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Amazon looks to further logistics automation (AMZN)
BI Intelligence
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Amazon has formed a team to investigate how the company might use self-driving technology within its growing logistics network, The Wall Street Journal reports.
The team does not intend to design a self-driving vehicle — instead, it will function as a think tank tasked with helping the e-commerce titan integrate automation into its logistics strategy.
The company could use self-driving forklifts, trucks, and other vehicles to expand on its early automation efforts. Amazon is already at the forefront of delivery and supply chain automation: It started its first drone delivery tests in the UK last year, and has more than 45,000 of its Kiva robots moving goods around 20 of its warehouses.
By further automating logistics, Amazon may be able to cut delivery costs, giving it a key competitive advantage. For example, autonomous forklifts could bring down labor costs in the company's warehouses — the Kiva robots have already cut warehouse operating costs by 20%. Meanwhile, autonomous trucks might help Amazon reduce fuel and labor costs for delivering packages, allowing the online retailer to expand on its efforts to disrupt the trucking industry. Amazon could pass on these savings to its customers by expanding its free shipping offerings, undercutting its competitors.
The parcel delivery industry — a segment of the shipping sector that deals with the transportation of packages to consumers — is booming thanks to e-commerce growth, and players outside the industry want a piece of the pie.
BI Intelligence, Business Insider's premium research service, has compiled a detailed report on the future of shipping that looks at efforts by Amazon, Alibaba, and Walmart to handle more of their own shipping and concludes that big retailers are well positioned to disrupt the parcel industry.
Here are some of the key points from the report:
Transportation and logistics could be the next billion dollar opportunity for e-commerce companies. The global shipping market, including ocean, air, and truck freight, is a $2.1 trillion market, according to World Bank, Boeing, and Golden Valley Co.
There is much at stake for legacy shipping companies, which have seen a boom in parcel delivery as e-commerce spending has risen. Twenty different partners currently share the duties of shipping Amazon's 600 million packages a year, with FedEx, USPS, and UPS moving the most.
Amazon, Alibaba, and Walmart have so far focused on building out their last-mile delivery and logistics services but are increasingly going after the middle- and first-mile of the shipping chain.
Amazon has already made major moves across each stage of the shipping journey. It launched same-day delivery service, which it handles through its own fleet of carriers, cutting out any third-party shippers. The company also recently began establishing shipping routes between China and North America.
Walmart's interest in expanding its transportation and logistics operations is almost purely related to cost-savings. It's begun leasing shipping containers to transport manufactured goods from China and is making greater use of lockers and in-store pickup options to cut down on delivery costs.
Alibaba has begun leasing containers on ships, similar to Amazon's Dragon Boat initiative. This means that Alibaba Logistics can now facilitate first-mile shipping for third-party merchants on its marketplace.
In full, the report:
Sizes the market for the shipping industry.
Explains how the industry operates in broad terms.
Suggests why major e-commerce retailers should disrupt the space.
Outlines the shipping initiatives of Amazon, Walmart, and Alibaba.
Concludes how these moves might impact traditional carriers.
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