Amazon’s Transformation to Global Third-Party Logistics Provider
Amazon continues to invest the capital and the resources to create a global logistics network that will soon become capable of three-day deliveries to nearly anywhere in the world, a source at Amazon told EBNOnline.com.
Palatalized freight for third-party logistics customers in some geographic regions also will become available for three-day deliveries, but those looking for lower costs will have other options. It's part of a strategy to make Amazon the largest third-party logistics (3PL) provider worldwide, from the United States to Africa, Latin America, India, and even China where the company has gained ground as it tries to compete with Alibaba and Tmall.
"If all we took was 5% share of the global contract logistics market that's $25 billion of additional revenue," estimated the source.
The global fulfillment market represents between $400 billion and $450 billion, Colin Sebastian, Baird Equity Research analyst, wrote in a research note. "Amazon may be the only company with the fulfillment and distribution sophistication and scale to compete effectively with incumbent service providers (UPS, FedEx)," he wrote.
Sebastian told EBNOnline.com that it's part of Amazon's DNA to continually push up the bar. If they can replicate globally what they do in the U.S., then yes, the delivery window worldwide would become between two and three days," he said.
Tax and legal implications are being worked out, along with the timing and the implementation of certain technologies. Amazon Web Services and data will become the backbone of the service.
Amazon's model, now backed by a fleet of branded semitrailers and cargo planes, will push more inventory through the supply chain and increase Amazon's purchasing power. The fleet of planes based in Ohio gives the company more control of the last mile, and lower costs through practices like cross-docking. More than 120 warehouses worldwide will allow Amazon to leverage volume to reduce costs.
"We plan to perfect the process within one year, and once we perfect the process we will increase the fleet size where necessary to have complete control over our cargo needs worldwide," the source told EBNOnline.com.
The Making of a 3PL
Amazon could take on the characteristics of Alphabet, Google's parent company, and create a holding company with a variety of finance, logistics, and ecommerce subsidiaries under its umbrella. Or it could simply create a business similar toCaterpillar's model known as Cat Logistics, as Amazon moves forward to control its own logistics and distribution and delivery services.
Cross-border ecommerce will become the next challenge for companies in 2016. Even some of the largest electronics companies do not have the capabilities to sell and ship products globally after selling products from their ecommerce sites.
As a 3PL, Amazon would offer companies like Hewlett-Packard and Dell the ability to outsource their worldwide logistics and distribution processes. Amazon Web Services would assist in hosting ecommerce sites to take products direct to consumers.
Manufacturer and retailers might have a better understanding of Amazon's vision by reading some of the concepts presented by Brittain Ladd, a consultant for Deloitte at the time. He wrote extensively on the topics of strategy, cross-border commerce, supply chain network optimization, omni-channel, logistics, and transportation.
Amazon isn't alone when it comes to cross-border commerce. Alibaba, and Walmart are in different stages of investing and implementing global cross-border and e-commerce strategies.
Most of the means to pull off Amazon's massive undertaking has been in place for years. The cloud-built Amazon Web Services will support the backend infrastructure to automate and schedule quantity requirements, shipments and push updates to the manufacturer for pick-ups, as well as to the retailer for deliveries.
Amazon will house the data on its systems and update clients as necessary. The company will not only manage freight and the supply chain, but optimize and plan their clients' daily operations without having them make an investment in infrastructure.
The transformation
DHL, FedEx, and UPS supported Amazon for years. Then two years ago as Internet sales began to rise, Amazon openly blamed UPS for its failure to deliver packages on time and began testing its own service. From a lot adjacent to Candlestick Park, Amazon loaded supervised contractors in trucks hauling packages for addresses around San Francisco, Los Angeles, and New York.
The final roadblock came down in October and made public in late-December whenAmazon acknowledged leasing a former DHL airstrip and packaging facility in Wilmington, Ohio, giving the company the ability to take control of a fleet of cargo planes in the U.S.
While the North American team runs the ground operations for Amazon Logistics, the United States remains one tiny part of this global strategy that will also have the ecommerce giant go head-to-head against Alibaba in China, Flipkart in India, among others.
The budding business model has the potential to streamline the supply chain, but it also opens the door for smaller businesses to sell their wares online and ship globally. It gives big box retailers access to global customers, and creates an opportunity for original equipment manufacturers and consumer products goods companies that only sold through retailers, forging their own relationship to ship direct to consumers, who would receive free shipping as an Amazon Prime member.
Three million new members were added to Amazon Prime in the 2015 holiday season, with a record number of units shipped worldwide through the membership program, per the company. Amazon shipped to 185 countries this holiday.
The company didn't release exact numbers, but RBC Capital Analyst Mark Mahaney pegs the global figure at around 80 million, with 50 million U.S. subscribers.
Data firm eMarketer pegs global eCommerce sales at roughly $3 trillion by 2018.
Palatalized freight for third-party logistics customers in some geographic regions also will become available for three-day deliveries, but those looking for lower costs will have other options. It's part of a strategy to make Amazon the largest third-party logistics (3PL) provider worldwide, from the United States to Africa, Latin America, India, and even China where the company has gained ground as it tries to compete with Alibaba and Tmall.
"If all we took was 5% share of the global contract logistics market that's $25 billion of additional revenue," estimated the source.
The global fulfillment market represents between $400 billion and $450 billion, Colin Sebastian, Baird Equity Research analyst, wrote in a research note. "Amazon may be the only company with the fulfillment and distribution sophistication and scale to compete effectively with incumbent service providers (UPS, FedEx)," he wrote.
Sebastian told EBNOnline.com that it's part of Amazon's DNA to continually push up the bar. If they can replicate globally what they do in the U.S., then yes, the delivery window worldwide would become between two and three days," he said.
Tax and legal implications are being worked out, along with the timing and the implementation of certain technologies. Amazon Web Services and data will become the backbone of the service.
Amazon's model, now backed by a fleet of branded semitrailers and cargo planes, will push more inventory through the supply chain and increase Amazon's purchasing power. The fleet of planes based in Ohio gives the company more control of the last mile, and lower costs through practices like cross-docking. More than 120 warehouses worldwide will allow Amazon to leverage volume to reduce costs.
"We plan to perfect the process within one year, and once we perfect the process we will increase the fleet size where necessary to have complete control over our cargo needs worldwide," the source told EBNOnline.com.
The Making of a 3PL
Amazon could take on the characteristics of Alphabet, Google's parent company, and create a holding company with a variety of finance, logistics, and ecommerce subsidiaries under its umbrella. Or it could simply create a business similar toCaterpillar's model known as Cat Logistics, as Amazon moves forward to control its own logistics and distribution and delivery services.
Cross-border ecommerce will become the next challenge for companies in 2016. Even some of the largest electronics companies do not have the capabilities to sell and ship products globally after selling products from their ecommerce sites.
As a 3PL, Amazon would offer companies like Hewlett-Packard and Dell the ability to outsource their worldwide logistics and distribution processes. Amazon Web Services would assist in hosting ecommerce sites to take products direct to consumers.
Manufacturer and retailers might have a better understanding of Amazon's vision by reading some of the concepts presented by Brittain Ladd, a consultant for Deloitte at the time. He wrote extensively on the topics of strategy, cross-border commerce, supply chain network optimization, omni-channel, logistics, and transportation.
Amazon isn't alone when it comes to cross-border commerce. Alibaba, and Walmart are in different stages of investing and implementing global cross-border and e-commerce strategies.
Most of the means to pull off Amazon's massive undertaking has been in place for years. The cloud-built Amazon Web Services will support the backend infrastructure to automate and schedule quantity requirements, shipments and push updates to the manufacturer for pick-ups, as well as to the retailer for deliveries.
Amazon will house the data on its systems and update clients as necessary. The company will not only manage freight and the supply chain, but optimize and plan their clients' daily operations without having them make an investment in infrastructure.
The transformation
DHL, FedEx, and UPS supported Amazon for years. Then two years ago as Internet sales began to rise, Amazon openly blamed UPS for its failure to deliver packages on time and began testing its own service. From a lot adjacent to Candlestick Park, Amazon loaded supervised contractors in trucks hauling packages for addresses around San Francisco, Los Angeles, and New York.
The final roadblock came down in October and made public in late-December whenAmazon acknowledged leasing a former DHL airstrip and packaging facility in Wilmington, Ohio, giving the company the ability to take control of a fleet of cargo planes in the U.S.
While the North American team runs the ground operations for Amazon Logistics, the United States remains one tiny part of this global strategy that will also have the ecommerce giant go head-to-head against Alibaba in China, Flipkart in India, among others.
The budding business model has the potential to streamline the supply chain, but it also opens the door for smaller businesses to sell their wares online and ship globally. It gives big box retailers access to global customers, and creates an opportunity for original equipment manufacturers and consumer products goods companies that only sold through retailers, forging their own relationship to ship direct to consumers, who would receive free shipping as an Amazon Prime member.
Three million new members were added to Amazon Prime in the 2015 holiday season, with a record number of units shipped worldwide through the membership program, per the company. Amazon shipped to 185 countries this holiday.
The company didn't release exact numbers, but RBC Capital Analyst Mark Mahaney pegs the global figure at around 80 million, with 50 million U.S. subscribers.
Data firm eMarketer pegs global eCommerce sales at roughly $3 trillion by 2018.
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