Amazon Prime price hike could ease supply chain pressure

Amazon (NASDAQ: AMZN) looks to be revamping its delivery system, possibly funding it with higher Amazon Prime membership fees. The initiative could ease supply chain pressure and help eliminate shipping delays heading into the holiday season.

Amazon is focused on its top 40 markets, or roughly half the U.S. population, and building out a private delivery fleet, according DC Velocity. The effort is meant to support the growing Amazon Fresh online grocery service and alleviate the clogged shipping schedules as holiday online shopping grows.

The remaining 60 percent of Amazon's market will be served by a combination of regional parcel delivery companies and the U.S. Postal service. While USPS currently fulfills the majority of Amazon's orders, its role will be downplayed in the future.

James Tompkins, who runs Tompkins International, a Raleigh, N.C.-based consultancy, told DC Velocity that Amazon will route orders through its 55 fulfillment centers, with a reserve of inventory set aside exclusively to support local shipments.

Amazon has not disclosed the timeline for its rollout, but according to Tompkins, "They are moving on this very aggressively."

Amazon's efforts to improve delivery have been under intense media focus following the much discussed promise to use delivery drones to drop packages. That publicity stunt aside, Amazon's ability to build out regional delivery networks, provide same-day delivery of fresh food and general merchandise, and drive costs from the system are unparalleled.

And if Amazon removes a measurable amount of product from USPS or FedEx's purview, it could ease supply chain pressure for the rest of the retail industry. Take away shipped product from the largest online retailer, and the rest of the pipeline could flow uninterrupted this holiday season.

For more:
-See this DC Velocity story
-See this Forbes blog post

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