FedEx Corp. (FDX) announced last week the opening of a container freight station in Chicago to facilitate shipments to Puerto Rico. The freight station constitutes part of the company’s entire North American network which involves over 360 freight service centers. We expect this station to enhance network fluidity and service efficiency and eventually attract more customers.
Category: Industry News
Shipping and logistics is a business where capital intensity and network size really matters. The world’s largest parcel delivery company, United Parcel Service, is showing its biggest two competitors, FedEx and DHL, why its business structure generates higher margins, and thus superior profitability.
To sum it up, the factors that make UPS a great investment case and an amazing company to hold for long-term investment are its greater package volume, concentration on high-margin ground shipping, and use of a single network rather than parallel air and ground operations.
However, its competitors should not be underestimated, as they hold a good position and well-established brands as well.
James Tompkins, who runs Tompkins International, a Raleigh, N.C.-based consultancy, said Amazon has divided the nation into three segments based on population size: The top 40 markets, which comprise about half of the U.S. population; the next 60 largest population areas that account for about 17 percent, and the remaining areas, which account for about one-third.
UPS Inc., which today handles much of Seattle-based Amazon’s current deliveries, will not play a prominent role in the network realignment, Tompkins said. Nor will FedEx Corp., which manages a lesser portion of Amazon’s delivery business. An Amazon spokeswoman was unavailable to comment.
Amazon has stated it is currently reviewing the performance of delivery companies. The company seems quite ready to take shipping matters into its own hands, as became clear from CEO Jeff Bezos’ plans to use drones at some point in the future. According to Amazon, the company passed on all the deliveries to the shippers on time. Declining to give exact figures on how many customers were affected, Amazon stated that only a small percentage of shoppers faced delays.The online retail titan has plenty of cash to throw at the venture of developing its own delivery service, and the backlash it faced as a result of the Christmas delays could serve to expedite the development of these options. If major online retailers such as Amazon decide to launch their own delivery services, shippers like UPS and FedEx could potentially find themselves in a lot of trouble.
Did you hear the one about the U.S. Postal Service wanting to stop delivering mail on Saturdays? Actually, that’s nothing. Up in Canada, the postal service says it’s planning to quit delivering mail … period.
Or at least, delivering it door-to-door.