The deal represents a resurgence of the two companies’ relationship over six years after FedEx declared it would not extend its domestic delivery contracts with Amazon for Ground and Express. FedEx stated at the time that it wished to concentrate on the larger e-commerce industry.
Although e-commerce is still a top client category, the carrier is implementing extensive network modifications to better manage those deliveries.
Serving a client like Amazon, which may provide high volumes but frequently at a less profitable clip, is especially crucial. UPS has complained about its Amazon delivery contract.
In a LinkedIn post, Jay Kent, managing director of SLB Performance, asked whether FedEx had a competitive advantage in network optimisation and could deliver these package types at a lower cost than UPS while still turning a profit.
UPS Ending its Contract with Amazon
The revelation of the arrangement follows UPS’s January declaration that, because to financial concerns, it would reduce its Amazon business by more than 50% by the second half of 2026. But according to Amazon, the FedEx deal isn’t intended to take UPS’s delivery capacity over.
According to a LinkedIn post by LPF Spend Management founder Nate Skiver, the agreement satisfies a requirement for both businesses. Amazon gains support for products that are more difficult to handle, while FedEx sees an increase in volume and revenue.
Skiver went on to say that the US parcel market offers few large-package delivery choices for Amazon, especially for shipments that are greater distances. If UPS won’t accept it, he continued, there’s nowhere else to go.
Amazon’s Strong In-house Logistical Network
According to Amazon, its internal logistics network delivers almost two-thirds of its packages in the United States. However, even with highly automated networks like FedEx and Amazon, handling huge goods effectively can be challenging. Bulkier shipments are usually subject to costs from parcel carriers, and these rates have increased recently.
A media report stated that FedEx had more affordable prices than UPS. Additionally, according to media reports, FedEx will support AMXL, Amazon’s Extra Large delivery network, which handles order fulfilment, delivery, and installation for big, heavy, and bulky products including appliances and furniture.
“The reference to AMXL is premature at this point,” according to Amazon. FedEx terminated its domestic ground delivery agreement with Amazon in 2019 due to what it considered to be challenging service criteria and low yields. According to estimates at the time, FedEx handled 4% of ground traffic for Amazon.
Before the separation, Amazon had shifted a large portion of its business away from FedEx’s now-defunct SmartPost program, where FedEx Ground sent packages to the USPS for final home delivery.
However, FedEx still has a lot of extra capacity in its parcel network that has to be filled, according to John Costanzo, president and CEO of consulting firm LDK Global Logistics.
Because non-standard cargo typically cannot pass via their sorting machinery and must pass through a manual bypass centre, network carriers despise them.
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