FedEx Boss Dismisses Threat From New Amazon Logistics Service

The CEO of FedEx says Amazon’s new supply chain service is no threat to his company.

“Last week’s announcement versus what FedEx operates is completely different,” Raj Subramaniam told CNBC’s Jim Cramer during a Tuesday (May 12) edition of the “Mad Money” program. “FedEx is a true end-to-end global network.”

The announcement he referred to is Amazon’s Supply Chain Services (ASCS), which gives companies outside of its marketplace merchants access to the eCommerce giant’s shipping, distribution and fulfillment capabilities.

As CNBC notes, the news triggered concerns that Amazon could replicate in logistics what Amazon Web Services (AWS) did for cloud computing. PYMNTS explored that idea last week, writing that the AWS/ASCS comparison is an imperfect one.

“Computing workloads virtualize more easily than physical goods movement,” the report said. “Warehouses cannot scale infinitely with software abstractions alone. Yet Amazon’s advantage across logistics also lies in the same principle that powered AWS: utilization.”

Many companies, PYMNTS added, leave their logistics assets underused. Trucks leave plants partially empty, warehouses carry inefficient inventory allocations and distribution centers can find themselves facing fluctuating throughput.

“Amazon’s scale allows it to aggregate demand across thousands of businesses, helping smooth inefficiencies through network density,” the report continued.

In his interview, Subramaniam argued there is an important distinction between Amazon’s new offering and FedEx’s core business.

“The true network is something you can pick up in any one part of the world and get it to any other part of the world in a couple of days,” he said. “For that, you need a system like what we have here and the networks around the world.”

Subramaniam said “that’s not what was announced at all,” adding that Amazon is offering third-party logistics, which is just a small portion of FedEx’s business.

FedEx’s third-party logistics division “is about a $2 billion business,” he added. “It’s not the biggest piece of our business.”

FedEx is forecast to bring in more than $93 billion for its fiscal year ended in May, CNBC said, citing data from FactSet.

The report also cites a note from Barclays analysts who labeled Amazon’s move as “more noise than risk,” arguing the announcement was primarily a rebranding of logistics capabilities Amazon has offered for years rather than a new threat to competitors.