Planning FLEXibly: Is Amazon’s latest delivery service model flexible enough?

A woman is horrified by a large stack of parcels by Amazon.com in different sizes waiting in front of the entrance door to her flat.

While sitting in the coffee area of Post-Expo 2015 in Paris today, a 3-day exhibition dedicated to everything postal and express, I read about the launch of Amazon Flex – the Uber-like service for same-day parcel deliveries. Perfect timing, you would think – the news is triggering a lot of buzz here, indeed.

The idea of crowdsourcing has been around for quite some time. It’s become commonplace in personal transportation (Uber and Lyft), short-stay accommodation (Airbnb) and retail (e-bay). Applying the same model to same-day delivery e-commerce makes perfect sense.

If London drivers are satisfied with earning 30 GBP per hour (compared to the 70 GBP tariff of a normal taxi) for being stuck in traffic near London Eye, why wouldn’t they be up to earning similar money for delivering Amazon packages?

Still, I see three possible problems with Amazon Flex:

  1. Scale – The cost of a $20 “crowd-sourced” delivery only makes economic sense if a driver can carry several packages at a time. Five deliveries in an hour could bring Amazon’s costs down to $4 per package, a good price.  But if a courier only delivers one package in an hour, the price no longer looks so good. Consolidation would remain a critical ingredient for success.
  2. City density – currently piloting solely in Seattle, Flex will reach other megacities where traffic disruptions are the norm rather than the exception. Drivers have to consistently reach a “break-even point” (where the value of being stuck in traffic is higher than just not accepting the job at all).
  3. The fury of the express provider – Obviously, new service will compete directly with express operators helping Amazon do the “regular” deliveries – UPS and FedEx. How will they react to seeing their biggest customer crowdsourcing their work to less skilled express logistics service providers?

As the head of Quintiq’s Logistics business unit, I’m really curious to see how this new service will turn out. And since we do believe that same-day delivery could be a profitable proposition, watch our most recent take on this topic: Same-day delivery: Shaping the customer experience.

This post was originally published on LinkedIn.

CATEGORY

Transport & Logistics

AUTHOR

Frank Tinschert.

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Frank Tinschert

About Frank Tinschert

Frank Tinschert heads the Logistics Business Unit in the EMEA (Europe, Middle East and Africa) region. He’s a qualified engineer in transport systems and has more than 15 years of professional experience in the field of complex transport and logistics solutions. In his spare time, Frank enjoys country music, ice cream and travelling the world.