Page 6 - Logistics News May 2016

global logistics
Amazon is building a
global delivery business
Recently, speculation has mounted that Amazon.com plans to launch a global delivery
and logistics operation that will compete with United Parcel Service (UPS) and FedEx Corp.
Acknowledgement to CSCMP SmartBrief
When Amazon was asked about reports that the company
was leasing aircraft and had registered an ocean freight
booking business, company spokespeople downplayed
Amazon’s ambitions. The company, they said, was
simply looking to supplement its delivery partners – not
replace them – during peak periods like the Christmas
shopping season.
But some Amazon documents reveal a far bolder plan.
As far back as 2013, a report to Amazon’s senior
management team proposed an aggressive global
expansion of the company’s ‘Fulfillment By Amazon’
service, which provides storage, packing and distribution for services, which it developed internally and gradually
independent merchants selling products on the company’s
website. The report envisioned a global delivery network
that controls the flow of goods from factories in China and
India to customer doorsteps in the US and London. The
project, called Dragon Boat, appears to be proceeding,
according to a spokesperson familiar with the initiative.
Swelling industry
The ambitious strategy promises to turn FedEx and UPS
into Amazon rivals, but will also pit the Seattle giant
against Chinese counterpart Alibaba Group Holding.
The companies are vying for dominance of the rapidly
growing cross-border e-commerce market, which by
2020 is expected to swell into a US$1-trillion industry
serving 900-million shoppers, according to Alibaba’s
research arm.
Amazon’s plan would culminate with the launch of a
new venture called ‘Global Supply Chain by Amazon’, as
soon as this year, the documents said. The new business
will locate Amazon at the centre of a logistics industry
that involves not just cargo owners, but also legions of
middlemen who handle cargo and paperwork associated
with transnational trade. Amazon wants to bypass these
brokers, amassing inventory from thousands of merchants
around the world and then buying space on trucks, aircraft
and ships at reduced rates. Merchants will be able to book
cargo space online or via mobile devices, creating what
Amazon described as a ‘one-click service for seamless
international trade and distribution’.
Ease and transparency
“Cargo owners will no longer book with DHL, UPS or
FedEx but will book directly with Amazon,” a report said.
“The ease and transparency of this disintermediation will
be revolutionary and sellers will flock to operation Dragon
Boat given the competitive pricing.”
8 May 2016 • Logistics News
Amazon will partner with third-party transporters to
build the global enterprise and then gradually squeeze
them out once the business reaches sufficient volume
and Amazon learns enough to run it on its own, the
documents said.
If the logistics business takes hold, financial services
could follow, with Amazon giving loans to merchants,
processing international payments and consulting its
network of sellers on customs and tax matters.
The strategy echoes the company’s move into cloud
expanded into a commercial enterprise that’s now
Amazon’s fastest-growing and most profitable division.
Amazon never made big proclamations about its cloud
operations in the early days and instead marketed directly
to software developers. Companies like Hewlett Packard,
Dell and Microsoft largely ignored the threat and are now
playing catch-up.
According to analysts, this is classic Amazon fashion.
The consensus says a global logistics operation could
become a US$400-billion business for Amazon. The
analysts agree that Amazon’s strategy is to take baby
steps along a long path, which allows some companies
that could be disrupted to remain in a sense of denial.
Amazon rarely takes one big step forward that shocks
the market.
Amazon laid out its logistics strategy in 2013 after
predicting an uptick in the flow of merchandise from
Amazon sellers in one country to buyers in another. In
the initial document – a proposal to Amazon’s senior
executive team for planning purposes – the company
described a “revolutionary system that will automate the
entire international supply chain and eliminate much of
the legacy waste associated with document handling and
freight booking.”