Amazon.com Purchases Trailers to Speed Up Package Shipments
Amazon.com Inc. said it has purchased thousands of dry van trailers to carry goods from its distribution centers to local sorting facilities, a move seen as further evidence of the company’s intent to create its own delivery fleet and develop faster and more efficient transportation services for itself and other merchants that sell goods online.
Speaking to reporters in Chicago earlier this month at an event where employees were loading trailers with packages to be shipped to U.S. soldiers overseas, Mike Roth, Amazon’s vice president of North American operations, said the company is buying “thousands and thousands” of Amazon Prime-branded trailers and would continue to invest in its fulfillment network to meet rising demand for package deliveries.
“I couldn’t be more pleased that our very first Amazon trailer headed out on the road carrying such special packages — thousands of boxes filled with beloved holiday items and Amazon Fire devices to support troops abroad this holiday season,” Roth said in a statement provided by the company to Transport Topics last week.
Amazon spokeswoman Kelly Cheeseman said the trailers are part of a nationwide “rollout” to increase capacity for package delivery from fulfillment centers to local distribution hubs. The trailers would be driven by various “dedicated third-party service providers,” she noted, without providing additional details.
Cheeseman did not comment on reports that Amazon has set up an in-house air cargo delivery operation to expedite the movement of packages in its network. The Verge website reported that Air Transport Services Group had begun shipping consumer goods out of a facility in Wilmington, Ohio, for a client that is thought to be Amazon.
“Amazon is in the process of becoming a logistics company,” said Jeremy Bodenhamer, CEO of ShipHawk, a California-based company that provides shipping of automation software. “It started in warehousing, then added fulfillment and now it is running linehauls and using trucks and planes to get packages to the point of delivery. One day Amazon is going to flip the switch” and take on responsibility for transportation and final-mile delivery.
Satish Jindel, owner of SJ Consulting Group in Sewickley, Pennsylvania, said he doesn’t see the purchase of trailers as a sign that Amazon is getting into the trucking business, at least not yet.
“They don’t want to be a transportation company,” he said in an interview with TT. “They want to make sure the customer experience is what they want it to be.”
Having trailers available means Amazon doesn’t have to wait for trucking companies to arrive to begin loading trailers, which can speed up the process of shipping.
“This move by Amazon is another step to further streamline, control and integrate its fulfillment operations,” said Evan Armstrong, president of Armstrong & Associates, a logistics research and consulting firm based in West Allis, Wisconsin. “With its significant outbound shipment volumes, having an on-hand trailer pool should provide Amazon with increased operational flexibility.”
Bodenhamer and Jindel said they believe Amazon’s strategy also is designed to lower costs and make the company more attractive as a distribution service for other online retailers.
“I think this is about control,” Bodenhamer said. “They want every retailer to sell through Fulfillment by Amazon by offering quick, efficient deliveries.”
Nearly half of Amazon’s online sales already come from independent retailers using Seattle-based Amazon’s distribution system, according to data reported by the company in the third quarter ended Sept. 30.
Jitenda Waral and Charles Allen of Bloomberg Intelligence said they expect growth to continue in 2016 as the number of Amazon Prime subscribers continues to increase.
“The cycle continues as more subscribers bring sellers,” Waral and Allen said in a research report published last week.
Jindel said Amazon is shipping more than 5 million packages a day during the holiday season and, if sales continue to grow at double-digit rates, the company’s volume could soon exceed the number of ground package shipments of FedEx Corp.
“Amazon has established fulfillment capabilities that it figures will be more robust and lower cost than what most retailers can do for themselves,” Jindel explained. “They figure that will mean Amazon will always have an advantage in the marketplace.”
At the Chicago event, when asked whether Amazon will continue to spend more on growing its fleet, Crain’s Chicago Business reported that Roth said: “It’s really driven by customer demand. If we see there’s good use and that we can expedite shipments to our customers, I think we will continue to invest, yes.”
