Slashdot Mirror
Amazon To Build $1.5 Billion Air Cargo Hub In Kentucky, Creating Around 2,000 New Jobs (techcrunch.com)
Amazon is planning to build a $1.5 billion air cargo hub in a spot that crossed the Cincinnati and Kentucky border, according to the Wall Street Journal. When the project is completed, it will eventually result in around 2,000 total new jobs. TechCrunch reports: The new hub is designed to help provide a home for its increasingly large fleet of at least 40 cargo planes, a group of vehicles it perviously revealed it was leasing under the name of Amazon Prime Air, complete with Amazon exterior paint jobs. The planes are designed to help Amazon handle its increasing transportation needs, which are growing as its share of global retail business increases, and straining the capacities and capabilities of its shipping partners, which include FedEx and UPS. Amazon has long maintained that it's not looking to compete with other logistics providers, but it recently became an ocean cargo shipping company, with the ability to act as a "freight forwarder," services that FedEx and UPS also offer. Amazon still hopes to eventually offer services both to itself and to outside companies and retailers, which would put it in direct competition with its current partners, according to the WSJ's sources.
"They would have to be increasing their shipping output to create 2,000 new jobs. Instead..."
Considering Amazon has double-digit revenue growth, and it's reported that they "shipped more than 1 billion items around the world for the holiday season, more than five times its sales last holiday season", it's obvious that they are increasing their shipping output, by a lot.
"National Security is the chief cause of national insecurity." - Celine's First Law
I'm fairly sure that both FedEx and UPS would be more than happy to build out their respective fleet if they knew that Amazon would not leave them hanging, as Amazon apparently is doing.
I'm sure they would. Problem is that they necessarily have to make a profit and Amazon would rather keep that money for themselves if they can. This margin leakage is why companies sometimes find it valuable to vertically integrate. Unless the supplier can provide the service at a substantially lower cost then there is no reason to outsource the work. Most companies don't find if worthwhile to build their own delivery networks but for companies like Amazon or Walmart it can make very real fiscal sense. You need a certain minimum scale for it to be economically worthwhile but the savings can be substantial.
Honestly I'd expect Amazon to continue to vertically integrate their delivery and logistics systems as they continue to grow. It will make it harder and harder for anyone to compete with them because they can move product cheaper than anyone else. Walmart has used basically the same tactic for decades now. They invested in their logistics while their competitors ignored it until Walmart had an almost insurmountable price advantage over most of them.