Amazon is asking the major US transport operators to help it to deliver orders within its internal transport network. This is all the more surprising, as the e-commerce giant had previously avoided partnerships with the big players in the transport market. The reason for this is a sudden increase in freight rates.
Until now, Amazon has relied on small transport companies or individual truck drivers that they do not employ directly. Two years ago, Jeff Bezos’ company decided to become independent of large transport operators by opting for its own logistics network.
At that time, Amazon started to gradually take over the deliveries – first in the United States, then in Europe (e.g. in Germany, where the e-retailer’s partners are to carry out last mile deliveries). This had serious consequences for the industry, not least for XPO Logisitics. The company had to reduce its expected revenues by $600 million in 2019 after Amazon gave up XPO’s services and chose to transport goods through its own network.
Since then, Amazon has grown from 3,700 trucks in 2018 to 13,000 trucks in 2020 (only drivers carrying out so-called ‚line-haul’, i.e. courier transport between air hubs and logistics centres).
Meanwhile, as reported by Business Insider, the situation in the transport market in the United States has forced Jeff Bezos’ company to look for partners among the largest carriers. The heads of three large transport companies, whose names have not been mentioned, have confirmed to the website that Amazon has increased demand for their services in recent weeks.
The sudden boom in trucking rates has galvanized many of Amazon’s truck drivers, who are not directly employed by the company, to move loads for other customers,” explains Business Insider.
In the last week of August, US investment bank Cowen pointed out that retailers and manufacturers pay on average 29% more for transport services in the spot market. No wonder, then, that many of the drivers who previously carried out transports for Amazon decided to enter the spot market instead of continuing to work for the company.
Amazon replenishes stocks
Why have prices increased? Retailers like Amazon are looking to replenish inventory before the approaching the eCommerce peak. Their inventory was also drained earlier in the coronavirus crisis when overseas manufacturing and cross-ocean shipping came to a standstill.
They need inventory all at once, and that’s what’s created such a big capacity crunch,” says Cathy Roberson, the founder of research firm Logistics Trends & Insights. “The trucking industry had a slow period for a while – then, all the sudden, boom,” she added.
“Most big-box retailers are likely feeling the pressure of today’s trucking market,” Roberson said. “But Amazon is one of the few that will have to upend its transportation strategy.”
Photo credit @ Flickr/Álvaro Ibáñez/CC BY 2.0