Will Amazon Kill FedEx?

https://www.bloomberg.com/features/2016-amazon-delivery/

by Jerry2 • 10 years ago

68 66 10 years ago

It has definitely been replacing the need for FedEx with it's super fast delivery, although some Amazon items still come via FedEx...

dawnerd2• 10 years ago

Amazon has almost 100% been using the local Prime Now drivers to deliver boxes - which is great because they come next day. Down side is drivers are always new and have no experience delivering mail. It's gotten a little better but I had to call amazon and request that their drivers not call me to tell me to meet them at the corner of the block for my package.

I've figured out that if I want something tomorrow, I check the prime now site and see if it's available there. If so there's a very good chance it'll come overnight.

What I wonder if how are the drivers compensated for delivering a box vs same day? Same day you tip them. So does that mean they're getting screwed for normal deliveries? Knowing amazon, probably.

aninhumer• 10 years ago

Same day you tip them.

I'm quite annoyed about this in the UK. They're basically trying to fabricate a price-obscuring tipping culture just so they can advertise "free same day delivery".

I would be totally happy to pay £2 for the service when I need it, but I don't appreciate being charity mugged at the checkout.

ensignavenger2• 10 years ago

Were they calling because they were having trouble finding your address, or because they were lazy?

fma2• 10 years ago

Why does Amazon need to kill any service. Even with their cloud platform, rack space, digital ocean and plenty of other providers are thriving and coming up.

bdcravens• 10 years ago

Apples and oranges. You're talking about horizontal competitors in one industry, and significant cost centers in another.

fma2• 10 years ago

Will the orange industry kill off the apple industry?

No. Because there's such thing as competition. More than one company can survive and thrive in the same industry. That's my point.

jhall1468• 10 years ago

AWS is infrastructure as a service. Digital Ocean sells virtual private servers. They aren't even remotely the same product. I host a blog on DO for a few buck a month. My company hosts their entire infrastructure on AWS for 4 different applications.

Apples and oranges.

ownagefool• 10 years ago

You can do the same on DO, it's just slightly more involved, almost certainly less resiliant and they supply less PaaS options.

In fact as an IaaS if you throw kubernetes at it, run ceph and put a little effort into getting autoscaling, then you have a knock-off cloud.

Amazons value is that it's cheaper for a small company than hiring the people who can do this well and you can hire a generalist to glue it all together.

dfsegoat4• 10 years ago

FedEx is both an established airline AND one of the most trusted logistics companies on the planet. So Amazon can beat them when they can do this on demand:

https://www.youtube.com/watch?v=J-qPtWc4heA

For brevity: the above purports to show a time lapse of FedEx's fleet of DC-10s, Airbus A310s etc - packed with fuel, valuables and people - scrambling for the Memphis, TN hub and hooking in handily around a massive angry thunderstorm.

It looks like a perfectly organized, well timed dance - with incredibly high stakes.

edit: clarity.

erelde2• 10 years ago

The Fedex courier in my area has been consistently bad for years and doesn't get fired. Two weeks ago: doesn't come, doesn't leave a notice, two days in a row, claiming he came, I had a to exchange some salty emails with customer service to get my package. Each time I had to use Fedex these last 3 years I've had to do this cycle.

On the other hand I have developped a "good relationship" with the UPS courier.

gambiting2• 10 years ago

The thing is, people like you and me are not primary customers of Fedex. Corporate is where it's at - when I worked at an oil refinery in Scotland, engineers would request parts that had to be literally delivered ASAP, and refinery didn't think twice about paying a bill in thousands of pounds for overnight delivery of few parts from US.

dfsegoat4• 10 years ago

As a logistics manager - I would constantly switch between the two, depending on who could get me the best rate for our most common small package parcel sizes, etc.

They constantly alternate between "the best" and "shitty".

waterphone• 10 years ago

I live in quite a remote area, with UPS and FedEx drivers that are driving hundreds of miles per day on their route, often starting over 100 miles away, and yet they're both consistently excellent. They virtually never miss delivery estimates, and often exceed them. I'm honestly quite impressed with them, especially considering a moderate amount of their route is also on fairly poor quality dirt roads.

devy• 10 years ago

I have the EXACT OPPOSITE experience in my neighthood - FedEx always deliver package above and beyond but UPS has been shitty ALL THE TIME. I live in Northen NJ.

eloisant2• 10 years ago

It is really FedEx who organizes that, or the air controllers in Memphis dealing with pilots directly?

CPLX3• 10 years ago

I'm a licensed pilot. What's interesting about that video has literally nothing to do with Fedex. It's a demonstration of the skill of the center and approach controllers at Memphis during inclement weather.

abajaj2280• 10 years ago

algorithms are way better at controlling traffic than humans. what you're seeing is just the best so far

read_only_sofar• 10 years ago

I don't see the point of that video.

a) If anything, it is not a feat of Company, but of nowadays IFR systems in cooperation with ATC guys who probably sweated off at least 10 pounds during that shift.

b) Each and every airline does that, from top notch VIP charters to those we-are-declaring-emergency-because-our-company-doesn't-let-us-take-in-enough-fuel-so-we-are-landing-RIGHT-NOW-GET-OFF-OUR-WAY poor souls piloting Ryanairs.

c) Aviation is a market. If you pay, you get aircrafts and pilots. If you pay good, you get good pilots. That's it.

d) This is very inside the box thinking. An equivalent of this would be showing a video of a bunch of guys running to the local hardware shop, hastily throwing HW boxes into a car, driving fast and furious back to the site, assembling a server, plugging it in, installing OS and presenting it to the customer: here, your server. So Amazon can beat them only when they can do all of this on demand? No, they just built the AWS and "on demand" now means just clicking "I want an instance now" or even letting a balancer spin that up for you, done.

The article is talking about 15 years horizon and although that is a very brave speculation of Amazon's business plans and future events, just think about what 15 years means. 15 years ago, Windows XP has just RTMed a week before. GPS meant some ugly expensive box waiting an eternity to get a fix. Common large and heavy desktop crates called personal computers struggled with even playing a DivX video in CRT resolution. Capturing overhead footage meant flying an expensive helicopter running on expensive fuel and operated by highly trained pilot. Nowadays, you can buy an entire device called "quadcopter" for less than an hour of helicopter flight time and fly around and videotape everything like in a computer game. We have small slates of glass called "smartphones" that smoothly play 2880x2160 videos while projecting them onto a 3D surface twice (VR phone-based headsets) or even smoothly render an entire VR game scene from polygons. We have cars using half as much fuel. You can tap on your slate of glass and a car arrives for you.

In 15 years we can have supertough drones flying right through hurricanes, micro hyperloops moving small cargo around entire states, warehouses on every other corner with duplicated stock, carpooling packet delivery services like some Uber-Fedex hybrid, or even outright cargo teleports spitting out pizzas from local restaurants, shoe orders from Amazon and hell monsters from Mars military bases with id Software calling out software patents on that and claiming intellectual property on 50% of incoming daemons...

Sorry for long post - basically what I wanted to say is that everybody can do that with airplanes.

dfsegoat4• 10 years ago

Thanks for your post - I appreciate the constructive criticism - and agree the video isn't much to anyone with an aviation background.

I guess what I was trying to say, is that if you are an air-<whatever> business, you ALWAYS have to be an airline first - with all the Regulatory, Union, personnel, hardware, etc issues that come with it - and whatever else you want to do SECOND (air freight, passenger etc).

You know waaaaay more than I do - this is just my oversimplified take I am sure. I just am always impressed at the stakes / volume of traffic that goes in / out of the FDX hubs daily.

SSLy• 10 years ago

needs more 64kbps mp3 audio.

onion2k• 10 years ago

What's stopping Amazon doing the same thing over the next few years? They have the resources to buy some planes and write some software to schedule them. The hard thing would be negotiating with airports to get the same level of access that FedEx enjoys. I don't see what that would be a particularly big problem - it comes down to the fees they're willing to pay.

caseyf7• 10 years ago

Just yesterday I had someone from the other coast leave a laptop charger. Rather messing with the UPS or FEDEX, I just ordered a new one and had it delivered to their address.

duaneb• 10 years ago

That's like $70 you didn't need to spend. Hell of a convenience fee.

I've only recently hit power cord saturation, though.

eloisant2• 10 years ago

Maybe he didn't have a Mac, and the difference between the charger and shipping wasn't that big.

okket• 10 years ago

  "I fully expect Amazon to build out a logistics supply
   chain that others can use. Over the next five years? I
   doubt it. Over 10 or 15 years? Oh yeah."

From this speculation arguing that Amazon will "kill FedEx" is just nuts, IMHO. But printing nutty things is part of journalism, so enjoy the ride.

CodeWriter23• 10 years ago

I'm surprised this journalist, who apparently has some in-depth knowledge about the shipping industry, seems to be completely unaware of FedEx's contract with the US Postal Service. FedEx moves ALL mail that goes by air. That includes Priority Mail and Priority Mail Express. I don't see Amazon killing a company with a huge customer like that.

graycat6• 10 years ago

Gee, for a while I was Director of Operations Research at FedEx. My office was next to that of FedEx founder, COB, CEO F. Smith.

Poor Smith: One night at about midnight, I was in my office getting in a little violin practice before heading back to my rented room for some sleep (my wife was still in her Ph.D. program at Johns Hopkins in MD). As I left to get some sleep, I saw Smith in his office. He had had to listen to my violin practice of scales, intervals, etc.!

The first good thing I did for Smith was write some software for scheduling the fleet. The BoD was seriously asking if such scheduling could be done at all. One evening R. Frock (he has a book on FedEx) and I used my software and produced a schedule for the full, planned operation. Smith's remark was "Solves the most important problem". Our two BoD representatives of BoD Member General Dynamics said "It's a little tight in a few places, but it's flyable". The BoD was happy, and crucial funding was enabled.

But by the night of the violin practice, I was working on better scheduling. Right, I was encountering the question of P = NP. So, I had chatted with G. Nemhauser about integer linear programming set covering.

Later I went for my Ph.D. in applied math and, in the studies, kept in mind the problems I'd seen at FedEx. So, e.g., model various cases of arrivals as a Poisson process -- from an axiomatic derivation of that process or just from the renewal theorem. Use some stochastic optimal control for some of the operational issues. Have some much more accurate cost estimating of the airplane operations and include those in the integer linear programming, etc.

Gee, for the last 10 years, I didn't know that Amazon was doing so much in such logistics. No way can they be avoiding some optimization problems for their logistics without wasting significant bucks. For a lot they were doing, I'd been there, done that, went to grad school for it, written software for it, etc. Could have helped them!

Scattering warehouses, sort centers, fulfillment centers, ships, airplanes, trucks, bicycles, drones, etc. all around and changing all that ASAP over time has to encounter some severe challenges in applied math and corresponding software, especially having those two keep up with the operational changes.

I know; I know; if assume that the operations will be big enough, then there are some approaches to those discrete optimization problems that use just some continuous techniques that are much easier. In that case, maybe for a while, during the rapid growth period, go ahead and don't try very hard on the optimization, scatter around, and anticipate that, when reach the target size, nearly all those warehouses, sort centers, etc. will be close enough to something optimal.

Then I wonder: What is Wal-Mart doing in response? They have a lot of warehouses, trucks, and stores and a Web site for on-line ordering? Right, they bought Jet.com. But anything else?

Fundamentally I begin to wonder about Amazon and airplanes: For FedEx, sure airplanes are crucial. But for Amazon? I wonder.

Why? What's the difference?

For FedEx, hour by hour, a huge fraction of what FedEx receives and ships is different, literally never done before, that is, could not have been stocked in a warehouse. E.g., FedEx may receive a legal brief, some medical samples, a custom 3D printout, etc. That was the first and last time those particular items were ever shipped. The variety of what FedEx ships is beyond belief -- stand in the sort center in Memphis and watch the stuff go by and have to give up on any simple overview.

For Amazon, all they ship is what's for sale on their Web site. So far, next to none of that stuff is perishable. And, for nearly all of it, the time, hours, days, weeks, from when it is created by the original manufacturer to when it is needed in an Amazon warehouse doesn't much matter.

So, in comparison with FedEx, the variety is much less. So Amazon has an easier time just stocking nearly all their reasonably popular items at each of their local warehouses and delivering to those warehouses by the cheapest way possible, typically 18 wheel trucks.

Okay, maybe Amazon is selling some item, expects to sell only 15 of them in the next month, but has 60 local warehouses. So, can't stock the item at each warehouse. So, for slow moving items, have to stock in some central warehouse and ship from there via airplane. So, have 60 planes, and each day ship from the central warehouse for slow moving items to each of the 60 local warehouses all the slow moving items that warehouse needs.

Right, maybe have fewer than 60 planes, often have one plane serve more than one warehouse, on a given day maybe have some planes make more than one trip from the central warehouse, and each day, given the loads to be moved from the central warehouse to each of the 60 local ones, decide which planes go to which warehouses in what order -- back to integer linear programming set covering again. Okay.

How does that set covering work? Okay, just enumerate all reasonably efficient trips a single airplane might do. If have several airplane types, have to do that separately for each type. Assume that if an airplane stops at a warehouse, then it brings everything that warehouse needs (one warehouse that needs more than one airplane can carry would be a special case, easier in some ways). Then take those candidate airplane trips and pick the ones that move all the loads, within the performance limitations of the airplanes, in the times required and that give the least total operating cost. That last part is the optimization and 0-1 integer linear programming.

But, still, the variety for Amazon is much less than that for FedEx.

Actually, FedEx has long had a warehouse in Memphis. So, shipping customers would use trucks to put their stock in that warehouse, and FedEx would pick from that stock and ship via FedEx planes the orders that had arrived and accumulated from end-user customers. So, in that case, a truck was used for the trip to Memphis and an airplane, for the trip from Memphis.

Airplanes are strange beasts: Generally, if can keep an airplane flying nearly full lots of hours each day, then can have a license to print money. But if have an airplane sit on the ground or, worse, flying with not much load, then have a path to going broke. How much usage FedEx can get from an airplane is well understood, at least by Smith. But I question if Amazon can get enough usage out of airplanes.

Of course, maybe by now, beyond what was in the OP, Amazon has plenty of data to know that they can put a big warehouse there in southern Ohio for their slow moving items and ship those items to local warehouses and distribution centers as orders arrive from the Amazon Web site. Maybe. But, again, for their fast moving items, just stock the local warehouses and distribution centers by 18 wheel trucks -- no expensive airplanes involved.

Gee, in my Ph.D. program, I took courses in optimization, stochastic processes, facility location, multi-objective optimization, etc. from world-class people. I never got a call from an Amazon recruiter! I wasn't that difficult to find: The guy who taught the course in multi-objective optimization and was one of my Ph.D. dissertation advisers was, during a lot of those years of Amazon's growth, President at CMU. The guy who was Chair of the committee that approved my dissertation research was a world-class guy in transportation.

Lesson 1: Go get a Ph.D. for some ways to get approximately optimal solutions to some really complicated NP-complete problems, maybe also with some random elements, and even if a big business has a lot of need for such applied math maybe still won't get an opportunity to apply what studied.

Lesson 2: If want to make money with some applied math and, then, some corresponding computing, then pick own practical problem to solve, do the math to solve the problem (yes, pick the problem so that can use some math to get an advantage in getting a good solution to the problem -- that is, pick the problem and the math together, as a good pair), write the software, and do own startup where are already the CEO. That is, for own future applying math and computing, don't depend on some other CEO. And that's what I'm doing -- my own startup.

uptown3• 10 years ago

Can you elaborate?

graycat6• 10 years ago

What I wrote is about 8859 bytes and, thus, already "elaborate". What do you want elaborated?

kevincox• 10 years ago

Did all the "you"s get deleted from your post? It was a little awkward to read.

graycat6• 10 years ago

There is always a question about that: When the subject of the sentence is clear, omitting that subject can result in more compact writing , but whether the writing is easier to read or not is a question. I thought that omitting some obvious subjects would help, but thanks for your feedback.

wccrawford2• 10 years ago

Years ago, Amazon used DHL. I complained once about the service with them, and they said they had to continue using them in my area until they'd had enough complaints. (Which I felt was kind of reasonable, I guess.)

Less than a year later, they were no longer using them in my area, and then a while later I hear DHL basically doesn't exist in the USA.

So yeah, Amazon can apparently kill a mail carrier. Whether they will or not will depend on how bad that carrier does its business.

ensignavenger2• 10 years ago

I don't know that Amazon killed them, DHL just pretty much failed to get a foothold in the US market. I never had any trouble with them when they were delivering where I lived, myself.

CPLX3• 10 years ago

That is an extraordinarily loose usage of the principle of cause and effect.

wccrawford2• 10 years ago

Obviously Amazon alone didn't kill them. But being dropped by Amazon as a carrier certainly didn't do them any favors.

Grishnakh• 10 years ago

I've had one package shipped by DHL to me, ever. The package never arrived, but the driver claimed it did; I even watched as the tracking showed it as "delivered" at a certain time in the morning on a day I was home and was watching for the package. I filed a complaint, and the driver came to me personally with a nasty attitude and left in a snit. I never did get my package, or a refund, or anything.

That was my one and only experience with DHL. I'm glad they no longer operate in the US. I've had countless packages delivered by UPS, FedEx, and USPS, and never had them go missing; my only problems were when drivers want a signature when I'm not home and can't leave it at the door and I end up having to drive to the distribution center to pick it up.

Good riddance, DHL.

ISL• 10 years ago

Amazon's edge isn't in shipping. It's in fulfillment.

Fulfillment By Amazon (FBA) is a boon for many businesses, as it combines warehousing, packing/labelling, and shipping into a single interface at an attractive price. Let's not forget that they also bring customers and handle the entire billing operation, too.

If Amazon does harm FedEx/UPS, it won't be by starving them of packages directly, but rather by sidestepping their business, attracting companies to FBA, so that they never enter the "shipping" business sector.

I don't expect to see Amazon enter the point-to-point shipping business anytime soon.

draw_down• 10 years ago

I expect it. A family member has worked for FedEx ground since it was RPS, and has been telling me for years how Amazon kept hiring away their execs. And the company is your typical sclerotic old-style megacorporation mired in bureaucracy so it moves very slowly on everything.

optimuspaul• 10 years ago

Why wouldn't AMZN just acquire FedEx?

Will Amazon Kill FedEx?

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