UPS and FedEx were long thought to be darlings of Wall Street. They were a bell weather of how the economy was doing because they reflected where the both consumers and businesses (especially small) stood. The shipping giants move products all over the place, delivering them to homes and offices.
That was then, this is now. What does the future hold for entities such as these.
Automation and technology are penetrating every industry. This means that companies that are in one industry traditionally are entering completely new ones. In fact, it is not uncommon to see one's customers becoming a competitor.
This is the case for both FedEx and UPS. A large portion of their business is the delivery of products. This, however, is being threatened.
Amazon is probably the biggest threat since they are working on an end-to-end, automated system. It wants everything from order to delivery to be handled without the use of humans. They also do not want it to include delivery companies.
Instead, they are experimenting what drones and delivery robots to see what they can come up with. The "last mile" is a valuable part of the logistics chain that Amazon seeks to keep for itself. Automating this part of the process will allow the company to reduce costs.
Not to be overlooked is the company's investment in Riveon. While this company deals in electric vehicles, which Amazon already ordered delivery vans, it is looked at as a stepping stone to automated delivery services. This is another piece of the puzzle in the logistics chain that Amazon aims to conquer.
We also saw Wal-Mart order a number of Tesla Semis when they were opened for pre-orders. Again, we see the idea of electric as a piece of the puzzle. The second part is the automation, eliminating the driver which will reduce costs.
Of course, this does not affect FedEx and UPS since Wal-Mart handled the transportation along its supply chain. However, it does exemplify what is taking place. And, as these technology become less expensive, smaller entities will find they can do what only the large corporations could do before.
Longer term, there is another factor that could really hinder these companies. As technology advances, more of our world will be digitized. Thus, we will not be sending products but digital scans. The creation of the products will be localized, perhaps using 3D printers. This will even extend inside the home at some point.
Obviously, we are going to see these companies combat the loss by implementing the same technologies I just mentioned. However, the bigger picture is already being written. While not going out overnight, this could be a slow bleed. FedEx already expressed a number of challenges they are having. It is not a pretty picture at present. While a part of this is due to the fact that we did see economic slowdown, a shift in technological capabilities is also having an impact.
FedEx made a name for itself by getting any package anywhere in the country by 10:30 AM. This was before we became a digital world. Often, what was sent was paper work that simply had to be there. Digitization changed all of that. Not only could documents simply be emailed but courts and other entities started to accept digital versions of the paperwork. Thus, originals were not required.
We are going to see a similar shift in physical products over the next 10-15 years. Thus, I foresee similar experiences in the shipping industry. We do not send paper all over the place like we use to and there will come a day when physically sending a product or item makes little sense.
How will this affect the companies mentioned in this article? While it is hard to predict the future, I can say they best start addressing the issues now.
If not, they might end up on the same list as Blockbuster and Kodak.
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