Depth | Amazon's ambition: to expand the logistics system, or intended to replace FedEx and UPS

Editor's note: Lei Feng network (search "Lei Feng network" public concern) has reported UPS launched drone delivery project, at that time there were comments that may Amazon's delivery business will be a share. However, this article starting with the Wall Street Journal provides a new perspective from Amazon's point of view. This article was jointly compiled by Xiong Meng and Jiang Xiaopian and must not be reproduced without the permission of Lei Feng.

"In order to reduce logistics costs, Amazon is integrating the logistics system. Some people say that online retailers are prepared to cooperate with several mainstream agents in the logistics industry," said Lee Hawkins of Wall Street.

At the peak of the early Thursday morning, a group of trucks opened to the warehouse near the Los Angeles International Airport. The workers wore bright green vests. Each wagon contained about 150 Amazon parcels and were sent to the customers' homes in the city.

The long-term logistics operators of online retailers are not all FedEx Express and US Post. Another part is Amazon's own logistics operator, which laid the foundation for Amazon to become a shipping and shipping giant.

An Amazon executive publicly stated that completing the logistics business can reasonably improve the transportation capacity, especially during the Christmas period. However, about 24 Amazon employees and current employees said in an interview that retailers have higher goals than they publicly acknowledge.

they said:

Amazonâ€™s goal is to not only deliver its own packages in the future, but also deliver packages from other retailers and customers, potentially subverting the relationship between traditional sellers and shippers.

Some executives have taken â€œconsumer citiesâ€ as their initial concept and agreed to establish a large-scale transportation system. With this transportation system, they can compete with well-known courier companies such as UPS.

Cargo executives, analysts and logistics experts all expressed doubts about this. They said that it is difficult to establish a domestic logistics system that competes with large players in the United States and that it is costly, especially at DHL Express 2000 in Deutsche Post AG. After billions of dollars.

Memphis FedEx Express:

Each year it takes more than US$5 billion to expand its scale; UPS expresses that it will cost more than US$2.5 billion to upgrade. The two companies are planning to use 4,000 centers and other courier equipment every day to deliver millions of packages around the world. There are also 1,000 aircraft and 200,000 ships to deliver goods.

Alan Graf, chief financial officer of Federal Logistics, said:

The level of global investment in sending courier equipment, packaging, aircraft, ships, imitating the services we provide, or services provided by competitors is low, and frankly speaking, it seems to us unrealistic. We have been doing this area for 40 years.

Atlanta UPS Express reduced the intensity of the competition, Chief Commercial Officer Alan Gershenhorn said with an analyst on a conference call:

UPS's transportation network system is difficult to match.

A spokesman for Amazon said in an e-mail statement:

We are very happy to have the same level of transportation as our competitors. If competitors improve service levels, we must also improve our service level and cannot be replaced.

Inside the company, as a senior official said, senior officials described how Amazon effectively built a fully-service logistics transportation network system from scratch.

Amazon strongly promoted the transportation sector to show that they are willing to challenge the traditional business model constraints and form new models in powerful technology companies.

Since Amazon started to be an online book seller, it has gained tremendous trust as a producer of TV shows and big screen movies. Amazon Web Services, as the fastest growing branch system, can provide data services for large companies. This year, it is estimated that sales will reach one billion US dollars.

After leaving the Amazon Center, the parcel will eventually arrive at the destination via the circuit, usually delivered by FedEx Express and UPS Express.

At this stage, Amazon competes with partners who have helped them. Since 2009, transportation costs as a part of sales have increased. Last year, Amazon spent 11.5 billion US dollars on transportation costs, accounting for 10.8% of sales. In 2010, it accounted for 7.5%. Last year, the total revenue was 107 billion US dollars.

According to Citigroup analysts, if Amazon does not use FedEx Express and UPS Express, it can save $1.1 billion in annual expenses. Each courier using self-owned logistics system can save 3 US dollars, or more. They estimate that if you use FedEx Express or UPS Express, you will spend an average of $7.81 per courier.

According to data from supply chain consulting company MWPVL International, Amazon has basically established a transportation system in the past two years. Recently Amazon has distributed about 70 express delivery devices in 21 states. According to the data of the United States Piper Investment Bank, 44% of the US population now has an Amazon delivery facility within 20 miles, which is only 5% compared to 2010.

From factories in China that manage through the United States port to large, suburban warehouses and surrounding parcel sorting centers, these help explain why Amazon wants to better control the logistics chain. It hopes to provide more transportation time, including the transportation time that the traditional logistics system cannot provide. People understand this plan, but how much this system will cost is unknown.

In order to effectively supervise this transportation project, this summer Amazon rehires Uber Technology's executive Tim Collins as vice president of global logistics. Mr. Collins spent 16 years at Amazon, guiding retailers in Europe, before leaving the Amazon. , joined Uber at the end of 2014.

Relevant persons said:

In recent years, Amazon has recruited more than a dozen UPS Express and FedEx executives and hundreds of its UPS courier workers.

At the same time, Amazon's transportation is more of a sea, land, and air movement: buying long-distance truck trailers to participate in road transportation, calling drones to participate in air transportation, and also developing ships to participate in maritime transportation. In August of this year, Amazon demonstrated its nifty airborne team: 40 Boeing 767-300F cargo planes, but also launched the eye-catching Prime Air logistics service.

According to financial services company Robert W. Baird:

The complete logistics network allows Amazon to achieve a global transportation market and generate US$400 billion in annual revenue.

In addition, Amazon also undermined its relationship with UPS Express and FedEx. According to related sources, Amazon has generated nearly US$1 billion in revenue for UPS Express. More importantly, the sales giant also allows drivers to remove more packages at once, helping UPS Express and FedEx become more efficient.

Amazon also established links with other small parcel airlines. In the past two years, Amazon has begun to reduce its parcels with several local and regional transportation partners. In recent years, Amazon has begun to solve "the last mile problem (the most expensive cost of wrapping the last mile in the journey from the shipper to the consignee)" and conduct tests in some cities.

Logistics experts said:

To make the last mile more profitable, companies need to ship as many packages as possible at each station. And now, Amazon has not crossed the threshold of the "last mile."

Now, Amazon is testing in big cities such as Los Angeles, Chicago and Miami. These cities have large population densities and all participate in Amazonâ€™s â€œ$99-per-year Prime unlimited shipping programâ€. Given the unsatisfactory traffic conditions in these cities (especially Los Angeles), this transport test is also a test of the patience and speed of drivers.

According to stakeholders, Amazon only uses trucks and its monitored infrastructure to complete certain transportation. At the same time, it has also begun to benefit a small number of customers in Los Angeles, they can use Amazon shipping services to send courier. This test will make Amazon trucks not empty when they return to the warehouse, so more customers will be willing to use Amazon's transportation business.

Relevant sources also revealed that on Christmas 2013, UPS did not deliver the goods in time, customers refunded, and Amazon lost millions of dollars. After this, Amazon began to establish the â€œlast mileâ€ network.

According to the logistics consulting company MWPVL International:

Since then, Amazon has doubled the number of U.S. warehouses, totaling over 180, of which 70 are local transportation stations and Prime Now centers, and each major city has sites.

A few years ago, if an Atlanta-based Amazon Prime customer booked a beer cup that was priced at $13 and was sold only in California, Amazon would pick up and ship the goods in the nearest UPS airport. The cargo plane will then transport the cargo to Louisville, Kentucky, and transport it to Atlanta. Next, the parcels will be shipped to the nearest transportation center and transported by UPS trucks to the customer's doorstep. Cargo needs to go through a long process on the road, which will greatly reduce Amazon's profitability.

Nowadays, Amazon's transportation has become more accurate and efficient. If the beer is not stored in a warehouse near Atlanta, Amazon will be able to use a dedicated aircraft to transport the beer glass to Atlanta and pay a certain amount to the Postal Administration before shipping. This will reduce the transport distance and shorten the transportation time.

At the same time, Amazon is testing the "I Have Space" project, which can use other companies' warehouses to help Amazon place inventory.

In addition, Amazon has also set up a Flex project, and ordinary people can use the Amazon App as a part-time delivery person. Last year, the project has expanded to nearly 30 metropolises. According to Amazon.com, the part-time delivery person will be able to earn 25 U.S. dollars a hour for a shift.

Some Amazon executives think:

This mode of transport can offset fuel and insurance costs and can become an important part of the company's network in the future.

At the same time, Amazonâ€™s â€œlast mileâ€ operation has been successfully tested in some parts of San Francisco. Two years ago, workers needed to rent freight trucks. These trucks were converted trucks and parked in the parking lot next to Candlestick Park. Today, a brand new Amazon white van departs from a huge warehouse near the airport and runs on the hustle and bustle of San Francisco, also on Sundays.

Via:Wall Street Journal