Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at Amazon.com. He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to Amazon.co.uk (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university. Read moreView Profile Page
It’s difficult to call out. Today, Amazon still doesn’t have the network to cover the full US anyway and it will take a long time to achieve that. You have the question about the density and the location where Amazon deploys. My belief is, the smart way would be to still keep both. If you consider the less dense areas of the country – within the US and Europe, it’s the same; within countries in Europe, it’s the same – at a certain point, there is a density at which you there is no benefit to going on your own. It’s better than one carrier goes and does the job for all the people selling in this area. This would have the best cost. Every retailer would have to accept the cost of it.
But the opposite applies, as well. When you take the big cities, they are very, very dense and there is a level at which adding more parcels doesn’t help. There is a level of density which is pretty high, but you could have more. But there is a time where even if a guy was delivering in his own area, without taking his car or truck back, he will still need the time to take the parcel, go to the door, ring the bell and stuff like that. At the level there, you could have more and the benefit is almost nothing. In that case, work with both, basically. Today, Amazon works with both, even in the areas where they are. If, for some reason, they are beyond this density, they may give the work to another carrier. They don’t want to set a new route and split the route in two as there is a scale effect. For example, if you have a good route, where you can deliver 200 parcels in a day and you are there for eight hours, that is a very, very good route. But if you are down to 50, you are struggling. Therefore, it’s better to give the 50 to another carrier, which may help their density and doesn’t impact yours, because you know you are maxed out at 200. If you have 400, you will keep the two routes.
If you want to be optimized all the time, you need to manage this. In that case, you will always need a partner to do it. I believe, for the Amazon business, the best way for carriers such as UPS and FedEx, is to really work in partnership with Amazon, understanding where they will be needed and, obviously, adapt their rate to that. But Amazon will not do better. One of the follies, for example, in the low density area, is that there will be a rate that will be more expensive than the high density and Amazon will have to accept paying more to those carriers, to do it, which ultimately, should have a better cost than Amazon would, because Amazon plus all the other parcels will always be better than just Amazon alone.
I think, maybe one or two will drop. In the US, there is UPS which is there. Of course, there may not be enough room for everyone. I think FedEx have already given up a bit, with Amazon in the US. I believe there will be room for one or two, per country, with whom we work in partnership. When I say in partnership, that doesn’t mean agreeing. It’s just making sure you are giving them the right number of parcels, where you don’t deliver. We did it in the UK, back in 2015, 2016, when Amazon Logistics was already big in the UK. We’re working very closely with DPD, in the UK, for example. Of course, this business, as you develop the network, will not grow extensively. However, remember that Amazon are still doing 15% to 25% growth, depending on the region. So every year, Amazon adds a quarter to its existing business. Ultimately, every year, you get a little bit more, despite your share decreasing, for some of the business. I don’t think Amazon will do a great percentage of their own parcels, because economically, it will not work.
If, in a country, every carrier decides not to work with Amazon, for whatever reason, yes, maybe Amazon will do and it won’t be optimized for the 10% to 15% where they will never have the density. But they will do it themselves. For the country where a carrier is smart enough to say, okay, I know I’m not going to have the best parcels, in the middle of the city, but I work in partnership and they give me a pretty accurate forecast and they guarantee me at least a certain level of business and I will work around that. I think people will still be able to grow their own business. Now, it will never be as good as it was, many years ago, except for one thing. If you compare the long range, I can tell you that Royal Mail is doing more parcels today, with Amazon, than they were doing in 2005. Okay, it was 15 years ago but, despite the fact that, in 2005, Royal Mail was 90% of the Amazon business, today they’re maybe 20%. But that’s not what matters. What matters is the total parcels they’ve been given and I’m sure, today, they’ve been given more parcels than they were, at that time.
That’s what some carriers should think about. Of course, they lost a lot of opportunity, but they’re still growing their own business.