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
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.
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