Entrepreneurship

Amazon to build incubator for startup trucking companies

Read more at www.freightwaves.com

Amazon.com Inc. (NASDAQ:AMZN) has taken the next big step to establish capacity assurance for its delivery network: Grow it in-house.

The Seattle-based company plans to launch a program to recruit hundreds of people to start their own trucking companies and haul goods exclusively for Amazon. An IT publication reported the news Friday morning. Brittain Ladd, an e-commerce consultant who was an executive at Amazon, said Friday that he became aware of the initiative last year and that it will be “fully operational” by the end of the second quarter.

Citing an internal Amazon document, The Information reported that Amazon will create an “incubator” that provides business training and loans for entrepreneurs to start their own trucking companies. Ladd said the idea was planted in mid-2018 when Amazon began recruiting Delivery Service Providers (DSP), independent intermediaries who would recruit workers to drive mostly for Amazon. 

The DSP program’s goal was to funnel local delivery operations through individual contractors who each controlled dozens of drivers. The hope was that the contractors would be motivated by big earnings potential to hire thousands of drivers across the country to augment Amazon’s in-house fleet operations.

Since that time, however, Amazon’s delivery volumes have skyrocketed, and it handles about two-thirds of its deliveries in-house, a much higher percentage than three years ago. With e-commerce demand continuing to grow, and more drivers retiring, Amazon is on the horns of a dilemma whether it contracts out the haulage or handles shipments itself. “I don’t believe Amazon will be able to generate anywhere near the needed trucking capacity” to keep up with increases in traffic,  said Ladd. 

Amazon did not respond to a request for comment.

Ladd said that Amazon, with a market cap of about $1.6 trillion, should begin looking at acquisitions at various points in the trucking supply chain. The company should explore acquiring one or more of the major truckload companies, he said, without mentioning any names.

Amazon should also strongly consider acquiring digital brokerage platform Convoy, which was founded by former Amazon executives and counts Amazon Founder, Chairman and CEO Jeff Bezos as one of its investors, Ladd said. “Convoy is an ideal platform to keep the carriers that Amazon contracts with operating efficiently at all times, even when they’re not hauling freight for Amazon,” he said.

David Glick, another former Amazon executive who is chief technology officer at Flexe, an on-demand warehousing company, said the Amazon incubator initiative is aimed more at the future of its business rather than the present. “Amazon is always planting seeds which will grow into trees in five to seven years, so they are looking at delivery capacity several years out,” Glick said. 

Ladd said that Amazon needs to build a from-the-ground-up model that doesn’t center on putting more trucks on the roads. Rather, the company should create a “consortium” of trucking companies, including fleets that it sponsors, he said.

Under the collaborative model, any truck in the consortium would pull any trailer, and any driver would drive any truck, Ladd said. “This will ensure trucks are able to operate nearly continuously because drivers with available driving hours will be able to keep the trucks going,” he said. 

Read more at www.freightwaves.com

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