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Amazon Seems Poised to Take Bite Out of UPS and FedEx With Own Delivery Service

Dubbed “Shipping with Amazon,” or SWA, the new service would have Amazon picking up packages from businesses and shipping them to consumers, the WSJ noted.

While not confirming or denying the report or the SWA launch, an Amazon spokesperson told Sourcing Journal, “We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices.”

It is expected that Amazon will introduce the new delivery service in Los Angeles in coming weeks with third-party merchants that sell goods on its website. Amazon could then expand the service to more cities as soon as this year.

While the program is being piloted with the company’s third-party sellers, it is envisioned to eventually be opened to other businesses too, sources told the WSJ, who noted that Amazon is planning to undercut UPS and FedEx on pricing, although the exact rate structure is still unclear.

Shipping With Amazon was previously tested and rolled out in London.

[Read more about Amazon: Amazon’s Net Income Jumps 153% in Fourth Quarter]

It is the latest move by Amazon to create its own freight and parcel delivery network. In the last couple of years, Amazon has expanded into ocean freight, built a network of its own drivers who can now deliver inside homes and leased up to 40 aircraft, while establishing an air cargo hub.

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Amazon already delivers some of its own orders in at least 37 U.S. cities. With the new SWA program, Amazon reportedly plans to send its own drivers to pick up shipments from warehouses and businesses and deliver the packages to consumers. For shipments outside Amazon’s delivery reach, the U.S. Postal Service and other carriers will take care of the so-called last mile to customers’ doorsteps.

UPS and FedEx have built out massive logistics networks over the course of decades to allow them to deliver across the U.S. UPS this year is planning to spend up to $7 billion on upgrading its delivery network.

On its December earnings call, FedEx executives said Amazon was a longstanding customer, but that no customer represented more than 3 percent of revenue or volume.

In reporting year-end sales and earnings last week, UPS said its domestic segment is transforming its network to take full advantage of structural changes in the direct-to-consumer market. Demand for UPS Ground rose in the fourth quarter with volume growth of 5.7% and revenue gains of 9.3%. Premium Next Day Air shipment growth continued to be strong at 4.9%, as customers selected faster delivery options.

DHL has made investments to increase capacity and delivery options to meet the demands of e-commerce growth spurred by Amazon.

DHL’s On Demand Delivery service designed to reduce failed delivery attempts and improve the receiver experience has successfully been deployed across all countries in the Americas.

Under the service, customers receive SMS and email messages to keep them informed of estimated delivery dates. Receivers can choose from six delivery options via the On Demand Delivery website, and shippers have the flexibility to choose which delivery options are presented to receivers.

Paul McMillan, vice president of sales and marketing for DHL Global Forwarding, announced in November that in 2017, “we have expanding operations in 18 new branch locations in U.S..” with additional operational expansion in U.S. local markets on tap for 2018.

“We have a full fleet of logistics services,” McMillan said.

These include e-commerce warehouse value-added services such as pick and pack, sorting, labeling and inventory management. He said a dedicated e-commerce IT platform for tracking and tracing global B2C business just finished a trial run in China and is ready to be rolled out globally.

Global Forwarding also has a specialized program to support Fulfillment by Amazon customers in the U.S. and abroad from cargo pick-up to delivery.

Amazon is testing a warehouse management system called FBA Onsite intended to help sellers more efficiently pick, pack, ship and manage their inventory. FBA Onsite is said to be a software that helps sellers manage their warehouse processes so they can better meet the rigorous requirements of the Amazon Prime customer promise. Sellers receive on-site support to assist with software setup.