Amazon Is Quietly Subverting the Logistics Sector With a New Freight Service

Date: Monday, May 6, 2019
Source: Sourcing Journal

Amazon is expanding its logistics operations, and the move could spell some trouble for traditional freight operators.

The e-commerce company’s plan to shift from two-day to one-day shipping for Prime members has it looking to cut shipping costs while streamlining operations. This means Amazon’s current logistics brokers may soon be counting one of their biggest clients as a competitor.

The Amazon Logistics program launched quietly in 2018 with an online freight network that allows shippers to book truckload shipment services. The program is currently in beta, providing service to Connecticut, Maryland, New Jersey, New York and Pennsylvania.

The site invites shippers to “tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates,” meaning that Amazon is officially billing itself as a freight broker. As the company continues to open up the program, it will give Amazon more leverage to negotiate rates with carriers who are eager to compete for business.

In recent months, Amazon has scaled back its reliance on third party providers like XPO Logistics Inc., which lost around $600 million in Amazon business in the fourth quarter, The Wall Street Journal reported.

Share prices for many of the brokerage firms that serve the market declined Monday and Tuesday, following a post about the Amazon program on Friday from trucking news provider FreightWaves, according to the Journal. Shares in C.H. Robinson Worldwide Inc., North America’s largest freight broker, have fallen more than 10 percent in the past week.

Even with the considerable impact to the space, Amazon is keeping mum about its plans to expand the program—and what that could mean for the future of its logistics relationships.

“We work with many line-haul service providers in our transportation network and have long utilized them to carry loads for Amazon,” an Amazon spokeswoman said in a statement. “This service, intended to better utilize our freight network, has been around in various forms for quite some time.”

 

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