Amazon Air Cargo Takes Off
Two years ago, news stories began to circulate on how online retail titan Amazon sought to gain more control over its fulfillment infrastructure. The goal was to improve the efficiency of its delivery network while also controlling transportation costs.
Speculation ran rampant in industry publications and message boards:
“They’re going to take on FedEx and UPS.”
“They will become the world’s largest overnight package delivery service.”
“One day, every Amazon package will arrive within two hours.”
Now, we know what was in the works. The company recently unveiled the first Boeing 767 in a proposed fleet of 40 Amazon cargo planes, acquired through lease agreements with Atlas Air and Air Transport Services Group. More than ten aircraft are already in service.
The creation of an in-house air transportation network will not only reduce delivery times, it gives Amazon greater control over its own logistics.
The Turning Point: 2013
Christmas, 2013: millions of people shopped Amazon for holiday presents, and as many often do they waited until the last minute to complete their orders. That late surge in business, coupled with weather that was unseasonably awful even for December, resulted in thousands of presents that spent Christmas in the back of a truck instead of under a tree.
After issuing apologies and a Santa’s sack full of $20 gift cards, Amazon realized that its sole reliance on carriers had let them down. The company started buying its own trucks (they have about 4,000 now), and purchased a state-of-the-art air cargo warehouse at an airport in Wilmington, Ohio. The facility, once a major hub for DHL, is capable of moving about one-million packages a day. The company also has a network of more than 125 fulfillment centers and 20 sortation centers.
With the launching of its air transportation network, not to mention its much-publicized drone deliveries, Amazon is now a first-team logistics player. This does not mean that the company is ready to cut ties with its transportation partners. Amazon-branded planes will be used primarily for the one and two-day shipments expected form the company’s growing ranks of Amazon Prime customers.
For those who didn’t spend the $99 annual fee for Prime membership, UPS is apparently good enough. “We’ve long utilized air capacity through a variety of great partners to transport packages and we expect that to continue,” said Amazon spokesperson Amanda Ip.
Billions and Billions Sold
While it is too early to determine how well Amazon’s new fulfillment process will be implemented, it’s unlikely that any other company will adopt a similar strategy. Amazon is a unique entity in the market today, and may be the only company with fulfillment/distribution requirements on the same scale as the top international service providers that focus only on package transportation.
According to a report by Sanford C. Bernstein & Co., Amazon ships an average of 608 million packages a year. That is 1.6 million packages every day – and more than 1,000 packages a minute.
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