June 22, 2015

Amazon builds mobile app for "crowdsourced" package delivery

Company would rent logistics space from brick-and-mortar stores.

By Ben Ames

E-commerce giant Amazon.com Inc. may begin hiring ordinary citizens to deliver its parcels in an effort to bypass traditional logistics firms and save money on last-mile delivery, according to a story in the Wall Street Journal.

The company is developing a mobile app to support a distribution plan—code-named "On My Way"—that would allow Amazon to pay brick-and-mortar retailers to hold products that had been purchased online until a willing driver arrived. That driver would then place each box in their personal car trunk or back seat and deliver them to the buyer's private address.

Similar to the way that Uber replaces professional cabbies by creating a network of citizen drivers, the Amazon plan would rely on a crowdsourced delivery service that engages amateur drivers who are neither employees of Amazon itself nor of a professional carrier or courier service, the newspaper reports.

Amazon did not reply to requests for comment.

The plan is Amazon's latest effort to hold down transportation costs by redesigning its delivery network to gain more control over its fulfillment infrastructure. In the past year, the Seattle-based company has suggested a range of delivery ideas that depart from using the network of traditional logistics and delivery services provided by UPS Inc. and FedEx Corp.

The company has proposed creative alternatives, including using flying drones to drop packages on customers' doorsteps, and segmenting the U.S. into different delivery methods based on population size, with a private fleet serving the biggest cities.

The latest plan continues this effort, but On My Way would have to clear some hurdles first, an industry expert says.

"The company has been trying to find a way to solve the last-mile problem for a long time," said John Santagate, a research manager covering supply chain execution at IDC Manufacturing Insights, a Framingham, Mass., analyst firm. "This is an innovative approach to a very traditional problem, but I don't know how feasible it is."

The plan would have risks such as how Amazon will pay these drivers, whether the rate will be economically appealing to them based on fluctuating fuel prices, and how the company will resolve legal questions over the privacy and security of sharing home addresses with unknown delivery drivers.

Still, the scheme may be worth trying because of the sheer size of the company and its perpetual search for profit. In its most recent results, Amazon posted a loss of $57 million for the first quarter of 2015, based on revenue of $22.72 billion.

With more than 60 distribution centers operating in the U.S., Amazon can already deliver more than 99 percent of its orders within one day, so the new delivery plan is less about speed than cost, Santagate said.

"[Amazon CEO Jeffrey] Bezos is an innovator," said Santagate. "He's the only guy who can lose money in consecutive years and still run a company. If anybody can do it, Amazon can."

About the Author

Ben Ames
Senior Editor
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.

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