Amazon’s most recent foray into last mile logistics promises to disrupt the e-commerce landscape as consumer demand surges.
Amazon has made a name for itself by disrupting tried-and-true markets with innovative solutions to structural problems. With its announcement of a new Delivery Service Partners Program, the online marketplace has declared its intention to expand its presence in the last mile delivery leg of the e-commerce supply chain.
The new program aims to launch last mile logistics startups into key roles for Amazon. While UPS and FedEx lost a combined $3 billion in market value following the unveiling of the new initiative, Amazon’s leadership has signaled that it still expects traditional players to occupy important positions within its overall fulfillment operation.
For shipping and logistics professionals, then, it’s important to understand what the Delivery Service Partners Program is and isn’t. The service promises to impact — rather than entirely upend — the way Amazon fulfills orders, but it remains to be seen how successfully this semi-independent network will fit into its current business model.
About Amazon’s Delivery Service Partners Program
Amazon hopes to use low startup costs and existing infrastructure to attract budding entrepreneurs. For a minimum of $10,000, Delivery Service Partners (DSPs) can begin assuming some of Amazon’s last mile operations in certain areas.
As a DSP, small business owners will lease an Amazon van or fleet of vans, wear an Amazon uniform, and take advantage of the online marketplace’s fulfillment infrastructure. Drivers will pick up packages from Amazon facilities and deliver them based on routes that have been optimized by the e-commerce giant as well.
Entrepreneurs are encouraged to hire and manage their own drivers as their operations with Amazon grow. Although fleet sizes are capped at 40 vehicles for a given DSP, Amazon plans to support small business owners by assisting with supplies, insurance, and training for employees.
How DSPs Affect the Last Mile Marketplace
In a statement contextualizing the announcement of the Delivery Service Partners Program, Amazon’s Senior Vice President of worldwide operations Dave Clark explained, “We have great partners in our traditional carriers and it’s exciting to continue to see the logistics industry grow.” However, he added, “Customer demand is higher than ever and we have a need to build more capacity.”
Accordingly, it seems that Amazon’s plan isn’t to oust traditional last mile carriers such as UPS, FedEx, and USPS from its fulfillment operations. Instead, the company is looking to position itself to manage the growing strains of e-commerce fulfillment, control costs, and avoid systemic issues during a period of sustained corporate growth.
Considering that UPS and FedEx experienced widespread fulfillment delays during the holidays this past year, Amazon’s move into last mile delivery is in part an effort to take a great level of fulfillment into its own hands. And, with less than six months until the peak of this year’s holiday season, this summertime rollout is likely a push to have a critical mass of DSPs on the road before November and December.
Where Logistics Providers Factor In
While selling on Amazon has its benefits for shippers of all sizes, budgets, and logistics experience, it can be challenging for small and mid-sized businesses to navigate the ins and outs of e-commerce selling on their own.
Indeed, with Amazon’s various selling options — from Fulfillment by Amazon (FBA) to Fulfillment by Merchant (FBM) — business owners can benefit from the expertise of third-party logistics (3PL) partners and integrated logistics services providers (ISPs) who know how to work with Amazon successfully — even as the e-commerce giant rolls out new operations such as Delivery Service Partners.
With over twenty years of experience in shipping and logistics, Primary Freight has the know-how businesses need to scale in the e-commerce economy. Regardless of your line of business, our award-winning customer service team can leverage cutting-edge technology and draw upon sophisticated warehousing to design logistics solutions that fit your unique needs. If you’re looking for a logistics partner with the warmth of a small business but the capacity of an industry heavyweight, Primary Freight is here to help.
To learn more about Primary Freight’s award-winning shipping and logistics services, give us a call today at (800)-635-0013.