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Amazon Looking To Abandon UPS, FedEx In Favor of Its Own Delivery Service (arstechnica.com) 239

An anonymous reader quotes a report from Ars Technica: A report by The Wall Street Journal claims that Amazon is building its own shipping service to replace FedEx and UPS, giving it more control over its packages and possibly allowing it to ship packages from other retailers. Amazon has said its own delivery services would be meant to increase its capacity during busier times of the year, like the upcoming holiday season. However, "current and former Amazon managers and business partners" claim that the company's plans are bigger than that. The initiative dubbed "Consume the City" will eventually let Amazon "haul and deliver" its own packages and those of other retailers and consumers. That delivery network would also directly compete with the likes of UPS and FedEx. It makes sense that Amazon would want to sell, ship, and deliver orders on its own. The report estimates that the company spent $11.5 billion on shipping just last year, amounting to 10.8 percent of sales. The shipping process is currently a bit convoluted: packages from Amazon warehouses get sent to one of two shipping routes, either FedEx or UPS, or to a sorting facility that lumps all packages with similar zip codes together. FedEx and UPS handle its shipments and deliver them to customers, while the packages at the sorting facilities either get delivered via USPS or by Amazon employees themselves. If Amazon were to have control over its shipments over longer distances, it's estimated that the company could save about $3 per package -- about $1.1 billion annually.
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Amazon Looking To Abandon UPS, FedEx In Favor of Its Own Delivery Service

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  • Good! (Score:2, Insightful)

    by Anonymous Coward

    These shitty courier companies that don't give a shit about the receiver as long as they keep their big contracts finally have to get off their ass and stop being shitty.

    • by lucm ( 889690 )

      I actually stopped ordering from Amazon when they started shipping most of my stuff with UPS. The shopping convenience fades quickly when you have to deal with frequent shipping problems, and 1/3 of the time for big items you end up going at the effing UPS warehouse because the lazy driver didn't want to be bothered to move it from his truck and just left bullshit "no answer" tags on your mailbox over and over.

      • I've had the opposite experience. Every order shipped via Amazon shipping has gotten lost.
        • From my own experience:
          Fedex - From Colorado to New Mexico via Chicago, Cincinnati, Phoenix, Dallas, and Cincinnati. My '5-day Ground' took near 3 weeks.

          USPS - New Mexico to Texas in 3-4 days... but they put the key in the wrong post box so you gotta bug your neighbors to get your packages.

          DHL - 3 weeks. Easy.

          Amazon - I pay for Prime and select 2-Day. For some stupid reason that becomes 5-6 day, no rationale given, no way to question it directly, no way to "update shipping" and have it be correct
      • by Jhon ( 241832 )

        I've got a ton of free stuff from Amazon because they keep using Dynamex.

        I just call and complain and I get anything from $10 credit to a refund for everything I ordered + the OK to keep it when it arrives.

        Literally, every single time Dynamex was used they screwed it up. Same day turning in to 3 or 4 days, saying they delivered the item at 8pm (and I'm on the phone with Amazon saying it wasn't delivered when they show up at 11pm delivering) to not delivering at all (I have a security cam and was able to pr

      • by kullnd ( 760403 )
        Wow, opposite for me - UPS has always been amazing here. If FedEx is used I expect problems.
      • by jonwil ( 467024 )

        If you are having problems with courier or postal companies that leave a card and dont actually deliver your package even when you are home, take video next time it happens and use that video as part of a complaint to the courier company. Tell them that you were home all day yet the delivery driver still left a "no-one was home" card instead of actually delivering your package.

        • by dgatwood ( 11270 )

          I keep having trouble with carriers leaving packages on Saturday and not bothering to ring the doorbell, then going out to church Sunday morning and finding them. I guess that because no other houses in my neighborhood have a doorbell there, they don't bother to look.

          The irony, of course, is that package carriers are the main reason I installed a doorbell on that door in the first place.

        • Use landmines. Protip: use low powered ones in order to reduce unnecessary damage to your goods.

      • Might be just luck, but I've never had a problem with UPS. Their deliveries are always on time at the least, and early at the best. The only courier I've had a significant problem with is USPS. Fuck USPS, it always arrives at least two days late. Then again, I've never bought anything big (physically speaking) from Amazon so I've never had to worry about that.
    • Re:Good! (Score:4, Insightful)

      by jcr ( 53032 ) <jcr@@@mac...com> on Wednesday September 28, 2016 @07:46PM (#52980753) Journal

      I have no complaints with FedEx, but UPS has always been a shitty vendor.

      -jcr

  • If this is actually implemented will be interesting to see how much they save in a few years-- especially as they will end up re-building the existing infrastructure.

    The article didn't mentioned it but I'm also curious if they start using their own electric vehicles as well? (Similar to how Google has backup DC power [cnet.com] to their servers.)

    i.e.

    Another illustration of Google's obsession with efficiency comes through power supply design. Power supplies convert conventional AC (alternating current--what you get fro

    • I wonder if Amazon will pass along any savings to customers?

      Amazon? No, they won't. Plus, they will drive the other carriers into higher costs which will discourage other competitors to Amazon by raising their shipping costs. It's a win win for Amazon, which is a loose loose for customers.

      • Common wisdom (amongst MBA types anyway) is to outsource things like shipping to external companies who are experts in that field. Reasons for doing it yourself are: the existing services suck, you think you can do better (which may be the case, what with their research into delivery by drone), or doing it yourself gives you a competitive edge for other reasons. Your suggestion may be one of those other reasons. Once this service is in place, they are in a good position to offer free shipping on anything. A
      • by rtb61 ( 674572 )

        Amazon is not an online seller of products, Amazon is a logistics company, those online sales drive their logistics revenue, it is normal for a logistics company to seek to ship products directly. UPS and FedEx are the slow companies as they should have established online sales of products to drive work to the logistics and dispatch branches. Likely that is what is floating around in the background and the reason for Amazons push into the dispatch arena.

        The whole idea is manufacturers abandon warehouses a

    • by ranton ( 36917 )

      I would be interesting to see if they save any money here as well, considering UPS operates on about a 7-8% profit margin. Considering Amazon is such a large customer I would be willing to bet they make far less profit on Amazon shipments. Not a lot of room for savings unless they believe they have a new better way of doing shipping.

      UPS has a revenue of about $60 billion per year, while Amazon pays about $5 billion in yearly shipping costs. This puts them in an entirely different order of magnitude as far a

      • You make a good point.

        On the other hand, UPS and FedEx are deisgned for any customer to send any type of package from anywhere to anywhere, using any of many services. Amazon's will be designed for only Amazon to send packages from the places they choose, and they need not deliver everywhere - they can have UPS deliver to small towns for them. Amazon doesn't need to ship those cookies grandma made for you and she's shipping from Tiny Town, Colorado, paying by check. Amazon Shipping will have one customer

        • You did not read the synopsis:

          "The initiative dubbed "Consume the City" will eventually let Amazon "haul and deliver" its own packages and those of other retailers and consumers. That delivery network would also directly compete with the likes of UPS and FedEx."

          It will ship Grandma's cookies to you.

      • I would be interesting to see if they save any money here as well, considering UPS operates on about a 7-8% profit margin. Considering Amazon is such a large customer I would be willing to bet they make far less profit on Amazon shipments. Not a lot of room for savings unless they believe they have a new better way of doing shipping.

        UPS had an operating profit of around 13% last year [ups.com] according to their annual report. That is plenty of margin to make it worthwhile for Amazon to want to vertically integrate their shipping.

        Several considerations:
        1) Amazon's retail business is a low margin business to begin with and they compete significantly on price - even a few percent can matter a lot. Walmart has margins of around 2-3% for comparison. If Amazon can eliminate the margin leakage to UPS that goes straight to their bottom line.
        2) Integ

    • Well, their model effectively has the infrastructure already. Their distribution centers require less double-handling that FedEx or UPS, and they can hire independent contractors to actually perform delivery, externalizing most costs.

      I would guess their end-game is to minimize shipping costs, and their only way left to do it now is by internalizing it, or at least as much of it near their distribution centers as possible.

    • by swb ( 14022 )

      Most of the UPS step vans are custom made for them, although I have noticed an uptick in what look like standard "Eurovans" lately. I think their over the road trailers are also custom made for them.

      I could see Amazon partnering with a major vehicle company to come up with an electric delivery van.

      I could also see them picking up a few retired airliners to manage moving bulk quantities between distribution centers to balance inventories.

  • First it was Uber. (Score:5, Insightful)

    by BarbaraHudson ( 3785311 ) <<moc.liamg> <ta> <nosduharabrab>> on Wednesday September 28, 2016 @06:43PM (#52980459) Journal

    Uber took away the taxi driver jobs, but I didn't say anything because I wasn't a taxi driver.
    Amazon took away independent courier jobs, but I didn't say anything because I wasn't a courier.
    You know how this ends ...

    • by ArtemaOne ( 1300025 ) on Wednesday September 28, 2016 @07:05PM (#52980573)
      They didn't take anything. They were competitive and surpassed their competition economically with better business models.
      • by BarbaraHudson ( 3785311 ) <<moc.liamg> <ta> <nosduharabrab>> on Wednesday September 28, 2016 @08:16PM (#52980887) Journal
        Competitive? That's not how I'd spell operating an illegal public transport business.
      • by squiggleslash ( 241428 ) on Wednesday September 28, 2016 @08:32PM (#52980949) Homepage Journal
        It's easy to gain a competitive advantage if you have more or less the exact same business model, but ignore the laws and regulations that govern your competitors.
        • Hell yeah! Overthrow the authoritarians!
        • by AmiMoJo ( 196126 )

          Amazon does the same sort of thing when it can. Until 2012 there was a tax loophole in the UK where stuff sold from the Channel Islands didn't have to pay any sales tax if it was valued at less than about £20. Amazon and a few other sites (like Play) used this to avoid paying sales tax on books and CDs and many other low cost items, by setting up shipping depots there.

          More recently Amazon was fined for ignoring the rules on shipping hazardous materials, namely lithium batteries.

        • by radish ( 98371 )

          I use Uber not because it's cheaper but because it's better than a regular cab. The cars are nicer, the drivers are nicer, the service is more convenient. There is no rule or regulation forcing yellow cabs in NYC to be smelly, noisy and uncomfortable. There's no TLC bylaw forcing yellow cab drivers to be assholes. There is now an app which lets you hail a yellow cab, and that's a start, but they have a long way to go. The taxi industry has benefitted for years from having a local monopoly and gouging driver

    • You know how this ends ...

      Indeed. It will likely end the same way all other productivity improvements have ended throughout history: With greater prosperity and rising living standards.

      • If the gains from increased productivity had been distribute between the employers and the employees over the last generation, we'd be enjoying 2-day work weeks. History is no guarantee of the future. People used to say that house prices would never go down ... until they did. We're still experiencing the financial hangover. People used to say that a degree was a guarantee of a job ... until nowadays it mostly isn't. People used to say that oil the days of cheap oil were over because of decreasing supply

        • by drinkypoo ( 153816 ) <martin.espinoza@gmail.com> on Thursday September 29, 2016 @07:33AM (#52982815) Homepage Journal

          People used to say that house prices would never go down ... until they did. We're still experiencing the financial hangover.

          That was a brief moment, it was manipulation, and now we're "enjoying" record high prices because of more manipulation. The banks are sitting on multiple empty houses for every homeless man, woman and child in America — while homelessness is at a high not seen since the Great Depression. So is unemployment, if you measure it correctly. That means looking at the inverse of the workforce participation rate, and not just counting persons eligible to receive unemployment benefits which is how the official number is calculated.

          People used to say that a degree was a guarantee of a job ... until nowadays it mostly isn't.

          It never was. People just said that. Or, it still is, but now it's a PhD or a Master's, not just a Bachelor's.

          People used to say that oil the days of cheap oil were over because of decreasing supply ... now we're in a glut and prices tanked.

          The amount of oil production is similar to what it was previously. Prices have tanked because OPEC is dumping oil. This is going to lead to a more severe cost increase due to decreasing supply in the future than what we'd have already had, since it's leading to less renewables since people buy less of them when oil is cheap.

          North Korea used to be a pimple on the world's butt ... and now they have nukes.

          Not for long.

          The US used to be the number one economy - now China surpasses it in terms purchasing power parity (ppp).

          They're heading for an economic crash that makes what's going on over here look like fluffy kitten time. They keep building stuff they can't use because they won't let their people have things.

    • by swell ( 195815 )

      First it was UPS...

      I was a mail carrier way back when. A fairly laid back job that paid quite well. Then came UPS (and similar companies). Managers followed the drivers around with a stopwatch in the unending search for more efficiency. Notice how young and healthy the drivers are- they are athletes trying to keep ahead of that stopwatch. But they were paid fairly well, don't know about now. The US Post Office pays very poorly now.

      So into this mix steps Amazon, the ultimate in efficiency. They will work the

  • Amazon said they were considering using drones to deliver packages, so using their own employees ... tomato / tomato.

  • by willoughby ( 1367773 ) on Wednesday September 28, 2016 @06:49PM (#52980493)

    Well, maybe. You don't save $ by having "control over your shipments", you'd save by making your shipping system more efficient than alternative shippers. FedEx & UPS are pretty darn good at it and have a lot of experience. Trying to break into that game would be costly and maybe foolhardy. Just the fleet management alone could be enough to eat up any "savings". Selling the service to other companies in addition to delivering your own stuff might work albeit not immediately profitable.

    It might work out but I think you'd have to throw a lot of money at it to prime the pump.

    • It might work out but I think you'd have to throw a lot of money at it to prime the pump.

      If there's one thing Jeff Bezos isn't afraid of - it's spending money to make money.

    • Selling the service to other companies in addition to delivering your own stuff might work albeit not immediately profitable.

      So, basically, the real world equivalent of the original AWS. "We have a shitload of extra computing power, wanna rent it?". Except now it's, "We have a shitload of extra delivery power, wanna rent it?".

    • by tlhIngan ( 30335 )

      Well, maybe. You don't save $ by having "control over your shipments", you'd save by making your shipping system more efficient than alternative shippers. FedEx & UPS are pretty darn good at it and have a lot of experience. Trying to break into that game would be costly and maybe foolhardy. Just the fleet management alone could be enough to eat up any "savings". Selling the service to other companies in addition to delivering your own stuff might work albeit not immediately profitable.

      Actually, FedEx an

      • Actually, FedEx and UPS are bit players. USPS is the big gorilla in the room.

        Not in my room, nor about 190 other rooms.

      • by sjbe ( 173966 )

        FedEx and UPS are bit players. USPS is the big gorilla in the room.

        Not in package shipping they aren't. USPS is small potatoes in the package shipping business. In Q2 2016 USPS shipped $1.2billion [usps.com] in packages. UPS had revenues 10X that amount [google.com] over the same period the vast majority of which was in package shipments.

        In a week, USPS moves more than UPS does in a year. FedEx is smaller. It takes USPS just 3 days to do the same.

        You are comparing letters with packages. Not a meaningful comparison. In theory USPS could compete strongly in package delivery but they haven't been effective at it to date.

        Amazon's network may be big, but they won't be UPS/FedEx big.

        They don't have to be as big as the third party couriers networks. Amazon doesn't h

    • You don't save $ by having "control over your shipments", you'd save by making your shipping system more efficient than alternative shippers. FedEx & UPS are pretty darn good at it and have a lot of experience.

      Untrue on both counts. First off any time Amazon (or anyone else) ships via UPS or FedEx they are experiencing margin leakage to the tune of something like 8-13% which is actually quite a lot of margin in a low margin industry. That is money that could stay within the company if Amazon could vertically integrate. It's highly unlikely that for a substantial portion of Amazon's customer base that they couldn't save money by taking over at least a portion of the freight themselves. They certainly save mone

  • I see the amazon white vans everywhere in Chicago area. Generic white van with magnetic amazon logo on the side. They ones I have seen drive like maniacs, really fast through narrow parking lots. I just assumed they hired in a similar manner to uber, i.e. , anyone with a drivers license can be a delivery truck.

    • Amazon has been doing this in the Pacific Northwest for several months already.

      And until recently, you could always tell an "Amazon" delivery because the packages were left out in the rain, thrown over the fence, dropped in the middle of the driveway, or otherwise mishandled by lazy-ass delivery people. But I suspect they've gotten a lot of complaints, because the last couple of Amazon-delivered packages were left at our actual door - what a concept!

  • I have a friend who works for Amazon complaining about having to sign for a (very low cost) shipment he got through UPS from Amazon. Then he said he couldn't wait for Amazon to have their own delivery service so he wouldn't have to do such ridiculous things anymore. He clearly did not realize that the reason the UPS driver needed his signature was because AMAZON chose the "signature required" option when they shipped it.

    Amazon is going to do the same thing in many ways, request that UPS or Fedex do somet
  • I find that FedEx is usually pretty good; I get that Amazon could save themselves a lot of money by doing their own delivery, but they might want to maintain a relationship with FedEx, for times when delivery volume exceeds current capacity or when other factors compromise their own fleet's ability to deliver. As for UPS, well, it's like that other common brown thing - it stinks, and nobody likes it. If Amazon flushes them, good riddance.

  • Now the shipping/logistics folks get to join in on the fun of being actively hated by your employer!

  • For some reason they seem to hire people who can't read an address, let alone get out of their fucking car.

    Delivery #1 - Phone call from Washington DC number, girl who can't speak English asks for wrong name, asks if I live at address that is incorrect. Once I figure out who the hell it is, I say correct address they say ok. (It's an apartment, there's a fricking buzzer) 1 hour later I get call from same number, I tell her to buzz the door, she doesn't, says she's outside. I go outside and she's half a bl

  • If Amazon wants to SAVE money on shipping, how about they pay attention to the size of boxes and packing material in comparison to the original item purchased?

    https://www.buzzfeed.com/moren... [buzzfeed.com]

    This makes me wish I'd taken pics of the packaging for the two circle batteries i just received for my key fobs for my car, because that shit was ridiculous!

    • by bongey ( 974911 )

      HP once sent 8 license keys for VMware , each on single piece of paper, and each piece paper in 8 2x2ft box.es. Also stuff with the fancy foam to protect one piece of paper.

  • Fedex has an enormous airfleet. I'm sure they are able to buy planes at prices other people can only dream of. Similarly UPS has a fleet of over 100K vehicles, which can be bought at a great discount (present supplier seems to be Daimler-Benz).

    I doubt Amazon can get anywhere close to those savings by going on their own.

    • by dgatwood ( 11270 )

      They don't need planes for the vast majority of their deliveries. Amazon has distribution centers in 21 states, within 20 minutes of something like 30% of the population, and within plausible single-day delivery range of probably the majority of the population. So for products that are frequently ordered (and thus are stocked at every depot), they can deliver to almost everyone on the same day by truck, or rent a few small warehouses in a few places and deliver the next day to probably 80–90% of th

  • If Amazon's service winds up even vaguely resembling their favorite go-to delivery whore these days, OnTrac, I hope it dies in an inferno. Amazon likes to always specify no-sig-required with all of its deliveries now. Amazon does this to please the carrier and get a discount, because only one delivery attempt is ever required. Since the package will be simply left unattended if no immediate response to the delivery is apparent, this results in package theft, among other things. The Machiavellian behavio

  • Nice to see the Planet Express guys getting work.

    Three hours and 90-odd comments before this, and no Futurama? Hell, Bezos probably doesn't care about the costs, so long as he cures his crippling bone-itis.

    Sweet bacteria of Liberia, what this place has become.

  • I honestly do not recall the last time I got an Amazon package via UPS (and never FedEx). And this is in a decent sized suburbia. For at least two years now, probably longer, everything arrives by USPS and frankly they are just as reliable as was UPS, perhaps more so.

  • is the option where *I* as the paying customer get to control how packages are delivered to me, and by which service.

    And I am happy to pay the associated shipping costs for my choice - I never asked for "free shipping"

    I cannot order from Amazon at all, ever, because shipping is "pot luck" and I *MUST* know how something will be shipped BEFORE placing any order.

    UPS CAN NOT deliver to me, PERIOD. I can accept FedEx, but need to list a different delivery address. Or I can go with USPS to my home address (prefe

  • They think they can use Independent Contractors to get out of kinds of costs like.

    Commercial insurance
    Minimum wage
    Cell phone reimbursement meanly (CA and other places)
    Over time
    car / truck / van expenses reimbursement and inspections
    CDL's for drivers
    Lost / stolen stuff.
    Workers comp
    Hours on duty for drivers

  • Perhaps the very first self-driving vehicles would rather deliver packages than people? I do not think quadrocopters are reasonable delivery methods esp. considering battery technology but a surface vehicles combined with somewhat automated (or at least standard) mailboxes, why not?

  • They already did this in the UK about 6 months ago, replacing the existing couriers with Amazon Logistics. Which incidentally, is a plain white van, here anyway.

    Where before you could track your package and get told within an hour when it'd turn up and get regular updates (unless it was a cheap item which they sent via Royal Mail), now you're told on the day that it's out for delivery and that's the extent of the "tracking". It can turn up any time that day. Be careful what you wish for, as I find this a

  • It makes sense that Amazon would want to sell, ship, and deliver orders on its own. The report estimates that the company spent $11.5 billion on shipping just last year, amounting to 10.8 percent of sales.

    It doesn't necessarily make sense at all.

    An airline might spend a third of its revenue on POL, but that doesn't mean it "makes sense" to dig wells & build a refinery.

  • In London (and lots of the UK I believe), most of my packages are sent by Amazon Logistics.

    All Prime deliveries that aren't bulky seem to come through them. Large items still use normal courier firms, or if it isn't an Amazon sold item.

    About half the time I'd get a better experience with Royal Mail..

    Amazon Logistics is run like Uber - random drivers sign up, go fill their car with packages, and then drop them off on the day. You get no surety as to the time (7am-10pm is the helpful window they give you). Mi

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