Will managing delivery logistics help Amazon improve service?

Posted on February 21, 2016 by aviyer2010

An article in the Wall Street Journal (December 23,2015) titled “Amazon Seeks to Ease Ties with UPS” describes the close relationship between the two companies evolving into one in which Amazon is now attempting to control it’s logistics costs, which have increased from 10.4% to 11.7% in the past year. Amazon is described as hiring UPS managers, reserving aircraft for delivering, working with USPS and focusing on increasing service while decreasing costs. Will Amazon be successful in launching it’s own logistics alternative and decreasing costs? What can UPS do to retain the business? Should UPS invest in drones and other technologies so Amazon can decrease it’s role?

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2 Responses to Will managing delivery logistics help Amazon improve service?

Selva Vadivelmurugan says:

February 24, 2016 at 4:57 am

I think Amazon will struggle having its own delivery logistics. Though they have some of the advanced technological capabilities to compete with matured players in this market and also have built a strong fleet for delivery, they should expect some hard resistance from its competitors. Amazon’s growing internal problems (like employee satisfaction) may also make it not have the needed strength to compete with major players who could simply target on Amazon’s weaknesses. Moreover, Amazon may become the target of anti-trust if they are going to combine their online retail sales’ advantage with their own delivery logistics.

UPS needs to improve its customer satisfaction ratings. UPS seems to have lower customer satisfaction than USPS. It may be a good idea for UPS to try improving this first. I like to see DHL Express partner with UPS to compete better with new players.

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Courtney Metzger says:

February 25, 2016 at 8:07 pm

I agree with Selva that it will be very hard for Amazon to be successful in launching a logistics alternative. Vertically integrating and adding delivery to the end customer will only be effective if Amazon innovate with a disruptive technology or process.

Currently, for availability and cost efficiencies, Amazon leverages multiple vendors for delivery to customers. Due to the USPS’ existing infrastructure, UPS will have a hard time competing on price without innovation. UPS could invest in drones in an effort to capture more of Amazon’s business. However, a joint venture may be a good option for the 2 companies as Amazon already is in the process of R&D in this area and UPS has extensive software that could be utilized in this venture.

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