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.
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