Amazon has quietly ordered 2,000-plus vans to deliver your Prime packages - and UPS and the Post Office should feel stressed
- Amazon just bought more than 2,000 large delivery vans from Spartan, a Michigan-based specialty vehicle company.
- "I think as you continue to read, what this customer is doing in the delivery area it's going to fit right into our strategy," Darryl Adams, president and CEO of Spartan, told investors in May.
- It's the latest sign that USPS and UPS, who provide considerable last-mile delivery services for Amazon, should be worried about Amazon's sprint to in-house its delivery network.
- Visit Business Insider's homepage for more stories.
Last week, a Michigan-based vehicle company announced it landed an order of more than 2,000 delivery vans from "North America's leading e-commerce retailer." Amazon confirmed to Business Insider on July 24 that the Seattle-based e-commerce giant was indeed that retailer.
According to a release from Spartan, the 2,237 delivery vans will be built during the second half of 2019. They're being customized for Amazon and its "last mile delivery requirements."
The order to Spartan Motors, the specialty vehicle manufacturer, underlines again where Amazon's delivery aspirations lie. Rather than depending on the US Postal Service, UPS, or FedEx for its last-mile deliveries, experts say Amazon will continue to invest into its own network.
"For that last-mile final delivery, it just kind of fits Amazon would do this as they build out their independent service provider network," Kevin Sterling, managing director at Seaport Global Securities, told Business Insider.
Amazon can save considerably when it moves packages itself. It costs Amazon $6 to move a single box through its own network, versus $8 to $9 to move through UPS or FedEx, says Morgan Stanley head logistics analyst Ravi Shanker. And, the company is already opening itself up to move third-party packages.
Spartan declined to comment on this story.
"We continue to see Amazon emerging as a significant player in the industry and believe its ambitions go beyond insourcing to third-party delivery as well, which could bring a new level of risk to numbers at both UPS and FedEx," Shanker wrote in a note to analysts on July 22.
Amazon already owns 20,000 Mercedes-Benz Sprinter vans for deliveries. However, these vans aren't big enough for Amazon's ever-growing volume of packages that it ships. The new vans Amazon purchased from Spartan, which are called Utilimaster, are larger per vehicle than the Mercedes fleet.
"It would logical for them to be providing step vans," Satish Jindel, president and principal consultant at SJ Consulting Group, Inc., told Business Insider. "As they are rapidly absorbing more and more packages that they ship, they know the cube of the (Mercedes) van will be a limitation."
"We work with a variety of vendors to ensure that our Delivery Service Partners have access to vehicle options to deliver to customers," an Amazon spokesperson told Business Insider.
And for Spartan, the partnership with Amazon is a boon - and one that will keep expanding. Company leadership highlighted to investors in May on an earnings call that the "large online, North American customer" that's been ordering their vans is likely to keep buying.
"I think as you continue to read, what this customer is doing in the delivery area it's going to fit right into our strategy," Darryl Adams, president and CEO of Spartan, said.
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