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Global Supply Chain News: It Begins – Amazon begins Freight Forwarding Operations with Shipments from China to US

 

Amazon's Fledging Freight Forwarding Service has Moved 150 Containers from China to the US Since October, as Global Logistics Strategy Unfolding

Jan. 31, 2017
SCDigest Editorial Staff

It has been almost a year since Bloomberg and others reported that Amazon was taking steps to build out an end-to-end global logistics service capability that would compete with major 3PLs, forwarders and carriers, perhaps not only to move its own freight but those of others.

Amazon moves included getting licenses in both US and China to act as a wholesaler for ocean container shipping. At the time, SCDigest wondered if it wasn't the most audacious logistics strategy in history. (See Amazon - The Most Audacious Logistics Plan in History?)

Supply Chain Digest Says...

With maritime forwarding's reputation as a notoriously complex and time consuming process, which is why forwarders exist, Amazon's entry could signal a cheaper, more straightforward option for Chinese shippers.

 


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It now appears those reports were indeed accurate.The Wall Street Journal reported last week that Amazon has begun handling shipment of goods by ocean to its US fulfillment centers from Chinese merchants selling on its site, taking on a role it previously left to global freight-forwarders, as do most other shippers.

The Journal says that "The move marks Amazon's latest step in a multi-year effort to build out its delivery business. The company doesn't own or operate ships, but is openly acting as a global freight forwarder and third-party logistics provider, categories of companies that book space on ocean vessels and truck goods between ports and warehouses."

Of course, Amazon has been acting as a 3PL for many years as part of its Fulfillment by Amazon service, for which Amazon does the pick, pack and ship activities for merchants that sell their own goods directly to consumers via Amazon's marketplace service, but let Amazon handle the fulfillment activities for a fee.

Amazon has moved 150 containers of goods from China since October, according to shipping documents collected at ports of entry that were compiled by Ocean Audit, a company specializing in ocean-freight refund recovery for shippers.

This month, Amazon has even started posting rates for new services such as sorting, labeling, and trucking shipments that traditionally are handled by third party logistics companies. The services and rates were posted under the name of its Chinese subsidiary, Beijing Century Joyo Courier Service Co., with Distribution-Publications Inc., a widely used platform for such information.

"Amazon has integrated all those services into one basket," said Steve Ferreira, CEO of Ocean Audit. Building this type of shipping product offers "a lot of strategic value," he added.

The moves propel Amazon further down the path of being able to provide end-to-end logistics services, including its own parcel delivery capabilities for itself and others in competition with UPS and FedEx, plans we reported on last Fall. (See Looks Like Amazon Really Does Want to Build Its Own Parcel Network.)

Ocean Audit found that bills of lading dating back to October list Amazon Logistics as a named party, signaling it has entered into an agreement with another party to provide ocean freight services. The analysis found the primary customers for Amazon's freight forwarding services are Chinese sellers on its website that use the aforementioned Fulfillment by Amazon service, with Amazon just moving its role in that fulfillment further back into the supply chain.

Unlike it's aviation strategy, where Amazon leases 767 freighters that are operated by Atlas Air Worldwide and ATSG, its maritime model appears to follow a more traditional forwarding approach, in which the Seattle-based company books space on ocean vessels and then trucks goods between warehouses and ports.

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With maritime forwarding's reputation as a notoriously complex and time consuming process, which is why forwarders exist, Amazon's entry could signal a cheaper, more straightforward option for Chinese shippers.

"They've made it so easy for these small, medium Chinese suppliers to make it into the supply chain," Ferreira told the Wall Street Journal. "Amazon is slowly building up a lot of volume," he said.

For its part, Amazon continues to say that it doesn't seek to compete with FedEx, UPS and other logistics providers, but rather to complement them as Amazon grows beyond these providers' ability to deal with all its shipments. And if you believe that…

Earlier this month, Amazon's Chinese competitor, Alibaba announced a partnership with Maersk Line that enables etailers selling through the Alibaba platform to reserve space on Maersk ocean vessels via the internet. This "OneTouch" booking service is available on the Alibaba ecommerce platform, and offers advance booking of cargo space on selected routes from eight Chinese ports, with a pre-paid deposit.

OneTouch, which was acquired by Alibaba in 2010, targets small- and medium-sized Chinese exporters and allows them to book airfreight and parcel delivery services.

All this just adds more pressure on the freight forwarding sector, which is under threat from a variety of digital technologies. (See Is Technology Likely To Roil Traditional Global Freight Forwarder Providers?)


What's your take on Amazon's entry to the forwarding business? Will it become a major force? Why or why not? Let us know your thoughts at the Feedback section below.

 

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