Amazon Fulfillment : Windfall For Air Cargo Companies, Saving Grace For 3PLs


Summary

3PL MANY-TO-MANY shipping networks get bogged down with Amazon’s volume; Amazon’s move into air cargo will reduce peak season stress on those networks.

Amazon’s ONE-TO-MANY shipping network provides a strategic advantage for next-day fulfillment and value-added opportunities for growth in the LTL, small business shipping, and high margin international air cargo market.

Involvement in this market development by Atlas Air Worldwide and Air Transport Services Group provide a unique opportunity for value investors.

Fulfillment by Amazon (NASDAQ:AMZN) – Windfall for Atlas Air (NASDAQ:AAWW), Air Transport Services Group (NASDAQ:ATSG), & Kalitta Air; Saves United Parcel Service (NYSE:UPS), FedEx (NYSE:FDX), & DHL

UPS, FedEx, and DHL, also known as Third Party Logistics Providers (3PLs) have built out significant PARCEL COLLECTION networks relying on volume efficient operations and numerous sorts to minimize the distance any one package needs to move. These networks can be classified as MANY-to-MANY. These networks are very good at picking up a parcel or pallet, moving it through the system, and delivering to the end user. However, these systems do not scale easily when receiving large volume shipments from a single supplier. To manage Amazon’s volume demand during peak shipping season, these 3PL providers are forced to ramp up staffing, infrastructure, and fleets across the network at every hub and sort facility. Quite frankly, the 3PLs don’t ramp up enough to handle the demand and the high peaking factor leaves a lot of equipment unused for a majority of the year. Parsing out shipments from Amazon’s Top 40 Markets, representing about half the US population would asymmetrically reduce Amazon’s utilization of the 3PL networks in major cities during peak season, precisely when the 3PLs see significant demand from consumers shipping holiday packages and where the 3PL network congestion is highest. Amazon’s move away from the 3PLs in the major metros will reduce CAPEX and Peaking Factors for the 3PLs, drive efficiency improvements, and ultimately deliver better returns to investors in an industry which always seeks to cut costs.

Original Source: seekingalpha.com/article/3769016-fulfillment-amazon-windfall-air-cargo-companies-saving-grace-3pls
Image Credit: intellitrack.net

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