In our coverage of the 2013 holiday buying surge period, Supply Chain Matters amplified the many reports relative to UPS, and to some extent FedEx, being thrown under the proverbial bus in the last-minute efforts among many E-tailers, including Amazon, to fulfill guaranteed delivery by the Christmas holiday. The result as we all now know was UPS’s admission that its network had been swamped in the immediate days prior to the holiday, and that “Brown” was forced to bear the onslaught of disappointed consumers.
In late March, FedEx CEO Fred Smith pointed a finger directly at online retailers indicating they need to shape-up on their sloppy last-minute shipping practices or risk losing customers.
The response comes from guess who- Amazon.
The Wall Street Journal revealed this evening what the industry has been suspecting for some months, that Amazon has been piloting its own same day package delivery services (paid subscription required). The article boldly declares: “The move is a shot across the bow to United Parcel Service Inc., FedEx Corp. and the U.S. Postal Service, which now deliver the overwhelming majority of Amazon packages.”
According to the WSJ, planning for the delivery network began several years ago but the project took on added urgency after the Christmas delivery snafu, which Amazon blamed on the carriers. Green Amazon delivery vans, driven by Amazon-supervised contactors have been operating in the greater San Francisco area and packages are labeled “AMZL” and “AMZN_US” to indicate an in-house delivery network. The vans are fed by trailers of direct shipments from local Amazon fulfillment centers. The network has also been piloted in the U.K according to an annual letter to Amazon shareholders. The article authors report that the U.K. efforts experienced considerable hiccups with customers experiencing late or inaccurate deliveries.
Amazon elected not to respond to WSJ’s request for comments regarding its report.
The article concludes that it far from clear that Amazon will achieve its goals, since existing package delivery giants have huge investments and proven capabilities in delivery networks. However, these pilots could pave the way for supporting premium priced same day delivery services in select major cities.
We suppose that this report, coming on the heels of previous media reports related to development efforts directed at Amazon delivery drones reinforce that the online E-tailing giant continues to think boldly about alternatives to current logistics and delivery services. Give credit where credit is due- Amazon thinks boldly and differently and continues to challenge online customer fulfillment norms.
More reinforcement came from today’s report of Amazon quarterly earnings, which are being characterized as skimpy profits amid double-digit increases in total sales. During the latest fiscal quarter, Amazon spent heavily on shipping, warehouses, cloud computing and other infrastructure initiatives. Shipping costs were reported as $1.8 billion, increasing 31 percent faster than revenues.
By our lens, that seems to be the core motivation for piloting a premium shipping network.
Bob Ferrari
