FedEx Stops Delivering for Amazon

August 8, 2019

A couple of weeks ago, we posted a video about the rise of rush shipping and its effect on the environment. Along with impacting the health of the planet, the recent push to deliver products as fast as possible has also altered the balance of power in the shipping industry. Over the past few years, Amazon has developed its own delivery network of trucks and planes in order to decrease its dependency on outside shipping firms. As a result, companies like FedEx are ending their business with the e-commerce giant so they can focus on other big clients.

In June, FedEx announced that it would not extend its air-shipping contract with Amazon. Then this week the freight firm said it would also stop shipping Amazon packages through its ground network, essentially severing ties with the online retailer. Company representatives claim that FedEx will now be able to better serve the e-commerce operations of other retailers like Target and Walmart. “This change is consistent with our strategy to focus on the broader e-commerce market,” said FedEx in a statement.

The loss of FedEx will likely require Amazon to find a new way to deliver millions of packages ahead of the holiday shopping season. Nevertheless, the online retailer has been steadily winding down its dependence on FedEx as the two companies grew more distant over the years. In July Amazon used its own drivers for 45 percent of orders while the rest were fulfilled by the U.S. Postal Service and UPS. FedEx, meanwhile, registered no deliveries for Amazon last month. “Nothing but respect for FedEx, but they were [a] very small piece of our network and vice versa,” said Amazon’s senior vice president of operations Dave Clark. What’s more, UPS has recently expanded its capacity so that it can handle even more packages for Amazon. Then again, those efforts could all be for nothing if the e-commerce giant’s own delivery network eventually eclipses industry mainstays like UPS and FedEx. 

Questions:

  1. Why has FedEx stopped doing business with Amazon? 
  2. Do you think Amazon’s delivery network will eventually become larger than longtime operations like UPS and FedEx? Why or why not? 

Source: Paul Ziobro and Dana Mattioli, “FedEx to End Ground Deliveries for Amazon,” The Wall Street Journal, August 7, 2019. Photo by Phillip Pessar.

Leave a Reply