Amazon sells an expansive range of products in nations across the globe, and the online retailer continually seeks innovative ways to streamline its logistics, cut its costs, and manage more of its supply chain. Learn how launching a sea-based shipping initiative could help Amazon gain greater control over its supply chain.
Situation: Amazon Aims to Make Shipping More Efficient
For online retailers like Amazon, shipping costs are one of the company’s biggest expenses. That’s why Amazon has spent years experimenting with ways to make its supply chain more efficient. Doing so would reduce expenses, limiting the distance that shipments must travel as well as the amount of time they take to arrive at their destinations. Since Amazon completes many of its shipments by air, the retailer has considered the idea of purchasing its own aircraft and launching an air cargo provider.
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The online retailer has also launched Fulfillment by Amazon, a service that manages warehousing and distribution for small businesses and enables these retailers to sell products through the Amazon platform. As Amazon expands its global offerings and aims to add drone shipments to its offerings, however, the company recognized a need to make its logistics business even more efficient.
Approach: Amazon Launches Sea-Based Shipments
In response to growing logistical challenges, Amazon China obtained a license to serve as an ocean freight forwarder, enabling the online retailer to operate by sea. As of mid-2017, Amazon’s sea-based initiatives are still relatively limited, as they apply only to the retailer’s Chinese subsidiary and allow for forwarding of other companies’ goods.
However, the long-term implications could be immense. Countless companies currently resell Chinese products in the U.S., but Amazon’s sea-based forwarding service could allow those companies to streamline their operations and sell directly to customers.
Impact and Advantage
Launching sea-based shipments is likely to be a boon to Amazon, as it will give the online retailer much more control over its logistics. This initiative may also allow Amazon to realize a greater return on investment (ROI) from its shipments and fulfillments.
However, launching this sea-based forwarding service could negatively impact the many retailers who sell products through Amazon’s platforms. Establishing a shipment forwarding service would effectively remove these smaller retailers from the supply chain, boosting efficiency but potentially driving these companies out of business.
Those in the industry have also suggested that Amazon’s move to handle sea-based logistics is indicative of the online retailer’s larger push to manage a global supply chain. The retailer has a history of partnering with smaller companies, only to buy them out or take over their share of the market later. This move to the sea could suggest a future move to manage every step of Amazon’s business in-house, from manufacturing to sales to logistics.
Amazon’s move to manage sea-based logistics is likely to benefit Chinese companies in the near future, but the impact on American companies still remains to be seen. Retailers and logistics companies should watch closely to determine Amazon’s effect on retail supply chain management.[/show_to]
