By Christine Kern, contributing writer
Online retail giant is building its own delivery infrastructure
Amazon appears to be working to eliminate its reliance on FedEx and UPS, according to Business Insider. An October report by trade-publication DC Velocity said that Amazon plans to launch its own shipping network "sometime in 2016," under the goal of doing "whatever it takes to serve every community" in the US. Now, the relationship between Amazon and UPS is becoming increasingly strained, according to The Wall Street Journal.
Consumers are demanding faster, more reliable delivery of their orders with smaller, more accurate fulfillment windows. This means increasing pressure on retailers to meet those demands.
And as Amazon looks to gain efficiencies by building its own fulfillment capabilities, including controlling the last mile, it is beginning to question its once strong relationship with UPS. As part of its fulfillment initiative, Amazon has added its own fleet of trucks and has experimented with a variety of end delivery options, from taxis, Uber-style drivers, newspaper couriers, and even delivery drones. And UPS is fighting rising delivery costs, which it is trying to shift to the retailers, and ultimately to the customers, by changing the way fees are calculated. Increasing pressures have caused the shipper’s margins to shrink as it presses to meet the surge of e-commerce, particularly from Amazon, which represents more than $1 billion of business for UPS.
As the Amazon website explains, ‘The vision for Amazon Logistics Technology is simple: to build Earth’s best delivery network. Our Logistics Technology team fuels, creates, and develops the systems used to drive the shipping of products from Amazon Fulfillment Centers to our Customers’ doorstep.” The Amazon Logistics Team “optimizes Amazon’s logistics network to reduce costs and pass those savings on to our customers.”
To date, however, Amazon logistics has a weaker track record for delivery than either UPS or USPS, but that looks to be shifting for 2016 as the e-retailer shifts in to high gear for its own delivery and fulfillment systems. The keys to success are speedy and inexpensive delivery, so Amazon will need to keep a sharp eye on its services, since a troubled delivery record could quickly wreck an e-commerce business — even Amazon’s.