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Anecdotal , but I heard from UPS employees that they essentially break even on their ground network, and essentially all their profit comes from airmail. FDX mi

Anecdotal , but I heard from UPS employees that they essentially break even on their ground network, and essentially all their profit comes from airmail. FDX might do slightly better on their ground, given they pay their drivers < 1/2 of what UPS pays.

malandrew 10y ago
Interestingly, if Amazon scales back on UPS and FedEx as they ramp up their own logistics, this would leave both companies with a lot of excess capacity and infrastructure to maintain unless there is equivalent growth from the rest of the market. Given how much Amazon ships, that a big potential problem. It also gives Amazon even more leverage with both shipping companies when it does need to use them. I'm curious if this eventually could create market problems like we are seeing with excess shipping capacity. The World Container Index hit a 5 year low this past year due to excess capacity.
- digler999 10y ago
  I'm thinking network capacity is easy to sell off / write-off in domestic shipping, isn't it ? Trucks and trailers are "consumables" (not sure what the proper econ term is), UPS could just stop buying new trucks for a while (not the case with cargo jets though, those will burn a hole in anyone's pocket). I think where it counts is the "last mile", similar to the cost of telecom. But I dont see that many package car drivers being laid off, since the demand is "inelastic". The driver still needs to cruise the neighborhood whether 1 guy or 100 guys are getting packages. If UPS's volume gets cut by 20%, there's no way they're going to need to cut 20% of their drivers. What I predict amazon will do is just have delivery stations. I would gladly drive a mile or two to pick up my stuff from an automated locker, versus contend with some of the tricks that I hear about so much with at-home delivery (that I'm thankful has never happened to me). If you eliminated the "last mile" package cars, all you'd need is hubs (which UPS is well on their way to fully automating for pkg sorting), long-haul drivers/pilots, and a few delivery drivers to load up the "automated lockers" in each neighborhood. Re: world container index, I'm assuming that includes marine shipping, which should be independent of amazons network?

malandrew 10y ago

Interestingly, if Amazon scales back on UPS and FedEx as they ramp up their own logistics, this would leave both companies with a lot of excess capacity and infrastructure to maintain unless there is equivalent growth from the rest of the market. Given how much Amazon ships, that a big potential problem. It also gives Amazon even more leverage with both shipping companies when it does need to use them. I'm curious if this eventually could create market problems like we are seeing with excess shipping capacity. The World Container Index hit a 5 year low this past year due to excess capacity.

digler999 10y ago
I'm thinking network capacity is easy to sell off / write-off in domestic shipping, isn't it ? Trucks and trailers are "consumables" (not sure what the proper econ term is), UPS could just stop buying new trucks for a while (not the case with cargo jets though, those will burn a hole in anyone's pocket). I think where it counts is the "last mile", similar to the cost of telecom. But I dont see that many package car drivers being laid off, since the demand is "inelastic". The driver still needs to cruise the neighborhood whether 1 guy or 100 guys are getting packages. If UPS's volume gets cut by 20%, there's no way they're going to need to cut 20% of their drivers. What I predict amazon will do is just have delivery stations. I would gladly drive a mile or two to pick up my stuff from an automated locker, versus contend with some of the tricks that I hear about so much with at-home delivery (that I'm thankful has never happened to me). If you eliminated the "last mile" package cars, all you'd need is hubs (which UPS is well on their way to fully automating for pkg sorting), long-haul drivers/pilots, and a few delivery drivers to load up the "automated lockers" in each neighborhood. Re: world container index, I'm assuming that includes marine shipping, which should be independent of amazons network?