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OM in the News: Amazon Explores an Uber for Trucking

December 27, 2016

amazontruck“With an eye toward moving deeper into the $800 billion trucking industry, Amazon is quietly building an app that matches truck drivers with shippers,” reports Business Insider (Dec. 15, 2016). The app would work the same as Uber but would be for truck drivers to find shippers that need goods moved. The advantage for Amazon is that it would eliminate the need for a third-party broker, which typically charges a commission of 15% for doing the middleman work. (This is a great article to share with your students when you discuss the Uber Technologies, Inc., case in Chapter 1).

The app will offer real-time pricing and driving directions, as well as personalized features such as truck-stop recommendations and a suggested “tour” of loads to pick up and drop off. It could also have tracking and payment options to speed up the entire shipping process.

This is part of a larger plan by Amazon to become a full-scale logistics company that controls the entire delivery cycle. Over the past year, Amazon has purchased thousands of trailer trucks and dozens of cargo planes while launching new “last mile” services like Amazon Flex that take packages straight to the end customer.

The new service would put Amazon squarely in competition with numerous companies in this space, such as Convoy, Trucker Path, C.H. Robinson, and J.B. Hunt. Unlike its competitors, Amazon has an advantage in not having to worry about demand from the shipper’s side. To make an “Uber for trucking” marketplace work, you need demand from both sides of the equation — shippers and drivers. Amazon already has a giant shipping network and a rapidly growing package volume, so theoretically it shouldn’t be hard to find a load match for the drivers on its platform.

Amazon’s Minneapolis office is expected to have more than 100 engineers by next year working on this project, which is considered confidential. The opportunity is huge. Roughly 84% of freight spending is on trucking, and truck driving is the most common job in 29 U.S. states, but it’s a market that’s been slow to adopt new technologies.

Classroom discussion questions:

  1. Is this a core competency of Amazon?
  2. Why is Amazon entering this market?

 

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