Amazon edges closer to becoming an integrator

In recent years, Seattle-based e-tailer Amazon has doubled-down on the expansion of its supply chain and fulfillment infrastructure, launching a dedicated freighter network, and enlarging the reach of its own-operated last-mile delivery services to include some 37 US cities. Many in the air freight industry have long believed that it would only be a matter of time before Amazon began selling capacity across its delivery network – and now it looks as if that day may arrive sooner than expected. Amazon is piloting a new service called “Shipping with Amazon” (SWA), an indication that the e-commerce giant is moving closer to becoming an integrator in its own right, reports the WSJ.

Initially, SWA will be offered as a service to merchants selling goods on Amazon’s marketplace. Details of the program are still quite sparse, though the basic model is clear: Amazon will retrieve packages from the shippers’ warehouses and inject them into its own delivery network.

Whether this means Amazon will attempt to consolidate and move packages across the country with its own trucks and aircraft, or if the service will be limited to last-mile deliveries in the metropolitan area where the warehouse is domiciled, is not known. Cargo Facts expects Amazon will begin by offering last-mile delivery services to third-party merchants, before gradually exposing more of its supply chain to SWA.

Regardless of Amazon’s ambitions, it is widely agreed that it will not be an easy feat for Amazon to match the network reach of FedEx, and UPS. “The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic,” said FedEx CFO, Alan Graf. So while it may be possible for Amazon to move parcels between Los Angeles and Seattle, its hard to imagine the company moving parcels between Royal City, WA and Meridian, MS without reliance on third-party logistics providers such as FedEx, UPS, and USPS. But does Amazon require such a network?

Although a separate program, SWA appears to be closely linked to a recently-launched service that brings ‘Fulfillment by Amazon’ directly to shipper warehouses with a pilot program Amazon calls FBA Onsite. Participants in this program, which currently are added on an invitation-only basis, bring Amazon’s Warehouse Management System (WMS) directly to their own warehouses.

Participants in FBA Onsite then gain access to Amazon’s negotiated shipping rates without having to ship inventory to Amazon’s warehouses, as was previously the case. At this stage, shippers taking part in the program can ship with third-party logistics providers such as FedEx, UPS, and USPS. Further integration with Amazon’s SWA, however, seems like a plausible next step.

So, while it is not yet possible to login to Amazon and schedule a package pickup and subsequent delivery, that day seems to be on its way.

Those interested in learning more about the profound impact e-commerce is having on the global air cargo supply chain are invited to join us in Shanghai 23-25 April, at the Mandarin Oriental Pudong for Cargo Facts Asia 2018. For more information, or to register, visit www.cargofactsasia.com.