Consultant Insight: Is Amazon delivering to external customers?

In June 2020, Amazon paused its Amazon Shipping trial program, a service in which Amazon drivers would pick up packages from businesses and deliver them to consumers, rather than ship orders from Amazon warehouses. While it was only available in just a handful of US cities at the time, it set off alarms within the supply chain market as to whether Amazon was finally competing against FedEx and UPS. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Since then, the market has been on edge waiting for an announcement from Amazon that it is resuming its third-party delivery trial that was cut short due to the COVID-19 pandemic. Recently, an assortment of news items has suggested the possibility that Amazon has resumed shipping parcels for external parties but without a definite confirmation, we can only speculate. Amazon supposedly hit the pause button on the service last year to focus on its own deliveries, which were struggling to meet on-time promises. Since then, Amazon has beefed up its supply chain network by hiring thousands of workers for deliveries and fulfillment while expanding its fulfillment network, air network and the middle-mile – all to speed up its last-mile and perhaps once more reignite its Amazon Shipping program. According to various news outlets, Amazon opened 33 fulfillment facilities in the U.S. in 2020 and is on track to easily surpass that number for this year. The jump in e-commerce due to the pandemic and the rise of multichannel and direct-to-consumer strategies is resulting in the need for expanded e-commerce logistics networks by many retailers, including Amazon. Speed is the goal. At the same time, Amazon is rumored to be expanding its own trucking fleet that it uses for middle-mile operations in its supply chain, primarily between fulfillment and delivery hubs. Similar to what it does with its last-mile Delivery Service Partner program, Amazon offers a variety of perks. For its trucking fleet, it offers perks such as financial assistance for drivers wishing to obtain a CDL license, discounts on purchasing trucks and more to attract truck drivers. An efficient middle mile is important for faster deliveries. Amazon noted in its first quarter earnings call in April that “the ability to control the flow of products from the warehouse to the end customer is a competitive advantage.” Indeed, the investments it is making within its fulfillment network and in its transportation are connecting these dots. In addition, Amazon recently opened its air hub at Cincinnati/Northern Kentucky International Airport (CVG) . The air hub is part of Amazon’s Prime membership to deliver goods to members by next day or sooner, faster than the original two-day promise under the membership. CVG anchors a network of U.S. airports that allows Amazon to be within 100 miles of more than 70% of the U.S population. As a result, Amazon Airline can ship packages and inventory to points that are within a few hours’ drive by truck or delivery van to more than 217 million people according to analysis from the Chaddick Institute for Metropolitan Development at DePaul University. While Amazon is building its own air and road networks, it also uses other transportation partners. For trucking, Amazon uses such providers as JB Hunt on a daily basis. For air, the Chaddick Institute believes that Amazon leans on partner airlines such as UPS and various passenger airlines to operate about 20 to 30 daily flights to supplement Amazon Air flights in the U.S. domestic market. While much of the air transport network moves Amazon goods, Amazon also moves cargo on behalf of the U.S. Postal Service (USPS). Online publication The Information found mention of this relationship in a 2019 filing by Sun Country Airlines, which operates 737 freighters on Amazon’s behalf . “Amazon has entered into an agreement and may enter into additional agreements with the United States Postal Service for the air transportation of USPS cargo on flights performed by Carriers under this Agreement.” An Amazon spokesperson confirmed the arrangement. So, as Amazon continues to build its supply chain network, folks search for signs that Amazon is performing end-to-end transportation and logistics services to external customers to rival FedEx, UPS and perhaps other logistics providers such as XPO Logistics. As noted previously, it is providing air transportation to the USPS and maybe this will be the extent of their services to external customers – dependent on mode of transportation and dependent on available capacity – if there is extra room in a truck, a plane or a van, why not utilize that space and sell it to someone? Available capacity, no matter the mode of transportation or even space within a fulfillment facility, is money. And there is no reason to leave money on the table.

Consultant Insight: Is Amazon delivering to external customers?

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