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The five-year, indefinite-delivery/indefinite-quantity, fixed-price, next generation delivery service contract was estimated at nearly $2.4 billion. The contract is via the U.S. Transportation Command (USTRANSCOM), which is one of nine commands under the DoD Unified Command Plan.
United Parcel Service Co. (UPS) was also awarded a five-year DoD contract, estimated to be about $2.4 billion.
New York-based Polar Air Cargo Worldwide Inc. received a contract of nearly $200 million.
Amazon has set up a skunkworks project to explore using self-driving vehicles to deliver packages. Amazon wouldn’t necessarily develop the vehicles themselves. Instead, it wants to see how driverless vehicles would improve package delivery and make Amazon more efficient.
The project was first reported Monday in the The Wall Street Journal. The group is small, only a dozen employees. The think tank, as Amazon calls it, is part of a larger and more ambitious plan that would have Amazon transport more Amazon packages itself. The big picture has Amazon buying or renting jet freighters, operating its own long-haul tracks, and making its own deliveries. It also includes the showy possibility of Amazon drone deliveries.
United Parcel Service Inc. and FedEx Corp. could be facing significant risk to their business after Wal-Mart Stores Inc.said it would offer discounts to some online orders if customers choose in-store pickup rather than home delivery. Analyst Ravi Shanker at Morgan Stanley said Wal-Mart’s move marks “a seminal event” in the evolution of last-mile parcel delivery for e-commerce.
What UPS and FedEx have to avoid is being a cheap peak demand shipper for Amazon’s business, particularly during the holidays. Amazon wants to be able to build its own logistics operation it can run full steam, offloading peak demand to companies like UPS and FedEx. But if they’re not compensated appropriately, they’ll lose money building capacity to meet peak need that’s then idle during slower seasons.
But here’s where the duopoly these two companies have in shipping may come in handy. They’ll compete with each other for Amazon’s business, but neither is desperate enough to make Amazon a loss leader as a customer.
High-profile drone delivery demonstrations continue, but frequent market use is years away, and hurdles must be overcome.
One of the clearest hurdles to the evolution of drone delivery in the U.S. is the slow and complex process of developing regulatory rules. The Federal Aviation Administration admitted after coming up with initial drone regulations last year that settling on delivery-specific rules will take at least a few years.
That reality probably puts the U.S. drone delivery market behind the market evolution in other countries, but many in the drone delivery sector are not critical of the long timetable.
“The FAA’s timetable is not a gating factor,” Jerome Ferguson, director of autonomous systems at UPS, told Retail Dive. “The FAA is really doing what it is supposed to do in doing everything is can to ensure a safe airspace.” UPS has a representative serving on the FAA’s drone regulation advisory committee, Ferguson said, so it at least has a seat at the table as rules get sorted out.