Following the Christmas holiday debacle in delivering packages in a timely manner to customers, it was apparent that Amazon needed to make changes. Amazon Prime was a contributor to the mess, and the fees for Prime have been raised which may help damp down the last minute rush during the next holiday season.
A very good article in DC Velocity outlines other changes that are planned:
- UPS, who has been the primary carrier, will be replaced by a network of regional carriers.
- “The top 40 markets will be served by a private fleet being built by Amazon to support an expansion of its online grocery business” (Amazon Fresh). This means there will be a big expansion from the three metro areas currently served by Amazon Fresh.
- The private fleet network will “comingle groceries with general merchandise.”
- “Orders will be routed through Amazon’s 55 fulfillments centers, with deliveries made the same day, the next day or, at most in two days.”
The article makes the point that many of these changes were planned before the Christmas debacle, but clearly delivery failures should give Amazon incentive to move faster.
One way to read the article is that the top 40 markets will solely be served by an Amazon private fleet. I don’t believe that could possibly be correct. I think it more likely that general merchandise will be primarily served by regional carriers with general merchandise opportunistically placed on Amazon Fresh trucks when the trucks are not fully loaded and a grocery/general merchandise route is synergistic.
Further, in my opinion, very few general merchandise orders that are not loaded on the private fleet will be capable of being delivered in the same day.
In a conversation with Ross Merritt, who is in charge of Marketing & Product Strategy at Grand Junction, he pointed out that different types of regional carriers have different capabilities based upon their network design and technological capabilities. Grand Junction provides a SaaS software platform designed for tendering loads to local delivery and courier companies. UPS would rarely be capable of same day deliveries because their vans once loaded at an Amazon distribution center (DC), their vans go back to a UPS sort center, which may be many miles from the Amazon DC, and then sort the orders on to numerous trucks that then make the last mile deliveries.
In short, the distance of the parcel carrier’s sort center from an Amazon DC, the length of time required to sort orders into numerous delivery vans, and the distance of the sort center from a population center, can all work against same day deliveries. If a regional carrier’s network is well aligned with an Amazon DC and a metro area, Amazon might be able to take an order in the morning in that urban area and deliver it at the end of the day.
Couriers would be able to reliably deliver not just in the same day, but even within a few hours. Couriers work in a point-to-point manner where a courier goes to a store, picks up one customer’s goods and goes directly to the customer and delivers them. Even in a big city, this methodology can lead to deliveries within 90 minutes. However, courier deliveries are more expensive and Amazon competes in part on price. It seems unlikely Amazon would extensively use couriers.
Regional parcel carriers are less expensive than a UPS or FedEx, but performance has to be carefully monitored. The Grand Junction solution is capable of tracking the performance of regional carriers.
In conclusion, from a supply chain perspective, Amazon continues to be the most interesting company in the world. But robust same day delivery general merchandise capabilities is not something that Amazon’s competitors need to worry about any time soon.