Business Impact

Amazon Looks to the Sky and Sea to Shake Up Shipping

A new air cargo hub and logistical management of sea freight is complex, expensive—and ultimately worth it.

Amazon already ships all manner of objects to your door in double-quick time. But it wants to move more, and faster—so it’s increasingly taking on the painful logistics of cargo handling itself.

Bloomberg reports that the e-tailer is to invest $1.49 billion in a new air cargo hub in Hebron, Kentucky, near Cincinnati. The plan: to dispatch goods from 11 warehouses in Kentucky to all corners of America via airplane. Last year, Amazon announced that it had struck deals with two aircraft leasing companies in order to make use of as many as 40 airplanes to carry packages around the U.S.

Meanwhile, the Wall Street Journal (paywall) has reported that Amazon has also started to handle the logistics of booking containers onto cargo ships, as well as acting as a third-party trucking firm to move goods between ports and storage facilities. Since October, it’s said to have overseen the shipping of over 150 containers, and apparently last month began advertising its services as a third-party goods mover under the name of its Chinese subsidiary.

In the past, CEO Jeff Bezos has denied that Amazon is seeking to compete with the likes of UPS and FedEx. But there has been plenty of speculation about the company’s desire to build a more flexible kind of shipping service for its customers—and that’s far easier to achieve if it can oversee as much of the process as possible.

To be sure, Amazon is used to solving complex logistics problems. But the intricacies of global cargo are a step up. Still, it has a lot to gain in the process. While building a UPS or FedEx rival from scratch is complex and expensive, Citigroup last year estimated that doing so could save Amazon as much as $1.1 billion per year. Clearly, that hasn't escaped the attention of Jeff Bezos.

(Read more: Bloomberg, Wall Street Journal, “Uber and Amazon Want to Muscle In on the Shipping Industry”)

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