Amazon's "Other" Logistics Strategy
Dan Gardner
President of supply chain, logistics & trade compliance consultancy, co-founder of tech-enabled freight forwarder & customs broker. MBA, Licensed U.S. Customhouse Broker, Bilingual (SP)
Much has been said in recent months about Amazon’s motivations for investing so aggressively in its logistics portfolio. While it is true that they are acquiring small parcel companies, have been in talks to lease cargo aircraft and have already secured an NVOCC license, it might be that there is more to Mr. Bezo’s strategy than industry experts have deciphered.
Of course, most people believe that Amazon is broadening its logistics foot print to take control of the inbound supply chain, as well as drive out costs on the fulfillment side of the house. Another belief is that Amazon will offer services independent of its B2B/B2C platforms as an air, ocean and surface transportation freight forwarder.
Amazon is likely to deploy its logistics clout towards these ends, but this author believes that there is a bigger game afoot, and that it centers around the international B2B space. Specifically, Amazon will “Super-Size” its multi-country B2B platform through the integration of goods movement capabilities with advanced technology tools, and offer that integrated portfolio of services to importers and exporters around the world.
Consider the following sequence that would not only create a disruptive Value Proposition, but that also generates a substantial revenue stream for its owner:
- Amazon builds on existing software capabilities to develop a global B2B Marketplace along the lines of Ariba Network (which, is owned by the ERP house, SAP).
- Amazon then creates (or acquires) a cloud-based ERP system that companies can utilize to run their world-wide supply chain operations (forecasting, MRP, procurement, DRP, et al).
- Because global commerce is so data intensive, Amazon also extends its offering to include “Big Trade Data” storage via the Amazon Web Services business unit.
- To complement the above, Amazon rolls out its global transportation capabilities, operating as a multi-modal freight forwarder.
- Next, the Company acquires Customs Brokers in select markets and all of a sudden it’s in the end-to-end Third Party Logistics business for real.
- As a part of the above logistics model, Amazon also features cloud-based support like P.O. Management, Buyer’s Consolidation, e-documentation and global cargo tracking.
Envision for a moment the Value Proposition that these actions create. Amazon will have all the capabilities of the ERP providers and B2B Marketplaces, but will out-do competitors like Ariba Network, GT Nexus and Alibaba with physical logistics services. In transportation, Amazon will have the same services as the 3PL’s, but will out-flank them with technology.
Whereas both the tech firms and 3PL’s have parts of the puzzle, none of them can fully integrate the digital, with the physical world. And that’s where Amazon has the potential to game them all.
Dan Gardner is President of Trade Facilitators, Inc., the Los Angeles-based supply chain consulting & training firm. Mr. Gardner has no commercial or financial connection to Amazon and the opinions expressed here are exclusively his own. Dan can be reached at [email protected].
Supply Chain and Logistics
9 年Hi Daniel, Good Article. Working closely with both Amazon, Alibaba and Ebay the biggest issue is China. You have mentioned the "Cloud" word several times. This is impossible in China. And most of the all the manufactured goods you acquire are from China. There is government censorship called the "Great Wall" and there is no internet like what we have. We have an agreement with Sai Cheng Logistics (China Post) in China and they do not have the ability for any Cloud technology, due to the government. Vietnam and Malaysia are also tough. Another issue is China itself. What form of business will Amazon run to support the China end of the supply chain? Currently they only have Representative Offices in China, which have zero power to operate. They cannot even pay or collect payments form anyone in China. You can Joint Venture in China, but then you have the issue of who with. Then Amazon could try and be a 100% Foreign Owned Entity and the chances of that is a million to one. Being a freight forwarder allows Amazon to dance on the edge of China business without having to go through the above. It will not deliver an effective logistics or shipping solution, other than the current providers. All successful e-commerce business take low value goods from China and put them in a high value market in the west. Too many people are looking at the wrong end of what Amazon are doing. I commend Amazon for their efforts, but until they sort out China and how it will work there then I am not sure how they will be able to really have any effect. Lastly B2B logistics will not work. If you were a freight forwarder etc would you really what your clients details known to Amazon, which your business would provide for each shipment's manifest. Regards Tim .
Global Account Director
9 年Great article,Dan! I totally agree with what you see as a growth strategy and calculated ambition for Amazon to become the next generation global logistics provider empowered by technology. Their investment to enhance their global logistics capability seems to be legitimate steps made to solve an existing business problem. This will allow their overseas vendors to reach the US market faster and easier. At the same time, this model is certainly scalable combined with technology and can create a paradigm shift for the long established 3PL industry in many ways. My only reservation would be how they will address the knowledge gap serving B2B commerce for the diversified verticals beyond consumer retail as well as the gap of not having an extensive physical network globally which is critical to the physical flow of goods in global commerce and manufacturing environment. One logical step certainly could be future acquisition of established global providers with the right network and vertical expertise complimentary to Amazon's capability in the journey to become the next generation global logistics provider.
Managing Director - Spain | Leadership, P&L Management
9 年Interesting premonition and a disruptive one to the international / e2e 3PL business model specially in US and Europe.
Sr. Manager, Business Consultants
9 年Thanks Amy! We were just discussing this at the office today....
Founder, Jon Monroe Consulting (KEEP IT SIMPLE)
9 年Dan, this is so right on.