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What Is the Amazon Effect and How Does It Affect Logistics?

The “Amazon Effect” is a term coined in 2016.  Aptly named after the leader in e-commerce, the Amazon Effect is exactly what it sounds like—the fallout from Amazon’s dominance in the market.  More than half of American households have Amazon Prime and ever since it’s introduction, it has changed the way people shop as well as their behavior towards shopping. 

Now, 92% of shoppers prefer stores with mobile platforms and cannot bear to wait longer than a day for their shipment arrives. This is evident through a seemingly domino effect of brick and mortar retailers closing.  Why go out and physically shop, when you can stay at home and shop in your pajamas?  With every other company offering free and/or easy return shipping, the experience is still more or less the same (except you get to stay at home and avoid people!) As a result, many retailers have re-engineered their logistics processes to accelerate shipping time frames.

The internet is making supply chains more complex and the only solution is to figure out how to work with it, than against it.  Back in the day, there would be one truckload with 5,000 units to manage, one purchase order, one invoice to issue.  This is no longer the case! Thanks to the internet, the order could be split between shipping to the physical store and online sales.  So, if 10% of the units were sold online—Boom! Suddenly, you have 501 shipments to track, 501 orders to receive, and 501 invoices to create. (501 because we’re still counting the shipment to the 1 brick and mortar store.)   This is how the Amazon Effect affects logistics.

So, what’s the challenge and how to overcome it?

In 2018, it was speculated that we were short about 60,000 drivers to fulfill America’s logistics needs with that shortage possibly tripling by 2026.  The Amazon Effect is not solely responsible for this.  Sure, an increase in freight demand is part of it– but so is an aging workforce, high turnover rate, high gasoline prices, and lifestyle priorities.  Some attributed the federal regulations restricting CDL-holding drivers under 21 from operating across state lines as a reason for the shortage, but experts disagree. Kara Deniz, the senior communications coordinator for the International Brotherhood of Teamsters, which is a labor union of drivers and warehouse workers stated, “The high turnover and working conditions don’t go away with a younger cohort of drivers,” 

So far, logistics companies have become more reliant on railways to combat the shortage of truck drivers while companies like Tesla are working to develop autonomous trucks which is a double-edged sword in of itself… Let’s not forget Amazon’s drone delivery service that has been delayed year after year since its initial announcement in 2013 (but it doesn’t mean it’s never going to happen!)  While automation may be the answer for the driver shortage, we cannot deny that it’ll impact the job market in the long run, create new safety concerns, and still indefinite years away from perfection.  Until then, the career of truck driving remains to be one of the fastest-growing occupations in the U.S. and remains a solid career path despite the much-publicized shortage.

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