Amazon is world renowned for their logistics (they shipped more than a billion items over the 2016 holiday season). As they grow, they are making a very conscious decision to handle more of their shipping themselves. Though Amazon’s desire to handle all of its own domestic shipping may be far off still, owning their own freight liners is within reach.
Amazon knows that taking control of every step of the shopping;shipping experience is crucially important when trying to improve margins and customer satisfaction. One of the biggest negatives Amazon hears from its customers is when purchases that do not arrive on time.
If you do not have experience, you may not be aware of how antiquated the freight forwarding business is. Here is Spencer Soper from Bloomberg explaining the potential benefits to Amazon owning their entire end-to-end logistics operation: “”Amazon wants to bypass these brokers, amassing inventory from thousands of merchants around the world and then buying space on trucks, planes and ships at reduced rates,”.
One of their strategies is to work directly with the source. Amazon is working with merchants in China and India to help with picking and packing, and fulfillment to their customers all over the world.
At this moment the plan tentatively named “Global Supply Chain by Amazon” Amazon would be competing against longtime rival Alibaba in an attempt to win the cross-border e-commerce battle which could grow to a $1 trillion industry by 2020. Amazon is also prepared to compete with DHL, UPS and Fedex.
They went as far as formally announcing themselves as a competitor in early 2016: “Our current and potential competitors include … companies that provide fulfillment and logistics services for themselves or for third parties,” Amazon stated.” – FOOL
This is not the first time Amazon had created a consumer product out of a service they use themselves.
The inception of Global Supply Chain by Amazon is very similar to the inception of AWS (Amazon Web Services)
Amazon found a fractured market that they depended on for their business to grow and decided to take the approach of building a new solution and selling it to others. It’s an incredibly lean way to create new consumer products while saving money internally. The key is to find every ounce of inefficiency and waste and destroying it at the source.