Dive Brief:
- Drones, driverless cars, and Uber and Amazon's own shipping fleets are lurking in the wings, readying advanced supply chain technology disruptive enough to outperform FedEx, the Los Angeles Times reported last week.
- Amazon continues to invest in its own planes and trucks, but contends that these measures are to supplement their business with big shippers. Despite this public stance, their building out a robust supply chain structure could be the biggest challenge to FedEx and UPS.
- Last mile delivery continues to pose challenges to all, and has thus far remained out of reach to any single feasible solution. The well-known industry mantra of "density means profitability," or that the more packages delivered to a single source, the easier and more cost-efficient for the deliverer, is still a counterweight to e-commerce innovation.
Dive Insight:
Can the delivery behemoths be budged? The e-commerce giants think so, but there is significant risk involved.
Shipping industry pundits are quick to speculate that Amazon and Alibaba are just behind UPS and FedEx, but how far behind is a matter of debate. Successful delivery on a massive scale requires billions in investment both in the supply chain as well as in the time and iterations it takes to hone a streamlined delivery system free from costly mistakes, which even the best are still vulnerable to. For example, in 2016, FedEx earned a single $58,000 fine for hazardous shipping violations, while Amazon has thus far totaled $532,000 in proposed fines, with an additional $1.3 million in back violations occurring between 2013-2015.
It is exciting to speculate about Uber and drones and the way emerging tech will enhance future delivery systems. Even independent delivery services may play a role in rivaling the big two. However, building a successful and safe logistics system that is arguably one of the main components of the supply chain is not going to happen quickly or easily, which will keep FedEx and UPS secure as the big two for the immediate term. In fact, in the minute or so it takes to read this paragraph, UPS has likely delivered roughly 10,972 packages. But staying confident today means that they must be ready to adapt for tomorrow, and as Amazon has shown, bringing deliveries tomorrow is their specialty.
