While UPS’ priorities have shifted, Amazon’s capabilities have transformed. But both face obstacles that could complicate plans to reduce business with each other.
Link: Amazon pulls back from UPS as it builds out logistics empire | Supply Chain Dive
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The UK version of this article would substitute Royal Mail/Parcelforce for UPS. That switchout has largely happened already. (I think in the past Amazon UK has used a mix of RM, Hermes/Evri, HDN/Yodel, and maybe DPD)
UPS is way too expensive for most B2C ecommerce in the UK. The sector is highly competitive with RM, Evri, DPD, and Yodel taking the biggest shares, and DHL Ground, DX some way behind. UPS and FedEX do operate across the UK but typically more for B2B, high value, next day shipments, and some international (import and export). Last mile for most B2C imports is Parcelforce (more than RoyalMail), as parcelforce operate the “default” import clearance path as part of international mail union; DHL, UPS, FedEx can do their own import clearance I think but typically only for their premium services, and then cover the last mile. There are also import brokerage/groupage services (used by Amazon, eBay) who hand over to RM/PF or Evri, DHL for last mile.
This further justifies the move by FedEx to pull back from dependence on Amazon and continue to build up other business. It has been obvious for years, as soon as Amazon started building out their own fleet of trucks for delivery. Being overly dependent on one major customer is a danger in any industry - either they need to acquire you or you have to keep costs and service level below their build-out costs (which is also a soft ceiling on acquisition price).
History from UK/Germany is for bigger pure play retailers to own their own parcel services. Amazon is just replaying the same journey.
The big mail order catalogues (e.g. Otto, GUS, Littlewoods etc.) all started their own services, which were spun out over time and became Hermes/EVRI, and HDN/Yodel (the latter through a sequence of acquisitions bringing together a number of differently owned catalogue parcel spinouts).
The reverse can also happen: Expert Logistics, who specialise in white goods delivery (1.5/2 person with services to take away old for scrapping and basic hookups) I think was started by one or more of the major white goods manufacturers, then spun out, then later acquired by pre play white goods retailer AO.com
I’m not sure the Fedex move is a great one. Won’t this give them less control over their own network?
That’s their only product.
It’s like saying: “we’re going to outsource our software development to cheaper labor. we fully expect our quality to go up!”
I meant the move from a few years ago that FedEx wasn’t willing to give away their product to Amazon’s demands, and to scale up having other distributed customers that were providing better margins for their core business. There are other things they have done which may not make as much sense, but I do agree with them not re-shaping the business to meet Amazon’s requirements at the detriment of their other customers who are providing them better overall value/profitability.
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Oh yes, I agree – !!!