end of the month and will not renew it.

In fact, FedEx announced in June that it would terminate its US express delivery contract with Amazon. However, the decision at that time was limited to the domestic air express service. FedEx said at the time that this was a “strategic decision” and that the change would not affect other existing Amazon contracts, including international shipping.

The two long-term partners have parted ways, and it has been confirmed that Amazon has been quietly building its own logistics distribution network.

For many years, Amazon has been deliberately downplaying its ambitions in the industry. But as consumers flock to Amazon.com to purchase everything from toilet paper to TV, Amazon has quietly built hundreds of huge logistics warehouses and community parcel sorting centers across the country. Amazon’s tens of thousands of self-operated trucks have been on the streets of the United States and have even begun to enter the air cargo field. These efforts, while costly and costly, have enabled Amazon to control how goods reach customers and gradually transform themselves from courier customers to competitors.

According to market research firm Rakuten Intelligence, nearly half of Amazon’s current order delivery is by Asia.Mason completed it by himself, and in 2017 this percentage was less than 15%. In December last year, Amazon said that it can “sell hundreds of thousands of packages every day” through the latest “dedicated air network”, and its air cargo fleet makes it possible to “approximately two days of delivery service anywhere in the United States.”

Ravi Shanker, North American logistics analyst at Morgan Stanley, said: “Amazon is seeking to become a logistics company with its own strength. We believe that In the next few years, Amazon will become a top logistics provider in both trucking and air transport. The question is how fast Amazon will advance this business.”

Control costs

The second quarter of this year’s financial report showed that Amazon’s transportation costs hit a new high, soaring by 36%. For a long time, Amazon has been actively pursuing a broader range of transportation controls and speeds, which has increased its spending on transportation and delivery. These costs have risen from about $5.5 billion in 2010 to about $61.7 billion in 2018, which is now more than a quarter of Amazon’s total revenue.

The main reason for the surge in transportation costs is the rapid expansion of Amazon’s Prime membership service, which promises to provide members with fast, free shipping for over 100 million items. In the second quarter earnings conference call, Amazon CFO Brian Olsavsky said that in the second quarter alone, Amazon spent an additional $800 million to deliver the standard “two-day” free. The goods service is compressed to “one day”.

Osawiski added that Amazon is seeing the benefits of speeding up transportation. “It strengthens customer buying decisions and stimulates the growth in demand for products purchased online.”

On the other hand, the more capable Amazon controls its logistics business, the better its ability to control costs.

Morgan Stanley’s Shankell said: “If you rely on your own logistics network, we estimate that Amazon will pay about $6 for each package. In contrast, Amazon The cost of delivering each package to UPS and FedEx is about $8 to $9. Considering Amazon’s size, controlling the transportation process can save at least billions of dollars in expenses.”

Market analyst Jeffrey Krause also pointed out that “FedEx and UPS have been setting prices at levels that are almost unacceptable to businesses and consumers. Amazon Realize that they can save billions of dollars by building their own express delivery business.”

With its own transportation service, Amazon also has better control over delivery speed. Tarek Abdallah, associate professor of operations management at Northwestern University, said: “Amazon will do more business internally, and they will only outsource the expensive business they don’t want to outsource to operators such as UPS and FedEx. By giving more control over the supply chain, they can ensure better service, because if the customer can’t receive his parcel on time, they won’t blame UPS or FedEx, but blame Amazon.”

ThisAbdullah said: “Amazon can also distribute the money saved in the transportation sector to their sellers. This means that sellers can offer products at a lower price, which will enable Amazon to establish a greater advantage in the field of e-commerce.

More Warehousing and Distribution Centers

Logistics consulting firm MWPVL International said that before 2005, Amazon had only three distribution centers in the United States. The 2013 holiday shopping season was a turning point in the company’s logistics business. Previously, American airlines received Amazon orders that made them overwhelmed, resulting in delays in packages and making customers very dissatisfied. Since then, Amazon has increased the number of warehousing, sorting and other distribution facilities from approximately 65 to approximately 400.

The Royal Canadian Capital Bank (RBC) said that the huge distribution network is the result of Amazon’s massive investment over the past four years. During this period, Amazon established a large number of distribution centers throughout the United States, almost doubled its logistics infrastructure in the United States. Amazon has doubled the distribution space currently owned by Home Depot.

This will help Amazon achieve its goal in its latest earnings report, which will shorten the current “two-day” free shipping plan for Prime members to “one-day”. These Prime members pay $119 a year in membership fees and enjoy free express delivery, unlimited music and video, and exclusive deals. According to market research firm CICP, Amazon’s Prime membership service has more than 100 million users in the US market, making Amazon’s subscription revenue in the second quarter up 37% from the same period last year.

Investment Bank Morgan Stanley analysts said after RBC’s report: “We are seeing Amazon’s one-day delivery service increase consumer expectations and increase in electronics The cost of competition in the business world.”

From the ground to the sky

“One Day” means that Amazon needs more ways to transport its growing packages. Last year the company developed a project that allowed entrepreneurs with their own courier companies to start shipping packages with Amazon-branded trucks. The company also pays contracted drivers through its “Flex” program to encourage them to ship packages in private cars. Recently, Amazon also launched a program to provide existing employees with up to $10,000 to start a parcel delivery business locally.

In the air transportation sector, Amazon’s air cargo division currently owns aircraft at 21 airports in the United States, and this year will be in Fort Worth, Texas, Will. Wilmington opened a new regional center and expanded a center in Rockford, Ill.

In June of this year, Amazon said it would lease another 15 Boeing 737-800 aircraft converted into cargo aircraft, and it also leased more than 40 larger aircraft. Amazon said the company will open a $1.5 billion aviation hub at Cincinnati International Airport in northern Kentucky in 2021. The hub will be able to support 100 aircraft operations in the future, which is twice the number of aircraft currently owned by the company, with plans to schedule 200 flights and takeoffs per day.

The Ontario International Airport in Southern California recently replaced Atlanta as the largest shipping airport in the United States, and there is also a busy business in the Amazon Air Cargo Division. Atif Elkadi, deputy executive director of Ontario International Airport, said: “We provide about 8 flights a day for the Prime Air business. When they started flying here a few years ago, they were only three or four per day. Flight, the business is still growing steadily.”

The Amazon aircraft part of the airport was repainted with the Blue Prime brand logo, while other aircraft still carry the airline logo of Amazon leased aircraft, including Atlas Airlines, ABX Aviation and air transport services groups, etc.

Once Amazon’s parcels are unloaded from Amazon’s aircraft, they will be sorted on-site at Ontario Airport, loaded onto Amazon’s delivery trucks, and sent to Amazon’s 185 distribution centers. in. Amazon Air Cargo recently opened a new distribution center at the Marcho Airfreight Reserve Base in Moreno Valley, just 50 kilometers from Ontario International Airport.

Unmanned vehicles and delivery to the car

Amazon has also been innovating in the field of express delivery. As early as 2017, Amazon used the “Amazon Key” technology to launch a home delivery service. When Amazon’s courier delivers the package to the user’s door, if the user is not at home, the courier can scan the tag through the phone and then apply to enter the user’s home. This system will automatically open the user’s home door lock and open the security camera at the same time, then the courier opens the door and puts the package into the user’s home. After leaving, the courier can click the phone again to lock the door.

And in April 2018, Amazon announced that it will deliver in-car services in 37 cities including Washington, DC, and the United States. Car owners who are compatible with the Amazon Key app can enjoy this. a service. Users can choose to have the courier put the Amazon package in their car and receive a four-hour delivery window notification showing when to start shipping and when to complete the delivery. Users can also track the process of unlocking their cars and being locked again via the Amazon Keys app.

Amazon says that when the courier delivers the item to the vehicle, the system will give the courier the authorization to open the door, and the courier does not need a special key or password to open the door or The trunk. The user’s mobile app will automatically prompt that the item is already in the vehicle, the trunk andLocked. Amazon said that these services are not available for an additional fee, but only for Amazon Prime members.

At the beginning of 2019, Amazon offered another delivery service to its Prime members: the garage. Amazon announced that from some time in the fourth quarter of this year, customers will be able to choose their own garage as a delivery location. Amazon’s new service will be used in conjunction with the consumer’s garage door system, and users will need to configure the corresponding smart MyQ door lock technology. A person in charge of the Amazon Smart Door Lock Partner said: “The garage is an extension of the smart home. The garage provides a convenient express destination, which can avoid being stolen or no one at home. We are honored to change with Amazon. Collaboration on industry game rules for delivery to the garage service plan.”

Amazon is still trying to ship with a robot. According to reports, in the past few months, Amazon has been testing its “scout” unmanned delivery vehicles near the headquarters in Snuohomish County, Washington, USA. Recently, the company announced that it will expand the project and begin a larger unmanned vehicle delivery test in Irvine, California.

Amazon currently has a limited number of unmanned delivery vehicles and delivers packages only during the day on weekdays. Each unmanned vehicle will be accompanied by an Amazon employee to monitor the operation, and in the future these unmanned vehicles will be automatically delivered.

According to Amazon, micro-car delivery will be seamlessly integrated into orders from customers in Irvine. If you buy something on Amazon, Amazon will determine the most reasonable shipping method, either by normal delivery or by micro-unmanned vehicles.

Micro-unmanned vehicles are not the only way for Amazon to enter the field of automated deliverytest. The company is also exploring the use of airborne drones for delivery, although it is also in the early stages of development testing. In early June of this year, the company showed off a new delivery drone, hoping that this drone will eventually speed up the delivery of North American Prime members.

Amazon will replace the traditional giants in the logistics industry?

As Amazon’s transportation capabilities increase, Amazon’s reliance on FedEx, UPS and US Postal Services has declined. The US Postal Service, once the main carrier of the Amazon package business, is now delivering half the package share two years ago.

Alex Pellas, a logistics research specialist at Lotte Think Tank, said: “Amazon accounts for 40% of all e-commerce delivery business. If they deliver themselves Half of the goods, that is 20% of the entire market, this is a very large number.”

After Morgan Stanley introduced investors to the Amazon Air Cargo expansion plan in December, FedEx and UPS’s share price fell 20% from its recent high. Analyst Shankell said: “If Amazon’s air cargo department does not exist at all, we estimate that UPS and FedEx revenue will be about 2% higher than now.”

But Patrick Fitzgerald, FedEx’s senior vice president of integrated marketing, said he wasn’t worried about it.

The same is true. Although Amazon has become an important force in the logistics industry, it is still working with other courier companies. After all, UPS and FedEx’s cargo volume and operations are still much larger. A UPS spokesperson said: “We believe that UPS and Amazon will work together to achieve mutually beneficial relationships.”

FedEx’s Fitzgerald said: “To be honest, we don’t think Amazon will be a FedEx competitor because there is no sensible way to compare them. You can Highly intensive market developmentThese local distribution businesses are by no means a competitive threat to FedEx’s extensive business portfolio.

Fitzgerald also pointed out that FedEx has 700 aircraft, while Amazon has only 40 aircraft. He said: “Every week, Amazon can fly 671 flights, and FedEx flights are close to 13,000. Amazon is a revolutionary e-commerce company, but that doesn’t mean it can suddenly compete with FedEx in transportation. .”

Fitzgerald said that even if you lose Amazon’s business, it is not a big deal for FedEx. He explained: “Amazon is our long-term customer. We are proud of our cooperation, but they are not our biggest customers. In fact, we have recently made it clear that the Amazon business does not account for our total revenue in 2018. To 1.3%. For our competitors, the revenue from Amazon is much higher.”

Relatively, Amazon is more cautious when it comes to its own logistics business. It said in a statement, “We have good partners among traditional operators, and we thank them for all the work they have done to deliver packages for our customers.”

Yossi Sheffi, director of the Massachusetts Institute of Technology’s Transportation and Logistics Center, said that although Amazon’s rise in the logistics industry looks dangerous, it is not necessarily to defeat competition. Opponents, but just want to get more profitable routes and business.

But Northwestern University’s Abdullah said that Amazon is cautious about revealing its ambitions. He pointed out: “Without logistics, Amazon’s e-commerce business will cease to exist. For them, it is very important to maintain close relationships with third-party logistics providers.”