For example, the bankruptcy of New England Motor Freight is being blamed on the impact of Amazon’s buying power. The large, regional ‘less-than-trailer load’ trucking operator entered Chapter 11 Bankruptcy protection last week with the company’s ‘Chief Restructuring Officer’, Vincent Colistra, observing that the “the macroeconomic factors confronting this industry are significant” and citing continuing and unsustainable rises in overheads as well as a severe shortage of drivers for the failure of New England Motor Freight. However, it is also being suggested that New England Motor Freight suffered from low margins on high-volume contracts from large customers such as major conventional retailers but also from Amazon.
A different reflection of the impact of Amazon was found in the latest results from XPO logistics. The diversified giant’s revenue and profit grew slightly less than expected over 2018 and Bradley Jacobs, CEO of XPO commented that profit growth would be lower in the immediate future due to “our largest customer substantially downsizing its business portfolio with us starting in the first quarter”. This “largest customer” is assumed to be Amazon.
What appears to be happening is that Amazon is in-sourcing an increasing proportion of its logistics operations. Areas including last-mile, road freight trunk-routes and ‘ugly-freight’ are being handled by Amazon’s own logistics capabilities. Some sources cite as evidence the building of a warehouse in Schodack in New York State designed to handle bulky, difficult to handle items.
This continuing in-sourcing has implications for companies beyond road freight and associated warehousing operations. Increasing Amazon last-mile activity will also impact UPS and FedEx, possibly even the USPS.
It is hard to measure with any precision the effect of Amazon on the market overall. The picture at New England Motor Freight appears to be complex but it would not be the first truck operator to miscalculate the profitability of a large contract. Overall, however, there is strong anecdotal evidence to suggest that Amazon is continuing on its objective of consolidating buying power to drive-down prices.
Source: Transport Intelligence, February 21, 2019
Author: Thomas Cullen
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