Amazon is steadily expanding its delivery infrastructure, whether it’s by driving items to consumers in select cities or testing a secretive drone delivery program. Could the company also reduce its reliance on shipping companies like UPS and FedEx by running its own air cargo operations instead of using others’ planes?
A report from Motherboard indicates that Amazon is most likely behind a secretive operation from an Ohio airport dedicated to shipping consumer goods. If the report is accurate, it would appear that Amazon is at least testing a system that could give it more control over the paths its wares take to reach consumers.
This control would help Amazon sidestep any issues other carriers face. Instead of being at the mercy of UPS and FedEx, the company would be responsible for making sure items reach their new owners on time, and it would have the power to fix anything that goes wrong instead of just mopping up after others’ messes.
It could also help reduce shipping costs. As Motherboard notes in its report:
With shipping, as with all of Amazon’s $250 billion empire, efficiency is key. Amazon’s net shipping cost in 2014 was $4.2 billion, up from $3.5 billion in 2013, according to a 10-K filing from 2014 with the Securities and Exchange Commission. With delivery costs weighing heavily on Amazon and ongoing headaches with UPS and other third party shippers, the company has a lot to gain from its own logistics network, whether just supplementing shipments in peak seasons or cutting out other carriers entirely.
This is what Amazon is all about — owning everything its customers might ever have to interact with. Take digital media, for example. Amazon sells the devices used to access online content; runs services used to stream that content; and operates the network that delivers all those bits and bytes to people’s devices.
Those efforts pay off by making Amazon an integral part of digital media, convincing people to continue purchasing things from its website, and even create an incredibly valuable business devoted to the cloud computing market. Why wouldn’t the company want to replicate that success in the physical realm?
Given all that, it shouldn’t come as a surprise that Amazon might be testing its own air cargo operations. If anything, it’s more surprising that it’s taken this long for a company whose greatest strength is owning every aspect of whatever business it’s in took this long to run an experiment like the one taking place now. (I reached out to Amazon for comment and will update this post if I hear back.)
Amazon is reportedly running a secret shipping operation in Ohio originally published by Gigaom, © copyright 2015.
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