DC Velocity - October 2018

newsworthy

E-COMMERCE GIANT AMAZON.COM INC. ANNOUNCED IN September that it had ordered 20,000 delivery vans from Mercedes-Benz, an announcement that puts meat on the bones of Amazon’s plan to recruit small business owners to launch parcel delivery fleets to help handle its rising flood of e-tail shipments.

Mercedes has already delivered the first vehicle of that order to Amazon and is ramping up production at a 222-acre plant in North Charleston, S.C., that it recently upgraded in a two-year, $500 million expansion, the German company said.

That plant now employs 900 workers, but Mercedes plans to up that to 1,300 workers by the end of 2020 as it increases U.S. production of its third-generation Sprinter van, the company said.

In placing the order,
Seattle-based Amazon
becomes the world’s larg-
est customer for Mercedes’
Sprinter van, which the
carmaker will deliver in an
Amazon-branded version
for its client’s “delivery
service partner” program,
Mercedes said. While the
order is large, it is in line
with Amazon’s description of that program, which the company said
could ultimately allow “hundreds of new small business owners to hire
tens of thousands of delivery drivers.”
Amazon had unveiled its delivery service partner program in June,
saying it would recruit entrepreneurs to create fleets of parcel delivery
vehicles by offering them training and discounts on vehicle leases and
insurance and by providing predictable volumes of shipping business to
those fleets, guaranteeing them a demand for the new service.

Amazon currently relies on a combination of service providers to deliver the boxes and pouches it sends to shoppers’ homes every day, using major parcel players like FedEx Corp., UPS Inc., and the U.S. Postal Service as well as local courier fleets and part-time citizen drivers working through the company’s “Flex” service.

—Ben Ames

Amazon orders 20,000

Mercedes-Benz vans for parcel delivery program

UPS Inc. in September officially took the wraps off a four-year initiative the company said would forge a profitable path for business-to-consumer (B2C) parcel shipping, a segment that has grown faster than UPS could have imagined and that to date, has failed to achieve the margins of its traditional business-to-business (B2B) operation.

The “transformation” initiative, unveiled in New York, is an aggregation of multiple measures that began last year when the company expanded its network of high-volume sortation hubs. From 2018 through 2020, UPS will add 350,000 to 400,000 pieces per hour of domestic sort capacity, which is about seven times the sort capacity it brought on last year, according to the company. Seven U.S. sort “super hubs” will come on line through 2022, UPS said.

A key objective, UPS said, is to get ahead of its B2C business, which now accounts for more than half of the Atlanta-based company’s volumes and which shows no signs of abating. UPS also said it would aggressively court the small to mid-sized customer (SMB) segment, and will focus more attention on B2B e-commerce, an area that in general has been overshadowed by the immense emphasis placed on penetrating the B2C category.

UPS’s plan is to achieve greater operating leverage for its U.S. business—which is expected to generate the bulk of the expected improvements—by identifying as many delivery consolidation opportunities as possible. More consolidations, it is hoped, will offset the margin-killing process of delivering one package to one house at a time and will lessen its reliance on the U.S. Postal Service (USPS) for final deliveries. UPS, like many parcel carriers, uses USPS’s universal-delivery infrastructure to bring packages to areas where it would be too costly for UPS to dispatch a driver and package car.