Amazon tests logistics as a service

Amazon has been adding to its fleet in preparation for a growing customer base– purchasing 11 Delta Air Lines and WestJet Airlines planes to be converted from passenger to cargo planes. Amazon is investing in sustainable aviation fuel, solar panels, and leading-edge electric ground service equipment, showing that they’re ready to do things differently than the leading carriers. 

In May 2020, Amazon launched a “logistics as a service” arm in the UK. Researchers at DePaul University predict we’ll see the same in the US within the next 18 months. When the launch occurs, the researchers believe that Amazon Air, especially the CVG/Wilmington hub, will be critical to the program’s success.

Amazon’s cargo shipments may not be as far in the future as some might believe. A former employee at Amazon’s Baltimore air cargo hub shared that they regularly unloaded USPS cargo from Amazon planes. Similarly, In 2019, Sun Country Airlines, one of Amazon’s air cargo carriers, disclosed that they are required to carry cargo from the USPS on Amazon’s behalf.

What can we expect from Amazon?

The report from DePaul University predicts that Amazon will focus its offerings on retail-to-consumer movements, rather than trying to replicate UPS and FedEx’s door-to-door network. 

Unlike FedEx, which dropped (and quickly reinstated) 1,400 less-than-truckload (LTL) clients this summer, Amazon plans to take advantage of wasted space in their trucks. CNBC reports that Amazon’s algorithms will connect trucks and sellers– shipping at a discounted rate to profit off empty space in trucks.

Should UPS and FedEx be concerned?

While Morgan Stanley believes Amazon may launch its third-party delivery service as soon as this year, nothing has been announced yet. Even if they do, the big parcel carriers’ immediate concern would be more about the diminishing Amazon volume being tendered to them rather than the addition of a new player in the market. Amazon’s delivery service is still essentially a last-mile offering which is a far cry from a full fledged pickup, sort, and delivery service. Building this from scratch will require many billions of dollars in network infrastructure – an investment that would strain even the 14th richest nation in the world.

One day, Amazon may be a great shipping option for your brand. Until then, ShipRx can help you keep your shipping costs low through contract negotiations and parcel audits with UPS and FedEx. We keep our finger on the pulse of the shipping industry, and you can be sure that as soon as there’s a better way to save money on shipping, we’ll let you know.

James Founding Partner