FedEx isn’t threatened by Amazon’s move to expand its third-party logistics offering with the launch of Amazon Supply Chain Services.
Talking to CNBC, the express giant’s president and chief executive, Raj Subramaniam, said that Amazon wouldn’t be able to offer customers access to a global network.
“Last week’s announcement versus what FedEx operates is very different,” said Subramaniam. “FedEx is a true end-to-end global network.”
He added: “The word network sometimes gets misused, and a true network is something you can pick up in any part of the world and get it to any other part of the world in a couple of days.
“And for that, you need a system like what we have here and the network [we have] around the world. That is not what was announced at all.”
He added that Amazon’s latest offering was a non-asset 3PL play. While FedEx does provide 3PL services, it is not the largest part of the FedEx business and the company has “long-term contracts with our customers” in that area of the business.
On announcing its Amazon Supply Chain Services (ASCS) offering at the start of May, the e-commerce company said that major firms Procter & Gamble, 3M, Lands’ End, and American Eagle Outfitters, were among the first to sign up.
Services offered through ASCS include freight, distribution, fulfilment, and parcel shipping solutions.
The freight part of the offering includes Amazon’s transportation network covering ocean, air, ground, and rail freight, supported by a fleet of 80,000 trailers, 24,000 intermodal containers, and 100 aircraft.
There is a range of speed and service options, including time-sensitive shipments, simplified booking, customs clearance, and end-to-end shipment visibility.
The distribution and fulfilment offering allows companies to import inventory from overseas, store inventory in bulk, position inventory closer to demand and fulfil customer orders across their sales channels.
Finally, the parcel service covers orders placed across sales channels, with two-to-five-day delivery speeds and seven-day-a-week service with pickups from warehouses or third-party providers and delivery to customers’ doorsteps.
Industry commentators have been suggesting that the launch of ASCS will be seen as a threat to the established express firms like UPS and FedEx. Reflecting these concerns, the two firms’ share price fell by around 10% following the launch of ASCS.
In a blog post, Christopher Henry, a vice president at Carnegie Investment Counsel, suggested that Amazon’s tech leadership could help it compete with established players.
“UPS and FedEx have strong brand recognition and long-standing customer relationships, but they face higher cost structures in many areas and do not have the same level of vertical integration or AI-driven optimisation that Amazon has built,” said Henry.
“The competitive pressure could intensify over time, especially as Amazon continues to improve its robotics and artificial intelligence capabilities.
“Companies that have relied on traditional carriers may now have a compelling alternative that offers better visibility, faster service, and potentially lower costs.”
However, others have pointed out that companies could be nervous about having their products transported by a competitor, while there will also likely be concerns about shipments being bumped for Amazon’s own volumes during peak shipping periods, a challenge the e-commerce giant also met when opening up its air network to third-parties.
