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- Nov. 12, 2015 -

 
       
   

Supply Chain Graphic of the Week: Is It Time for Amazon Logistics?

Analysts at Baird & Co. Say Amazon Should Consider Becoming a Full Blown 3PL

 
       
   

By SCDigest Editorial Staff

 
   

 

Most of us know that Amazon.com has been experimenting furiously with delivery models where it takes control of "last mile" delivery, whether that is using its own trucks and cutting out UPS and FedEx, or more recently testing of its new Amazon Flex program, an Uber-like system that would use freelance drivers and mobile apps for one hour delivery services.

But should Amazon take its logistics capabilities even further? Maybe so, says a recent research note from the Wall Street analyst at Baird & Co., and they even suggested a name for the new set of services - Amazon Transportation and Logistics (ATL).

 

In its research note, Baird provided the graphic below that at a very high level illustrates what such an Amazon 3PL service might look like.

 

 

"We believe Amazon may be the only company with the fulfillment/distribution density and scale to compete effectively with global [logistics] providers, and with an investor base that is historically tolerant of large-scale investment and low margin revenues," Baird wrote.

Baird adds that "Our assessment of Amazon's broadening fulfillment ecosystem, internal domain expertise, and early initiatives with Prime Now to offer third-party delivery suggests there is evidence Amazon may ultimately pursue more comprehensive third-party services. Similar to the gradual rollout of AWS [Amazon's Cloud IT services], we would expect Amazon to introduce competitive transportation and logistics services on an incremental basis, with a long-term focus."

Baird further posits that in addition to perhaps achieving savings in its own shipping costs by in effect taking out UPS or FedEx's margins, other customers of the service would range from SMBs to enterprise businesses that lack financial resources, expertise, or technology horsepower to manage fulfillment/logistics internally, with an offering that raises the competitive bar versus incumbent service providers.

Alll that said, our first reaction was "Why would Amazon want to enter the down and dirty and often low margin third party logistics business?"

And that of course may be the ultimate direction, but as noted above Amazon is already in the 3PL business with its Fulfilled by Amazon service.

 

Any Feedback on our Supply Chain Graphic of the Week? Let us know your thoughts at the Feedback section below.

 
   
 
   
 

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