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The End of Amazon and FedEx

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It was the break up heard all over the Supply Chain community. FedEx Express and Amazon have officially called it quits when it comes to U.S. domestic deliveries. The news was confirmed when FedEx decided not to renew their express shipping service contract with the e-commerce giant which is set to expire on June 30th. Amazon responded by diplomatically explaining to The Verge, ““We respect FedEx’s decision and thank them for their role serving Amazon customers over the years.” Express shipping tends to be the fastest way a package gets from point A to point B. Examples of express shipping includes same day, overnight, and next day shipping.

FedEx cited the rising demand in the e-commerce market as one of the main reasons they have ceased their express shipping relationship with Amazon. In a statement the organization said, "There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026.” They went on to proclaim, “FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it."  Amazon might have been the first e-commerce company to offer free two-day shipping, but as of today they are not the only one. With numerous businesses such as Walmart encroaching on their territory, consumers now have a choice on where to buy their last-minute purchases.

But what does that mean for Amazon and FedEx? Who will pick up FedEx’s slack when it comes to express shipping? Analysts are torn as to whether or not this will be a strategic move on FedEx’s part or will cause their stocks to plummet. Morgan Stanley analyst Ravi Shanker believes while it will be a smart long-term decision for FedEx, they will feel the pain for the next few years. FedEx won’t be going down without a fight. They recently introduced “FedEx Extra Hours”, a way for consumers to get their packages until 2 AM, the next day, or in two days- just like Amazon Prime.

With the new vacancy in Amazon’s supply chain, it’s anyone’s guess as to who will take over FedEx Express’ routes.  Will Amazon look to UPS who already handles a portion of their deliveries or turn to the United States Postal Service to pick up the slack. One thing is for sure- FedEx’s decision to end their relationship with Amazon is a pivotal moment in the history of supply chain and logistics. It will essentially begin a battle for the leader in supply chain and logistics. It could also solidify Amazon’s decision to control all aspects of their supply chain whether that means building warehouses to hold their products to the last-mile delivery. In fact, Amazon has already showed signs of this. In an ad located on their website, Amazon is looking for Amazon Delivery Service Partners to “deliver smiles to customers across the company” – a clear indication that UPS and USPS might be in trouble.

Delivering their own goods and services is not the end goal. Amazon has expressed interest in delivering third party goods and products, becoming more of a threat to the already established delivery companies. It’s hard to say which delivery company who will come out on top, but as of now it’s anyone’s game.

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 Danielle Loughnane

Danielle Loughnane earned her B.F.A. in Creative Writing from Emerson College and has currently been working in the data science field since 2015. She is the author of a comic book entitled, “The Superhighs” and wrote a blog from 2011-2015 about working in the restaurant industry called, "Sir I Think You've Had Too Much.” In her spare time she likes reading graphic novels and snuggling with her dogs.

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