Amazon could be planning to roll out its own private fleet of trucks to make more same-day deliveries, a supply chain consultant with close ties to the company told the trade magazine DC Velocity.
Amazon would deploy private vehicles — like the ones it currently uses for its grocery service, Amazon Fresh — to make service faster and to give it more control over its own transportation costs, according to consultant James Tompkins.
Amazon has divided the nation into three segments based on population size, says Tompkins: the top 40 markets (which make up about half the U.S. population), the next 60 largest population areas, and the remaining regions, which account for about one-third of the population.
Amazon would serve those top 40 markets with its own private fleet of delivery vehicles, and use regional delivery carriers and the U.S. Postal Service for the other two areas, respectively. Notice that FedEx and UPS get completely cut out of this restructuring. Orders would be routed through Amazon’s 55 fulfillment centres, and would let it deliver more items in under two days, presumably faster and cheaper than UPS or FedEx.
Hypothetically, increasing its number of delivery vehicles seems to make sense for Amazon. The company’s shipping expenses increased by $US1.1 billion between 2011 and 2012, and, in a recent quarterly report, Amazon said that it expected its net cost of shipping to rise even more as shipping methods get more expensive and more customers start using Prime.
Amazon also just announced that it’s raising the price of its Prime subscription service from $US79 to $US99 per year, a move that could be tied to this proposed expansion. After all, Amazon hasn’t changed anything about its Prime service with the price hike; the extra money could be used to fund the new vehicles.
Tompkins says that Amazon is modelling this new initiative from insights the company gained through Amazon Fresh, the service for people in Seattle, San Francisco and Los Angeles to receive same-day delivery of local groceries that Amazon has been running for the last five years. Unlike Fresh, the expanded service would deliver general products as well as groceries. Tompkins said that Amazon is pursuing the timeline of this rollout “very aggressively.”
Because Tompkins couldn’t describe the nature of his involvement with Amazon, we have to take this theory with a grain of salt. It’s hard to believe that Amazon would migrate completely away from using UPS and FedEx, which currently handle most of its deliveries. Likely, additional private Amazon vehicles would supplement these existing shipping methods.
Business Insider has reached out to Amazon for comment.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.