Sunday 19th Nov 2017 - Logistics Manager

Will Amazon be your biggest competitor in 2016?

Amazon is about to lease 20 Boeing 767s, and start its own air cargo service, according to press reports from the United States.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

The story originated with the “Seattle Times” – Seattle of course is home to both Amazon and Boeing. It suggests that Amazon wants to take control of its cargo operations and avoid delays at third party carriers such as UPS and FedEx in the US.

Earlier this year, the US aviation press reported that aircraft lessor Air Transport Services Group had started trials of an air express service based at Wilmington, Ohio for an unnamed client. The suggestion now is that this client is Amazon.

Amazon itself is saying nothing – nor are any of the other organisations that have been named – so at the moment, this all falls into the realm of speculation.

And it rather begs the question: why would Amazon want to do this?

What is certain is that Amazon has been extending its sphere of operations beyond its retail core. It created Amazon Web Services to provide range of cloud infrastructure services – that is now reckoned to be generating some $7 billion revenue a year.

It has developed “Fulfilment by Amazon”. This provides other retailers with a complete fulfilment service from storing goods in an Amazon fulfilment centre, pick and pack, through to delivery to the consumer. It works on a pay-per-use model and there are no minimum inventory requirements.

And it has been expanding its Amazon Logistics operation which operates a number of delivery stations using regional partners to make deliveries to the consumer. It impact on the parcels market in the UK is significant.

Royal Mail’s chief executive Moya Greene recently warned that “as a result of Amazon’s roll-out of its own delivery network, we estimate that volume growth in our UK addressable parcel market has, on average, been reduced to around 1-2 per cent per annum in the short term”.

Whether or not Amazon decides to launch its own air express operation, it is clear that the company will continue to expand its activities in the logistics arena.

And that in turn could mean that more and more logistics businesses finding that their biggest competitor is now Amazon.