How Amazon will use autonomous vehicles to take a big bite out of UPS & FedEx
Amazon is no stranger to the advantages of using autonomous systems in their warehouses to improve productivity and reduce operating costs. Now it looks like they’ll extend that vision to your doorstep. You’ll get your packages faster, less expensively (if you’re not already an Amazon Prime customer), and Amazon will add another profitable business unit (“Amazon Delivery Services?”) to their financial statement. It’s a win-win scenario.
…Unless you’re UPS or another parcel shipping company that’s grown to rely on revenues from delivering Amazon’s estimated five million packages per (average) day. Those companies face the loss of their biggest customer. For some shipping companies, that could knock a whopping 30% off their top line revenues. It would leave them with idle trucks, idle staff, and the kind of overbuilt delivery infrastructure whose costs eat profits.
With estimates of over one hundred fulfillment warehouses around the US and the aggressive acquisition of more, Amazon has brilliantly created a logistics behemoth that can reliably get items to customers in less than one day …hindered only by their widespread, legacy reliance on obsolete delivery services that aren’t structured for such rapid fulfillment.
But when autonomous vehicles can be dispatched to carry packages, same-day and even four-hour delivery times between Amazon fulfillment centers and your doorstep becomes cheap and easy.
Such delivery speeds will leave legacy package moving companies like UPS, FedEx, and (especially) the US Postal Service — who don’t offer inexpensive same-day service (and charge prohibitively high rates for guaranteed next-day service) — floundering.
The speed with which Amazon can leverage fully autonomous deliveries will grant them tactical advantage in this battle.
The transition to new, more efficient technologies will be a problematic one for legacy parcel services. Companies like FedEx and UPS and the postal service will face multi-vectored resistance migrating from using human drivers to autonomous vehicles. That tension, perhaps manifesting as drivers threatening strikes, cannot be allowed to disrupt ongoing operations. The result will be a slowed or turbulent migration to using driverless tech and delivery robots. Older companies’ modernization efforts will also be retarded by short-term investors who may protest plans to dump the vast inventories of (suddenly obsolete) trucking assets while simultaneously buying the new, autonomous fleets it will take to be competitive with new entries into the marketplace (like Amazon). Strategically-focused Executives trying to maintain the future viability of a company like UPS will have to sell the need to take huge write-downs, creating operating losses for several quarters, as the smartest path forward. Their stock values will plunge in the face of expanded uncertainty, revenue dips from lost business, and concern about heightened competition and lower margins. As these factors slow or stall the parcel services’ ability to take advantage of the self-driving vehicle efficiencies that become available to newer companies, the price they’ll need to charge for shipping parcels will remain as high as it is now.
But that price will no longer be competitive. A new Amazon Delivery Service (for example), using cutting-edge autonomous trucks and probably an autonomous robot to move packages from the truck to the recipient’s door will operate much more cheaply without the albatross of old-tech and human drivers bloating their operating expenses.
But wait, there’s more!
The arrival of autonomous vehicles will create other, more innovative advantages for smart, adaptive services with the freedom and agility to take a fresh approach to delivery logistics. Like using others’ cars for some deliveries.
How?
The saturation of autonomous cars into markets will happen along parallel tracks. Some autonomous cars will be sold to individuals, just as cars are today in 2016. But many other self-driving cars will go into operation as part of one or two large, on-demand transportation providers that will dominate each market — think Uber, but without the drivers. Some of the individual autonomous car buyers might lease their cars out to the on-demand transportation services. That allows a person’s car to earn them money when they’re otherwise not using it. This means that any given area will often have un-tasked cars that might be available for fulfillment jobs posted by a delivery company!
A savvy new package delivery service might tie into the local on-demand transportation provider’s network and use that to handle transient package delivery spikes without having to maintain as large a fleet of their own vehicles. It’s just one example of the resource efficiencies that on-demand transportation via autonomous vehicles will present just a few short years from now (2016).
The companies that take advantage of autonomous car efficiencies and their game-changing logistical opportunities soonest will win. And, as people once said in the deep backwoods of the American South when dinner was served, times were hard, and portions were scarce, “Them that are slow go hungry!”
This article is an excerpt from the 2nd edition of “Self-Driving Steamrollers,” a book that is Your Guide to a Future Featuring Autonomous Cars You May Never Buy. It’s available on Amazon.com in ebook version for Kindle and in paperback, for those who still draw comfort from fondling dead trees while they read. “Self-Driving Steamrollers” is an example of “Book 2.0,” encouraging collaboration. If you have something to say on the subject, you can submit your suggested essay or additional chapter(s) for inclusion in the next edition of the book. Editions come out often!
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