Question about the LTL and parcel industries.

I have often wondered this. There’s thousands of TL companies but like you said only a handful of LTL that are “major players” for lack of a better term. My only thought is perhaps the hassles of LTL, to wit; damaged freight claims, hiring, equipment, customer base, and a cut throat market just isn’t worth dealing with. Not to mention the wear and tear of equipment constantly in a city environment.
It is interesting what you said about DHL I all but forgot about them. Weren’t they like one of the few parcel companies servicing the Middle East, but then since they weren’t an operating US company they couldn’t fly in or out of the US so they had to contract that out or something? Sounds like a headache.

 

What you said about barriers to entry applies even more to package. That's probably your answer. LTL is extremely complex compared with TL operations as you noted, and it's a similar jump in complexity comparing LTL to package. In package, the terminal buildings themselves are incredibly complex, not to mention the network of airplanes and airport hub facilities required for FedEx Express and UPS to provide fast long-distance service.

Where you can break LTL terminals down to basically a slab of concrete under a roof with some forklifts inside, the system of conveyors and scanners required to load packages into the correct trailers, and the incredible amount of manpower required to physically hand load and unload them, would present a massive barrier to entry. I don't think even Amazon would try starting their own package transportation system up from scratch. Hell, FedEx Ground didn't even really do that; they bought the failing RPS (Roadway Package Service).

 

Amazon is probably the only company that I am aware of with long term plans and the abilities to actually move many of their own packages. Amazon spent $16.2 Billion last year on shipping costs. If they can only save a fraction of that, it is still a huge savings. They are currently building a $1.49 Billion air hub at the Northern Ky/Cincy airport to grow their air network. From what I have read, they do plan on being a major player in the transportation business one day even if it is only moving their own packages. They realize that to profitably do so they may have to also deliver others packages. I don’t think they will in my lifetime handle all of their transportation needs, but I do see them eventually being the biggest competitor to UPS and Fred Ex. The advantage they have is they can grow their delivery business in markets where it makes sense and allow carriers to do so where the volume is not there. Just my opinion, but I follow Amazon news fairly close as I have a vested interest in them.

 

Good point about the massive costs, and I forgot about that air hub deal. If anyone could do it from the ground up, it would be Amazon. They could probably do it with a fresher perspective and maybe do things more efficiently, but I wonder about the growing pains involved with reinventing the wheel so to speak.

They are probably using their established relationships with UPS and the USPS as research into how to go about it. I just think if they could do it through acquisition, they would. But I doubt FedEx is for sale...

 

I agree that they probably won’t buy a parcel shipping company, but you never know. I think that if you look back in history at UPS in 1907 and then look at what the world may look like 111 years from now. Amazon could very well dominate the shipping industry, if there is still such a thing. I think for the foreseeable future they will be more like Wal-Mart or Frito-Lay and other companies that have private fleets. It will be more of a complement to outside carriers than a replacement.

 

I talk about this in my latest entry in the JB Hunt thread.
Basically LTL has a much higher entry barrier.

 

CF tried the whole parcel business and air freight business thing. CF gave up on the parcel business in the 1970s and the air freight business almost bankrupted the entire company in 1990.

 

My dad used to work for Roadway Package Service well a contractor of there's and RPS was successful, but they were sold off and bought out.

Handling small parcels takes tons of men, buildings, and machines and vehicles same LTL work.
Truck Load which really look at the JB Hunt Book Thread we talk about this exact subject today truck load has a much lower entry barrier. Chapter 2 of JB Hunt Long Haul to Success gives the exact reasons. Maybe I'll do a You Tube Video and read straight from the book.