Amazon has a new initiative that will shake up the transportation industry. Over the past several years, we've seen many changes in this industry, causing major supply chain disruptions with railroad strikes, ocean carriers merging with other steamship lines, port disruptions, and driver shortages. But now, Amazon has been purchasing logistics providers, airplanes, ocean carriers, and others, intending to start shipping their own products and orders for other businesses.
CNBC reports that, “Amazon is on a spending spree to grow its fleet of planes, vans, semi-trucks, and drivers in its latest move to compete with FedEx and UPS. Now, it's using the added capacity to move cargo for outside customers, betting big on the business of third-party shipping while also delivering 72% of its own packages." The article continues with a quote from e-commerce consultant Chris McCabe, a seller performance investigator at Amazon from 2006 to 2012, "Down the road, I think Amazon will be so big, so powerful, so wealthy, they will simply absorb UPS."
To deliver the other 28% of its packages, Amazon is outsourcing much of this work to the US Postal Service and partnering with small trucking firms that provide dedicated capacity to service Amazon customers. Amazon has also ordered 100,000 custom electric delivery vehicles from Rivian, increased their rail load volume, and procured more and more trucks.
Amazon continues to expand its last-mile delivery services by using electric cargo bikes to deliver packages in urban areas and testing drones for delivery purposes. Amazon is also paying fuel costs for many freight partners and upping the pay per hour for delivery partners.
Plus, Amazon prime members can now shop from their favorite brand stores via Amazon.com and have their purchases delivered on the same day to their doorstep. Retail brands are partnering with Amazon in its expanded seller program, which includes delivery direct from those retail locations.
The Amazon Freight Program claims the company has a network of 30,000+ Amazon trailers and carriers that will move full truckload freight. Amazon’s freight matching system mentions, “We service thousands of lanes in the US. When your network overlaps with ours, you can leverage our reliability and competitive rates.”
Major Disruption in the Transportation Industry
How can parcel carriers and LTL carriers compete with the Amazon behemoth? What can a small company do to get its products shipped? Will Amazon ignore them and leave them on their own? What can companies do to prepare for this significant disruption in the transportation industry?
For small to medium-sized (SME) companies who want to avoid partnering with Amazon for fear of being swallowed up or losing customers, the solution is to use technology that is purpose-built for small- to medium-sized companies. While Amazon gives consumers the products they want, when they want them, using a transportation management system can help position a business to compete against the e-commerce giant.
Transportation management systems (TMS) can help businesses better compete against Amazon by providing rate comparisons, tracking and tracing shipments, securing capacity, booking freight, and managing shipments. A TMS will move the SME forward as companies spend millions on freight and lose hundreds of thousands of dollars due to inefficiencies, non-optimal mode selection, and discrepancies.
A TMS available to small businesses will help companies manage their freight more efficiently, have visibility to all shipments, gain control over their freight operations, and utilize their assets better. A TMS helps shippers fill their trucks better, creating revenue opportunities for transportation operations, which were once thought of as a cost center. Additionally, this system can manage contracts, contract rates, accessorial charges, fuel surcharges, certifications, and more. It ensures that the contract terms between the carriers and shippers are monitored and easily managed. The TMS can help with capacity issues by tapping into various channels, such as spot rates and load boards carriers use to find loads.
When you order from Amazon, you typically know when your order will arrive. You receive notification of where your order is in its life cycle and are alerted when the package is at your front door. With a TMS system, SMEs can see where drivers and shipments are in real time, provided the trucks have GPS devices on board. With real-time tracking, you can notify customers if a shipment will be delayed, which helps keep the customer happy, knowing you are doing everything you can to help them get their order on time and in full.
As Amazon disrupts for-hire logistics in nearly every mode, you can expect major change to decades-old pricing methodologies, the advent of surge pricing for high-demand time periods, freight handling service charges (accessorials), access and frequency of deliveries to remote areas, and even variations to carrier liability limits for lost and damaged goods. All of this will require the power of a TMS designed for small and medium-sized businesses. Doing without a tool like this in the coming times will be tantamount to performing open heart surgery with a butter knife and Band-Aids.
Sam Polakoff is CEO and Founder, BrillDog.
