Is Telecom and Freight ‘Commodity’ Spend? Look How Uber/Lyft and Amazon Manage Them!

Many firms look at their telecom spend and their freight spend basically as utilities. It’s infrastructure spend that is a necessary evil and not terribly strategic. But even the most basic “commodities” are anything but simple.

For example, consider metals like steel, or better yet, aluminum. Can’t get simpler than an atomic element, right? Yes, unless you get to the form/grade level in a region, and with special coatings, and volume upside guarantees, and so on.

For metals buyers in automotive and other industrial sectors, commodities are a major deal, as is fuel in transportation and telecom in high-tech. If you look at Uber, they manage their telecom spend extremely strategically (i.e., no mobile connectivity = no “digital fuel” = no rides = no business!) and situationally within various target markets, especially with major technology advances in 5G, satellite coverage, frequency hopping and innovations that these platforms themselves are working on.

For example, at an industry conference that I spoke at, Uber cited some developments regarding peer-to-peer vehicle communications to create a form of collective telecom capabilities (see this Google pending patent for something similar).

Now consider Amazon and its freight spend.

Obviously it’s become a very strategic spend area — and supply competency. Truckload and LTL bring their own complexity to any major shipper, but how about something as “simple” as small parcel?

Faced with huge freight spend with USPS, FedEx, UPS, DHL, etc., Amazon has basically evolved to pull every category lever that you can imagine: demand management, packaging optimization (e.g., its “FFP” incentive/penalty program kicked off last fall with large manufacturers), and now vertical integration by building its own captive logistics capabilities with Amazon Logistics.

Rather than just using its Uber-like gig-worker powered delivery program called Amazon Flex, Amazon is rapidly scaling up its Amazon Logistics business via an innovative business franchise model offered to small would-be fleet operators, even though there are costs/risks to these franchisees as discussed in this video here and an Amazon brochure here.

But what if you’re not Amazon and you’re one of the thousands of small parcel shippers who can’t take such a strategic and complex view of this area. You might not have as much leverage as the mega shippers, but it’s much simpler to manage, right? Wrong.

If you’re in the U.S., you’re basically facing the duopoly of FedEx and UPS, who are much better at managing you than vice versa, especially when they’re continually adding complexity (and cost) into their service portfolio, pricing methodologies/structures, contract updates and so on. When you see the data surrounding this, it’s pretty shocking, and a good reason why freight audits are alive and well!

In that vein, I’m sitting in on a webinar tomorrow with some amazingly deep transportation experts over at Spend Management Experts. These guys live and breathe small parcel, and if you want to learn about what’s really going on with small parcel spend and what you can do to bring more than a knife to a bazooka fight, you should check it out. They’ve got some creative strategies to handle this complexity, and this type of creativity and strategic thinking is critical when it appears like you don’t have many options in a category like this.

Join our webinar, held with NPI and Spend Management Experts, on Thursday, March 14, at 1 p.m. Central.

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