This week’s attention-grabbing headline screamed out news of the Apocalypse: FedEx Ends Ground-Delivery Deal With Amazon.
Who would have thought 10 years ago that the retailer-logistics relationship between Amazon and FedEx would one day see an end? The FedEx distribution powerhouse and the ever-growing ecommerce juggernaut called Amazon, together operated a juggernaut of global proportions. Who could forget the days where an online Amazon purchase would end with an at-home door delivery within a couple of days? Who would have dreamed that this relationship would end?
This saga had its genesis during Christmas 2013, over 5 years ago, when the combination of a surge in Christmas delivery orders and poor weather across the U.S., prevented FedEx, among others, from meeting the delivery commitment made by ecommerce giants like Amazon. While the logistics organizations change their staffing and operating practices to avoid a repeat performance during subsequent peak shipping periods, the faith in the reliability of the supply chain was broken. A fresh approach was deemed to be needed.
With the growth of its truck fleet in 2014 and the launch of its Prime Air service in the fall of 2015, Amazon has targeted its transportation partners with its own asset-heavy infrastructure, looking to leverage service disruption, i.e. same-day and 2-hour delivery, with laser-focused last-mile delivery practices. FedEx, along with UPS and USPS, have been observing and learning from this Amazon shift in supply chain management, all wary of the potential for this new Amazon model to further erode their traditional ecommerce support role.
While FedEx might be the latest service provider to feel Amazon’s focus on integrating distribution in-house, it is obvious that others are in Amazon’s cross-hairs. Look out UPS, USPS, your turn’s coming up.
As a business executive with oversight of your company’s supply chain, you need to be vigilant of the strategic moves being made by other, key players in the chain. Risk management and risk containment are key practices in today’s world and the Amazon-FedEx scenario should serve as a reminder that relationships can change, suppliers can become buyers and partners can become competitors.
John Gradek is Principal with Dergel Executive Search. His practice covers Executive Search for Supply Chain and Logistics, Manufacturing, Operations and Technology Leadership.