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Amazon re-shaping ‘final mile’ and beyond

Posted: March 28, 2018 by John G. Smith

Amazon has 6,000 trailers on the road in the U.S., and it’s investing in a private fleet. (Amazon photo)

NASHVILLE, Tenn. – Amazon — the bookseller that transformed into the world’s largest online retailer – has been transforming the way goods are trucked to market. And not just the freight that rolls through its distribution centers.

Thank (or blame) the need for speed.

Amazon Prime began offering two-day shipping in 2005, at a time when most online retailers were focused on shipping in four to six days. Today, Prime members in more than 1,000 cities receive free same-day deliveries on more than a million items. The recently acquired Whole Foods business will ship within two hours in some locales, and the Prime Now service launched in 2014 will deliver products around select areas within an hour.

The commitment to ever-faster distribution has led the company to amass 32 planes and 6,000 trailers of its own, and it’s even begun to build a private fleet of trucks and drivers.

“They fully intend to make a run at UPS and FedEx,” said Cyndi Brandt, Omnitracs’ senior director of product marketing and strategic alliances, during her company’s recent user conference.

“They’re going to move upstream, from boxes, to pallets, to truckload. It’s going to happen. They’re building that infrastructure,” she warned, adding that wholesale goods like building material and industrial supplies will move through the online channel.

Amazon Flex is already mobilizing a network of contractors to move small freight, tapping into a shared app and related services; Amazon Fresh is moving groceries; the Fulfillment by Amazon service stores products in fulfillment centers and handles everything from shipments to customer service. “You can be an expert retailer and never have a warehouse anymore,” Brandt said.

But as Amazon reworks its own warehousing and distribution models, it’s also changing customer expectations elsewhere, she said. The speed and convenience offered by Amazon are seen as the norm.

Brandt credits Amazon’s corporate culture for many changes. Company leaders are disciplined in the way they execute plans, and will tolerate failures as long as lessons are learned along the way, she said. So too will they “unmercifully” reinvest in any technologies that enhance the customer experience.

The latter investments are changing the way shippers view the approaches and costs of warehousing and shipping. Shipments are becoming smaller and more frequent, and those in the trucking industry have to innovate to prepare, Brandt said.

“How many of your customers want more information?’” she asked the crowd.

Beyond offering estimated delivery times, the Omnitracs executive expects available data to begin predicting what customers need before they actually place an online order, making decisions based on previous buying habits. For fleets, the advantage of that would be more-predictable routes, although the shift could also require operations to be flexible enough to adapt to different buying patterns throughout the day. Frequent orders, additional deliveries, and smaller drops could become the norm.

“What if I dynamically took in information and created phantom routes throughout the day based on predictive ordering?” she asked, insisting that’s possible using the technology of today.

A shift to so-called “final mile” deliveries will also require more drivers to interact with customers. It’s why fleets like Schneider are investing in “white glove” delivery services of their own, she said.

“Some drivers may not be able to adapt,” Brandt said. “Some drivers are not going to want to have more touches.”

Above all, fleets will need to draw together more of the related data, and innovate on their own.

“We are not integrating all the different pieces of data well,” she said of the trucking industry. “We need to figure out ways to bring it all together.” Integrated systems will have to address segmented markets, pricing, and predictive ordering, while devices linked through the internet of things transform trucks into rolling clouds of data.

“If we don’t use the data to change our businesses, there will be disruption – and it’s going to come in quickly,” she said.

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