Next Up for Disruption: Shipping and Delivery Businesses

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The shipping industry is ripe for disruption and the disruption is coming in the form of automated supply chains and driverless cars. FedEx and UPS's longtime hold on shipping and deliveries is being challenged by tech firms like Amazon, Google, and Uber.

The shipping and delivery industry is ripe for disruption and the disruption is coming in the form of automated supply chains and driverless cars. FedEx and UPS's longtime hold on shipping and deliveries is being challenged by tech firms like Amazon, Google, and Uber. On Tuesday, Bloomberg reported that it examined internal documents suggesting that Amazon plans to turn shipping into a core business. The documents, which are three years old, describe a "Global Supply Chain by Amazon" initiative that is to be launched in 2016. The initiative is described as a "revolutionary system that will automate the entire international supply chain and eliminate much of the legacy waste associated with document handling and freight booking," according to Bloomberg.

Merchants in areas like China or India would be able to use an app to hail Amazon trucks to bring their goods to ports for transport on ships chartered by Amazon. The report doesn't specify how the goods will be delivered once they arrive at their general destination, but it's not difficult to imagine Amazon building its own delivery company.

In fact, Amazon is expected to complete its acquisition of a French parcel delivery company, Colis Privé, over the next three months. It would make sense for the e-commerce giant to make a similar acquisition in the U.S. or continue building out its delivery network (read: drones). Amazon would therefore be competing against FedEx and UPS, allowing merchants to rely on Amazon to bring their products from warehouses all the way to a customer's door.

Google is also getting into the delivery business. As first reported by Quartz, Google has been awarded a patent on self-driving delivery trucks that would bring packages to a customer's door. The truck will contain compartments that can be opened with a pin number or credit card. Think of it as a self-driving version of Amazon's lockers.

The patent explains that the truck would use a combination of sensors such as radar and video cameras to navigate around traffic. Customers can place an order, select a method for unlocking the secure compartment, and even be notified by text when the truck is nearby. It's uncertain if and when Google will roll out these trucks, but its parent company, Alphabet, has been openly working on a drone delivery program called Project Wing that it hopes to launch in 2017.

For its part, Uber launched UberRush, an on-demand delivery network with local couriers, in October last year.

During a conference earnings call in June, Mike Glenn, executive vice president of FedEx, dismissed the prospect of new competitors, noting that "setting up a transportation network is an extremely capital intensive network, requires very sophisticated information technology, and takes a very long time to build out to scale."

Glenn also suggested that delivering the right customer experience is difficult. "Research has indicated time and time again that a uniformed person with proper identification showing up at your doorstep is an important issue for customers. Consistency of customer experience is very critical in that regard. So when you talk about the challenges of building a network, the scale, the input costs, the technology issues and the customer experience required to deliver what customers expect of companies like FedEx and our primary competitors, it's a pretty tall hill to climb...So obviously we continue to monitor these situations and opportunities that pop up from time to time. But we feel pretty comfortable in terms of our strategy going forward and our ability to serve the e-commerce market and our customers."

If FedEx plans to hold on to its customers with uniformed delivery workers, the company is in for a big surprise. Glenn is right that the customer experience is important, but in this case, customers value packages that are conveniently delivered far more than the experience of a uniformed worker leaving packages at their door.

Hopefully, corporate leaders at FedEx and UPS are paying attention to the tech developments that are underway, because while building an extensive transportation network is challenging, it's not impossible. Just ask Uber or Lyft.

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