phonlamaiphoto - stock.adobe.com

Manage Learn to apply best practices and optimize your operations.

Amazon moves into autonomous vehicle market

Amazon aims to lower transportation costs and complete the last mile of delivery with autonomous technology. COVID-19 could accelerate its adoption.

While high-profile companies such as Tesla, Uber and Google's Waymo have hyped their progress toward building autonomous vehicles, Amazon has quietly pieced together an ambitious strategy that could disrupt multiple industries.

The Amazon ecosystem could one day encompass autonomous long-haul trucking and last-mile delivery to its customers. Amazon's Alexa virtual assistant could become the dominant user interface between self-driving cars and a larger app-store ecosystem that extends to smart homes. And the AWS cloud could become the central repository for the storage and processing of all the data that will be generated by the connected car.

Amazon has been largely tightlipped about its plans, but analysts predict that as the company optimizes and automates its delivery systems, it will one day challenge companies like FedEx and the U.S. Postal Service for dominance in the third-party package delivery market.

Add to this the COVID-19 pandemic, which is a wild card that could accelerate the adoption of autonomous technologies in general. This is particularly true for last-mile delivery, as a way of minimizing the potential for transmission of the disease through human-to-human contact, said Oliver Mitchell, founding partner in the venture capital firm Autonomy Ventures.

"Who are the companies that are going to come out and the technologies that are going to come out more valuable to society in the post-COVID world? It's clear that Amazon is almost like a necessary resource in this world of social distancing," Mitchell said.

Amazon has tested a variety of technologies aimed at automating the logistics of package delivery, such as the use of pick-and-pack robots in the warehouse, long-haul trucks, last-mile delivery vehicles and drones, Mitchell said. The technology isn't there yet in terms of a fully automated system, but it's moving fast, and Amazon has established a leadership position, he said.

What's in it for Amazon?

Even prior to the worldwide pandemic, Amazon was already highly motivated to reduce its transportation costs, which have risen rapidly due to demand for one-day delivery of goods and two-hour delivery for Amazon Prime customers with the Amazon Fresh grocery delivery service. Amazon's transportation costs were a whopping $27.7 billion in fiscal 2018 and global shipping costs for the holiday quarter of 2019 soared to $11 billion, according to the company's earnings report.

According to a recent McKinsey study, deployment of autonomous vehicles for last-mile delivery could reduce transportation costs by as much as 40%. In an attempt to rein in these costs, Amazon has invested in its own cargo jets, freight shipping and trailer trucks. The company cut ties with FedEx and scaled back the number of packages it delivers via the U.S. Postal Service.

Amazon's autonomous driving moves

On the autonomous driving front, Amazon has a multi-pronged approach that involves almost everything except building its own self-driving vehicles.

Signs of the company's moves into the autonomous vehicle market started in 2015, when Amazon filed for a patent for autonomous lane-switching technology. The company was granted the patent in 2017.

At the Consumer Electronics Show in 2018, Amazon disclosed a partnership with Toyota and demoed a vehicle called e-Palette, a multifunction, autonomous minivan designed to move goods, people or act as a mobile office or hotel room.

Also in 2018, Amazon filed a patent for software that would personalize the autonomous vehicle experience. Amazon executives explained that drivers have different preferences for how they want an autonomous vehicle to operate and said the patent would enable individualized passenger profiles. The system could detect a passenger's identity in a number of ways, including voice recognition, facial recognition or biometric data.

In January 2019, Amazon introduced Amazon Scout, a six-wheeled electric-powered delivery robot. The size of a small cooler on wheels, the Amazon Scout navigates along the sidewalk and brings packages from the delivery truck to the door. The device has a top hatch that automatically flips open to allow the customer to retrieve their package. Amazon has already introduced the service to customers in a neighborhood in Snohomish County, Washington.

In February 2019, Amazon said that it has invested in Aurora, a company that develops the underlying hardware and software for autonomous vehicles.

These efforts might seem to be in the early patent and prototype stages, which would put Amazon behind competitors. Companies like Uber, Tesla and Waymo have already put their autonomous vehicles through millions of miles of test drives with a safety driver behind the wheel.

But in 2019, motorists captured photos of a self-driving truck sporting the Amazon Prime logo driving down Interstate 10 in Arizona. Amazon was working with Embark, a company that builds self-driving, long-haul trucks and then partners with shipping companies.

The Embark model currently starts with a human driver, who picks up a load of goods at a warehouse, drives through local traffic onto the highway and pulls into a rest stop. The driver unhitches the trailer and an Embark driver attaches the load to an Embark truck.

The Embark employee acts as a safety driver while the self-driving truck hauls the cargo hundreds of miles to a truck stop just outside of the cargo's destination, where the transfer back to a local driver takes place. Eventually, the goal is for the entire process to be autonomous.

Putting it all together

So, how do all of these different patents and initiatives, the e-Palette, Amazon Scout, the Embark trials, come together?

Analysts expect Amazon to use Aurora's technology to retrofit autonomous technology to its existing fleet. Amazon also heavily invested in Rivian, a company that makes electric trucks. Amazon could use a fleet from Rivian as the foundation for its self-driving vehicles of the future.

The result would be a highly integrated and automated supply chain that features robots in the warehouse and autonomous vehicles for long-haul trucking. Autonomous vehicles would cover the last-mile delivery and bring the package those last few feet to the doorstep via a robot.

"We continue to believe the natural step for Amazon is controlling more of its own transportation and logistics, as these are almost a necessity to continue the rapid expansion of Prime and Prime Now," said Colin Sebastian, a research analyst at Baird.

Amazon already has decent control of its own supply chain. The company is now the largest shipper in the U.S. and delivers nearly half of its own packages, according to market research company Rakuten Intelligence. But analysts like Baird's Sebastian predict that Amazon will one day take the leap into the third-party logistics business.

"We believe Amazon will offer transportation and logistics services to third parties," Rakuten said in a research note. "Moreover, we estimate a $400 billion plus market opportunity for Amazon in delivery, freight forwarding and contract logistics, of which even a small slice could prove material for Amazon."

Another angle to Amazon in the autonomous vehicle market is its work to install the Alexa virtual assistant in new cars from manufacturers including BMW, Ford and Toyota. This is an infotainment play that would connect the vehicle-specific adaptation of Alexa to an app store, but as OEMs add autonomous features to their vehicles, Alexa will become the user interface for all of the functions associated with a modern vehicle cockpit.

You will tell Alexa who you are and it will automatically set the seat to your preferences, turn on your favorite music, activate child-safety locks and try to anticipate where you want to go. You can use Alexa as your interface to a variety of other functions, such as temperature settings, cruise control, real-time traffic and weather conditions and more.

As vehicles become more connected and autonomous, they will generate high volumes of data that need to be stored somewhere. Amazon wants that place to be the AWS cloud, which would enable the company to generate revenue via data analysis and deliver business insight to OEMs. That data could open up a whole new market for predictive maintenance and other types of real-time services to consumers.

Dig Deeper on Amazon's Influence

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

SearchAppArchitecture

SearchCloudComputing

SearchSoftwareQuality

SearchITOperations

Close