
Amazon Jumps into Freight Brokerage - turtlegrids
https://www.ttnews.com/articles/amazon-jumps-freight-brokerage
======
sharkweek
Not mentioned in the article, but this is interesting because Jeff Bezos
invested in Convoy, a Seattle startup working to optimize freight brokerage,
back in their seed or series A, forgot which.

Though I'm sure nobody at Convoy, now valued over 1BN, honestly believed
Amazon _wouldn 't_ jump into a market this big and ripe for improvement.

Then again, there's almost certainly room for dozens of big players. I don't
think I even comprehend how big the freight brokerage space is, but I'm sure
I'm underestimating it by multitudes.

~~~
duxup
It's big, it's technologically really old / behind the times, lots of
customization.

And a lot of the human interactions are with people who have borderline
computer skills, even decision makers.

It is a strange space. LOTS of room for efficiency and at the same time so
easy to say "oh yeah this could be done better" and then you fall on your face
because logic is not how anything / anyone works ;)

~~~
kyllo
I worked at a major third party logistics company from 2012-2015 and they were
less than halfway through a massive project to rewrite their COBOL mainframe
systems in Java, and I doubt they're anywhere near being done yet.

The industry also runs on FTP transfers of flatfiles and ANSI X12 EDI
messages. The most "modern" partner API I saw was SOAP. No one I talked to had
even _heard of_ REST.

Meanwhile, on multiple occasions I heard senior managers express terror at the
prospect of Amazon entering their market and competing with them. Rightfully
so, given the size of Amazon's resources. Making money off a logistics network
is an economy of scale game.

~~~
duxup
>Making money off a logistics network is an economy of scale game.

And yet there are so many small niche providers.... you'd think that would
have gone away long ago...

Such a weird world.

~~~
kyllo
Yes, but the niche providers flourish when the market is good, but they're the
first to get killed off when it's bad. The post-2008 economic collapse saw
mass consolidation in the industry as smaller players either went bankrupt or
got bought up by competitors.

There's also a big difference between asset-owning and non-asset-owning
carriers.

You can start a logistics company with very little capital--just licensing,
bonding, and insurance. In that case, you're basically a travel agent for
freight. Some of these agents have grown into very large companies, however,
because they help big customers allocate freight across many asset-owning
carriers and mitigate their risks, and they handle dealing with international
customs and compliance regimes. They're like an outsourced supply chain
operations department.

In air and ocean, the niche asset-owning carriers generally have some
statutory protection. A good example is Jones Act carriers--there's a law
called the Jones Act that requires that only American flagged carriers can
transport freight between any two American ocean ports. That means there are
only a couple of ocean shipping companies that are allowed to go to places
like Hawaii, Alaska, Guam and Puerto Rico.

~~~
Itaxpica
Interestingly, similar laws come in to play with cruise ships - non-US-flagged
passenger ships that depart from a US port aren't allowed to return to a US
port without first stopping at a foreign port. Almost all American cruise
ships are flagged in countries outside of the US. The practical effect of this
is that the many cruises that travel between the west coast and Alaska all
have to stop over in Canada before they can return to the west coast, which is
a major driver of tourism to Victoria, BC - since that happens to be the
largest port city between Alaska and the mainland US.

~~~
0xffff2
IANAL, but I don't think it's "similar" laws, but the exact same law. Cruise
ships are just (very inefficiently) transporting human cargo.

------
duxup
>Lunak told Transport Topics that in the flurry of reporting earlier in May,
some outlets compared Amazon’s spot rates with contractual rates, which she
said was not “apples to apples.”

Rates are a weird thing in the industry in the sense that nobody pays the up
front rate and the "real" rates are heavily discounted.

~~~
kyllo
Yes, and the mathematical reason behind this is straightforward. Capacity
planning is the hardest problem in logistics[1]. You have to plan weekly
capacity several months ahead of time, and you have a minimum break-even load
factor to hit, but you also want enough capacity to not have to leave business
on the table when demand is high.

Contractual customers commit to give you a steady weekly load, which reduces
week-to-week variance in your demand and makes your forecasting more accurate.
A more accurate forecast means you need less excess capacity and can run at a
higher average utilization. This is very valuable, hence the discounts.

[1]Actually route optimization might be the hardest problem in logistics
because the traveling salesman problem is a classic NP-complete optimization
problem, but in practice it's not so hard to find a good-enough solution and
the stakes are lower. Suboptimal routes won't make or break your profit
margin, but poor capacity planning absolutely will.

~~~
ThrustVectoring
The alternative way of thinking about it is that buying at spot rates includes
an embedded option to not use the capacity. This real option has some value,
so customers are willing to pay higher rates in the spot market rather than
through contracts. There's necessarily some level of contract discount -
otherwise, everyone would pay spot rates for the free optionality.

~~~
sturgill
Which, at the end of the day, was the original value prop of EC2. Capacity
planning is a challenging problem, no matter the industry.

------
mruts
Japanese and Korean conglomerates' stocks are usually discounted compared to
their parts: their P/B is less than one. This is traditionally seen as a
inefficiency tax on their underlying value due to their inability to
communicate and mobilize internal structures in an efficient manner.

Amazon has achieved what many other conglomerates have failed to do:
effectively mobilize and monetize every part of their business. This is
something that is nothing short of a miracle are is a testament to their
organizational structure and managers, most of Jeff Bezos.

One would be hard-pressed to find a large diverse company that is as efficient
and well run as Amazon.

------
tedmcory77
I’m honestly surprised Amazon hasnt bought Flexport. They seem to “get” how
things should work.

~~~
SomeOldThrow
> They seem to “get” how things should work.

What makes you say that?

~~~
jquery
They’re like Uber for Freight?

They even have a website that’s a tongue-in-cheek reference to this:
[https://www.uberfreight.com/](https://www.uberfreight.com/)

~~~
SomeOldThrow
What part of uber do you perceive they emulate? Why isn’t amazon just buying
Uber if it’s so desirable?

~~~
jquery
I was talking about Flexport, not Amazon.

------
le-mark
Really interesting, odd move imo. As others have said, this is a highly
diverse industry, with entrenched players and smaller players as well. I think
it's interesting to consider 'why'? Clearly Bezos thinks he can make money at
it. A lot of money I'd wager.

~~~
ethbro
Leveraging a huge amount of organic demand from yourself makes a lot of
businesses feasible, that aren't otherwise.

Worst case, they lean less on their own brokerage. Best case, they excel and
can begin billing everyone else for providing the service. Win/win.

~~~
jquery
How is this different than the railroads that owned the railways and were
broken up in ye olden times?

~~~
ethbro
In US law, the key phrase from Northern Securities Co. v. United States, 193
U.S. 197 (1904, "the first railway monopoly case") was _" in restraint of
interstate commerce."_

The trust was deemed by the Supreme Court to have been created for the purpose
of ceasing active competition between the companies who joined it (there
having been recent strife between them in the news, the trust being the
negotiated solution, to back this purpose up).

So, very different. A similar case would be if AWS, Azure, and GCP decided to
create a holding company that combined all their assets.

[https://www.law.cornell.edu/supremecourt/text/193/197](https://www.law.cornell.edu/supremecourt/text/193/197)

------
2_listerine_pls
I know it's unpopular to talk about limiting Amazon because America is a
"free-market" but that's the argument of the dumbest kind, it's short-sighted.
You can't compete with them unless you have an advantage they can't replicate,
they have all the money and can buy any company they need, they can pay the
best salaries for the same reason, they own a lot of relevant data in every
industry, they can buy all the patents and license them to third-parties so
they sue you, etc... I am an Amazon fan, but looking into the future, these
companies will rule every aspect of our society.

~~~
hyperpape
Amazon currently does just above one quarter the retail sales of Wal-Mart.
They’re growing faster, but not enough to overtake them within a decade.

~~~
somatic
Wal-Mart and Amazon are not really in the same industry.

Wal-Mart is an old retailer with a lot of physical stores and a well-
established business model.

Amazon is a young software company with the world’s biggest Internet store,
the world’s biggest computer apparatus, and a bunch of other things I probably
don’t even know about.

But it’s the software thing that’s the important bit. Software is
intelligence, intelligence is efficiency, and Amazon is software first. In any
“old” industry it wants to enter, it becomes, by default, the smartest
competitor therein. It will _start out_ with better logistics than the
incumbent industry experts with decades of experience.

It’s like Amazon has a 20-point IQ advantage in anything it wants to do. Or
more.

A scary competitor. Scarier than anything from the Robber Baron era.

------
turtlegrids
I stumbled across this article while searching for something related to Amazon
Logistics. This freight service and the article are both wildly interesting.

But I still don't know how to do what I wanted to do in the first place --
does anyone know if there's an API that allows querying Amazon Logistics
tracking? Basically scan history and estimated delivery date given a
TBA######## tracking number.

~~~
ikeboy
There was no way back when they were just using it internally. They'll
probably open up something eventually after it has significant external usage.

------
kerng
Now they are heads on competing with Uber.

Also heard that they bought a food delivery startup today. Maybe Lyft is next!

This will be interesting to watch.

~~~
jquery
Like Google’s core business gives them the infinite cash to burn to prevent an
alternative to YouTube ever showing up, AWS might be that but for Amazon.

~~~
tachyonbeam
Out of curiosity, has Google bought/killed potential YouTube alternatives in
the past?

~~~
jquery
Is that the metric we should use? Who would even bother trying to start a
YouTube alternative? Does Google break out YouTube’s financials in their
quarterly? They don’t. How do you compete with a bottomless wallet?

~~~
tachyonbeam
Google has been clamping down on content they don't like and ramping up the
ads like crazy. Their recommendation algorithm is also terrible. There is
definitely room for competition.

------
matchagaucho
This is a triple whammy for UPS, who is experiencing pressure from:

* Self Driving Vehicles

* Amazon Freight

* Neo-Luddite Teamsters union resisting new tech

------
baxtr
Is this similar to what FreightHub is doing?

~~~
tschwimmer
Looks to be different. FreightHub is a forwarder, this looks to be a trucking
brokerage. For most trucking within the United States, the company you
contract with to move your stuff doesn't actually own the trucks. You're
dealing with a broker who matches your order to a trucker on the backend. The
truckers are independent owner/operators or employees of large truck lines
like JB Hunt, etc.

The better comparison would be to Uber Freight and Convoy, who seem to be
operating on the brokerage model.

------
blairanderson
see: [https://freight.amazon.com/](https://freight.amazon.com/)

also: [https://ship.amazon.com/](https://ship.amazon.com/)

------
jorblumesea
At what point does Amazon get broken up? Grocery chains, freight, aws,
ecommerce, each of these could be companies on their own. Seems like we're
heading to a dystopian future where megacorps own you in every sense.

~~~
JackFr
> At what point does Amazon get broken up?

They'd have to violate the law. As it stands, they're not engaging in anti-
competitive activity. Simply being better at something than your competition
isn't anti-competitive.

> Seems like we're heading to a dystopian future where megacorps own you in
> every sense.

Literally every business that Amazon has entered has improved my life. Books
are cheaper with an enormously larger selection available. Prime Video offers
alternative to Netflix. AWS has revolutionized the software industry.

Don't get me wrong -- Amazon is in it for Amazon, and I think Jeff Bezo's can
be an asshole. But the reason they get my money year after year is that they
do such a great job.

~~~
swoongoonz
it's improve your life because you're probably a highly paid software
developer or engineer (guessing because here you are on hacker news). I would
like to hear more from the people who work for amazon (not the devs reaping
all of the rewards of stock shares) and the retailers selling their goods on
amazon to see if the company has "improved" their lives.

[https://www.theverge.com/2018/4/16/17243026/amazon-
warehouse...](https://www.theverge.com/2018/4/16/17243026/amazon-warehouse-
jobs-worker-conditions-bathroom-breaks)

~~~
Reedx
Engineers are not the majority of Amazon's customers. Nor are they the ones
that benefit most from buying there.

For example, consider single mothers working two jobs, ordering from
Amazon.com to save time & money. And depending on where they live, they might
even get the order within a couple hours. That's a new kind of efficiency that
many benefit from.

~~~
ethbro
Consider why that person has to work two jobs, and the contribution Amazon
made towards that.

Low prices aren't free. Some of it came from efficiency, the rest comes from
simply paying labor less.

~~~
Reedx
That's a different discussion and it's hard to untangle and weigh all of the
effects. But it's worth noting that the % of people working multiple jobs has
actually decreased with the rise of Amazon.

[https://www.bls.gov/opub/ted/2018/4-point-9-percent-of-
worke...](https://www.bls.gov/opub/ted/2018/4-point-9-percent-of-workers-held-
more-than-one-job-at-the-same-time-in-2017.htm)

That's not to say it's casual. Maybe it would've decreased more sans Amazon.
Who knows.

Anyway, the point was simply that it's not only/mostly engineers who derive
value from their existence. It includes every Amazon customer who saves time &
money - especially those who have too little of both.

~~~
twoandfifteen
It also includes every person who lives in a city whose tax base has been
eroded by Amazon, so those "hard working single moms" send their kids to
shitty schools that will perpetuate the cycle of poverty.

For tens of millions of working poor who live in apartment complexes, Amazon
provides absolutely zero benefit since they cannot order anything bigger than
a kumquat without risk of it being stolen off of their porch. The office? The
office doesnt exist or is closed during the hours they are working - and UPS
wont deliver there anyways a lot of the time.

~~~
comex
In theory that’s what Amazon Locker is for, though it’s less convenient.

