Amazon Will Put UPS Out of Business

-edited

Amazon's new robot packs 600+ boxes per hour vs humans at under 200. With that announcement comes a $10K offer to quit.

Lights Out Warehouse

Please consider New Amazon Machines Pack 600 Orders Per Hour, Could Replace Thousands of Jobs.

The new machines, known as the CartonWrap from Italian firm CMC Srl, pack much faster than humans. They crank out 600 to 700 boxes per hour, or four to five times the rate of a human packer, the sources said. The machines require one person to load customer orders, another to stock cardboard and glue and a technician to fix jams on occasion.

Including other machines known as the “SmartPac,” which the company rolled out recently to mail items in patented envelopes, Amazon’s technology suite will be able to automate a majority of its human packers. Five rows of workers at a facility can turn into two, supplemented by two CMC machines and one SmartPac, the person said.

Amazon is not alone in testing CMC’s packing technology. JD.com Inc and Shutterfly Inc have used the machines as well, the companies said, as has Walmart Inc, according to a person familiar with its pilot.

“A ‘lights out’ warehouse is ultimately the goal."

Machine in Action

Opportunity to Quit

TechCrunch reports Amazon Offers Employees $10K and 3 Months Pay If They Quit

But there's a catch. They have to start their own delivery business instead.

The retailer says it will fund startup costs up to $10,000, as well as the equivalent of three months of the former employee’s last gross salary, to give the employees the ability to get their new business off the ground without worrying about a break in pay.

Amazon said last year that people were able to start their own delivery business with only $10,000. At the time, military veterans were able to get that $10K reimbursed, as Amazon was investing a million into a program that funded their startup costs.

Employees — or any other entrepreneur — who wants to become a delivery partner, are able to lease customized blue delivery vans with the Amazon smile logo on the side, and take advantage of other discounts, including fuel, insurance, branded uniforms and more.

Delivery partners, meanwhile, could earn as much as $300,000 in annual profit by growing their fleet to 40 vehicles, Amazon claims. The company said last year it expected that hundreds of small business owners will come to hire tens of thousands of drivers across the U.S.

Directly Competing With UPS, FedX

It's clear where this is headed: Amazon will directly compete with UPS and FedX.

If Amazon can offer retailers reduced costs and faster delivery, why wouldn't businesses take it?

Real Example

Consider what happened to me two weekends ago. I was at Arches and Canyonlands National Parks, staying at hotel in Moab, Utah.

A star tracker that I use for photographing the night sky broke. I wanted another ASAP and paid $50 extra for overnight delivery. I placed the order Thursday morning at 9:00 AM. I should have received it Friday, but didn't.

UPS does not deliver on Saturday. Prime does. I did not get my star tracker until Monday. I lost three days of being able to photograph the night sky the way I wanted.

These camera stores offer free 2-day shipping on most items.

If and when Amazon offers a deal to such places, they may be able to free one day shipping or save money on two-day shipping.

Mish Moments

Please check out my Photography Website: Mish Moments.

Union vs Non-Union

UPS is union-based with union costs and pension costs.

UPS is the single largest employer in the Teamsters Union. The UPS contract is the largest collective bargaining agreement in North America.

UPS will not be able to compete with Amazon on costs. UPS is doomed.

Mike "Mish" Shedlock

Comments
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Tcpbc
Tcpbc

You should really do 5 minutes worth of research. UPS does in fact deliver on Saturdays. But if you ship ground (because you don't want to pay for next day air or Saturday delivery) then there is no guarantee on a delivery day.

StraightUpToYourFace
StraightUpToYourFace

Sounds like Whoever Wrote This Article Is Reaching!!! UPS Definitely Delivers Air And Ground Every Saturday💯 UPS And FedEx Have Been Around For A Very Long Time Due To Their Loyalty To The Customer Base That's Existed For Decades..They've Both Been Resillant AF And Will Continue To Be...Let's Get Those Facts Straight Before We Throw Legitimate Businesses Under The Train✔

Myself Jay
Myself Jay

UPS and Amazon are after different market segments. Amazon is trying to cut costs for shipping to consumers. But at the same time they actually created the burden they are trying to solve. UPS has been more of a business to business shipper. The online boom didn't suddenly put UPS on the map, Amazon is just racing to catch their own tail. If they fail it won't really be a cosmic event for UPS. Which also means if they succeed it's not that detrimental either. It costs more money to deliver consumer package, they would be glad to let Amazon handle that burden.

thimk
thimk

such a deal ! a fleet of 40 vehicles grossing 400k pretax/expenses. /s
the packing device is evolutionary however , the uber like delivery system not so much. will amazon also pick up the returns and unbox them? as a side note here is a dirty little secret of on-line sales . great post

SeanJ420
SeanJ420

I work for UPS and yes Amazon is semi competition to us, and that's due to Amazon only delivers materialistic things like clothes, sodas, cameras etc. UPS and FedEx deliver that too but we also transport medical equipment, court documents, and also hazmats. Until Amazon gets a license to ship such items it's still not that much of a competition

Jojo
Jojo

I don't understand this 1 day shipping infatuation that Amazon is so hyped on. There are very, very few items that I care whether they arrive in 1 day, 2 days, 3 days or 7 days.

As to Amazon workers taking out UPS, I think it may be the other way around. I hear the Teamsters are good at using baseball bats!

Truepk
Truepk

UPS does deliveries on Saturday. UPS loads package trailers at 1000 packages per hour. They unload trailers at a lot higher than that. So all this technology is just a gimmick for share holders. UPS on the other hand has made the first delivery working drone on a campus. Now we are working on machines that are way better than Amazon's measly 600 packages per hour. If Amazon had to pay taxes, they wouldn't be here today.

Yamaharacer
Yamaharacer

Good luck keeping it running. We have an Italian made overhead cnc router that breaks down more than all of the others combined

Aaver
Aaver

I'm in CA and on the test program. I can tell you now once they roll this out people will switch. Rates are 50 to 75% cheaper than UPS and FedEx ground.

MikeC
MikeC

Mish, as a long time reader I appreciate your economic analysis but think you are off on the prediction that UPS is doomed. The union comment is spot on and is a huge challenge but the rest of the article is not correct. First, UPS does deliver on Saturday and has for the last two years and my guess is that Sunday delivery will be available at some point. In regards to packing automation, that is not UPS core business so not sure how that takes away from UPS business. Amazon has the cash to compete in the segment but they are still a long way off from building out their network.

JonesyLB
JonesyLB

I've had the opportunity to tour 2 of the big automated hubs and was a loaned executive for one of the companies you mentioned and I have to tell you that you have over simplified this thesis statement to the umpteenth degree. This technology that everyone thinks is perfect and is a job killer spends more time broken down and jammed than it does running. In fact it's been my first hand experience that it often requires more staffing to run than normal ops. Then there's service, no matter what people sensationalize there is no replacing a person for quality control and making the right decision at the right time.

Although I can appreciate this kind of article to grab viewers and pay the rent, you can rest assured the big 3 shipping companies move so much of the GDP that if UPS, FEDEX, or the Post shut down tomorrow it would cause economic upheaval.

Also consider volume trends... Everyone is shipping now and Amazon is growing at the rate that is still astronomical. If Amazon were to choose to pick only UPS as their shipping partner tomorrow UPS would only be able to deliver Amazon packages. Same for FEDEX and the Post. Amazon needs to generate a last leg workforce just to meet delivery requirements.

everything
everything

I was wondering how Amazon would do this, and suspected independent contractors because hey, that's the UBER model! Just use technology. They'll work the bugs out. They won't put anyone out of business directly, but they move enough product to justify their own shipping network. They can speed up their deliveries, and provide incentive to their employees to do so. Their are plenty of other online shopping sites to keep them all in business.

T85
T85

Some of you must have never heard of "too big to fail." Amazon couldn't possibly put UPS out of business, as UPS is essentially "too big to fail." Amazon would literally have to dump all its other projects and focus solely on shipping and logistics to even come "close" to putting UPS out of business. UPS is a shipping "company"...that is all it does...Amazon is a retailer "first" before anything...They also have grocery stores, television services and now..."food delivery" on their plate...they don't have the skill, fleet or ability to challenge any company, whose sole purpose...is to ship..

Futhermore, Amazon's commercial and international shipping is essentially non existent next to UPS and Fed Ex. Second, they do not have the business accounts and contracts for retail and commercial delivery, the modes of transpo necessary to assume such, (ships, planes) nor the equipment to deliver oversized merchandise. (8x10 rugs, building materials etc.) Someone mentioned that they don't even have the licensing to deliver certain merchandise and products that require government clearance and approval before such can be done...this is a fact, and a process that alone could take yeearrs!

TBH, Amazon "actually" "uses" UPS and sometimes Fed Ex to deliver some of their packages!...I know...I used to work for UPS and many moons ago. UPS has so many moving parts, and accounts across many, many countries. Where as Amazon ...well, you know..lol

And, you better believe there is a "huge" difference in pay. I know UPS drivers who have retired from the company comfortably where as I know a few Amazon drivers, who use it as a way to make "a little extra on the side." It is far from an income supplement. They may be stealthy in delivering groceries and small packages right now... but let's have this same discussion around the holidays when manufacturers are dumping hay loads of ship container amounts of product on to ports for retailers in time for Christmas. And guess "who" is picking it up? Again Amazon couldn't possibly put UPS out of business. They don't even have the logistics to do so.

KidHorn
KidHorn

I don't get why Amazon if offering $10k for people to start a delivery business. Seems like their long term goal would be to have automated delivery. And if they lack delivery people, it would likely cost less to use UPS or Fedex than to fork over $10k.

ksdude
ksdude

UPS is great, except for the cost. And FEDx is catching up to them. UPS makes a mockery of fedex services, being someone that ships a lot I know. Fedex independent contractor drivers are the worse. I suspect Amazon will be no better but if they are cheaper they'll still get business. Just be careful what you ship. Of course, the union will press forward with pay raises, etc and we'll end up with another GM on our hands.

I wonder if the clerk(not the pm) that works in my local town of 1100 people that made $74k last year is worried?

GrubbyZebra
GrubbyZebra

UPS does offer Saturday delivery, and even Sunday delivery in certain markets.

Amazon drivers have also mis-delivered packages, this is not unique to any single carrier.

Think too about Amazon's own profit projections for this venture, it works out to $7500 annually per vehiclen harxley groundbreaking for the operator (not to mention at some point they will end up having to meet DOT regulations of a commercial carrier)

Rouvim
Rouvim

UPS/ FedEx are third-party shippers. We're not in manufacturing, therefore we don't have a need for machinery as CMC. The only thing this helps Amazon with is; keeping it's people under payed and having lower prices.

AlexandreM
AlexandreM

I doubt they will put UPS out of business. I worked for UPS and their range of services as a well the way it's organized actually is hard to match for the Uber/Postmates style delivery companies. I worked for Postmates too btw.

Grumblenose
Grumblenose

Gee, maybe UPS customers will also start using CartonWrap (or similar product). Maybe UPS will start Saturday deliveries.

Brother
Brother

It's not the union that's the problem or the packing machines that put's UPS out of business. It's the tech buzz that convinces people and under cutting competitive shipping rates. At some point it all goes back to the same shipping price.

No. 26-49
magoomba
magoomba

There will be a lot of damage.

Homebiz
Homebiz

You should really do some research before you publish an article. Of course UPS offers Saturday delivery! And it arrives at your house more reliably than Amazon's deliveries do.

WhoaNelly
WhoaNelly

I agree with the various authors who disagree with you. UPS does deliver on Saturday's, you could have gotten your package. The idea that with 40 drivers they can not $300,000 a year is poor business math. As for ththe union issue, with a 62% turnover rate of their inside employees, and drivers working and making deliveries up to 9pm Ave tearing up their vehicles; it while management is making 6 figures between salary and stock bonuses and options, and will not be too long before Amazon get unionized. Then what?

Bankster
Bankster

Looks like the pension will be in trouble. They are 92% funded (their math), assuming a 7% return on assets, and assuming membership is steady.

Looks to me like UPS employees comprise ~20% of teamsters membership. When automated trucking comes, this is going to get ugly.

Jmarkg
Jmarkg

You have no idea what you are talking about. Amazon can't run ups and fedex out of business. Ridiculous