How Hard Will Amazon Push To Become a Logistics and Delivery ‘Powerhouse’?
In an article written by Cecilia Kang of The New York Times, “In Capital, Amazon Pushes Hard On Delivery,” Amazon remains ‘obsessed’ with looking for ways to speed up its package delivery services while saving on shipping costs. The e-commerce giant is actively working on becoming a logistics and delivery powerhouse in many transportation areas both on the ground and in the air. However, it’s not just looking inward. It’s very policy-focused, regularly meeting with lawmakers and regulators to allow the use of commercial drones. Apparently the company has doubled spending on lobbying in 2015 (versus 2014) and ramped up its lobbyists on staff to 60 in total!
To give you another example of how aggressive Amazon is investing in its delivery system, a March 10, 2016, article on NBC News* reported that Amazon has finalized an agreement from Air Transport Services Group to lease 20 Boeing jets for 5 to 7 years! With this recent deal, analysts are expecting for Amazon to be able to deliver on its one to two day delivery window for its customers.
And while Amazon’s commercial drone project is still in its early stages, it has hit plenty of roadblocks (no pun intended). “Some airline and pilot groups” have opposed the company’s drone delivery program, arguing that opening the skies to more drones “could create safety risks.” Amazon’s proposal for 33-foot twin-trailer trucks has also been rejected. Opponents said that longer trucks could make roads more dangerous for other drivers.
However, Brian Olsavsky, Amazon’s financial officer, has explained the reason why the company wanted to move more aggressively into its delivery program. He said, “To properly serve our customers at peak, we’ve needed to add more of our own logistics to supplement our existing partners. That’s not meant to replace them.” He insisted that UPS and FedEx would continue as its important partners.
Despite the growing number of detractors, Amazon’s newest delivery program has already achieved some success. They have worked with NASA in creating an air-traffic system that would establish lanes in the sky for commercial drones. Additionally, they have been successful in urging Congress to adopt rules that would allow them to fly drones beyond a pilot’s line of sight. The Senate Transportation Committee has already drafted a bill that ensures delivery drones within 2 years.
Amazon has also been working on creating some changes in different areas of its drone delivery project. The lead lobbyist, Mr. Misener, has called for an overhaul of an arcane system of international delivery rates that gives foreign competitors an advantage in delivering products to American consumers. He also insisted on the approval of legislation to improve roads, bridges and railways (which has been passed and signed into law last December).
Despite the many hurdles Amazon is facing, they continue to push to get what they want. Its impetus is certainly not hurt by the fact that their own shipping costs increased by 19% in 2015!
There is also a subtext for business owners. If nothing else, the article makes retailers think about who is ultimately accountable for delivery. Is it the service providers or the retailers? Amazon has certainly made that clearer.
How soon will Amazon integrate and own its entire logistics chain? What do other companies need to do to stay competitive?
