These days, Amazon is making news as much for its impact on the logistics industry as in retailing. The reason is that the ecommerce mega-retailer, which accounts for approximately 40% of online purchases in the U.S., has transformed the business of selling online primarily by investing in its logistics network and supply chain.
Forever pushing the envelope, the company has become known for experimenting with technology to help get orders to customers more quickly. In fact, the same holds true for every part of its order fulfillment process. Amazon is constantly finding ways to get logistics done better . . . and faster.
Introduction of New Technologies
Driven by the goal of more efficiency and speed — and scalability — Amazon has been experimenting with different logistics technologies for years.
For example, within its warehouses, Amazon has already automated many of the operating tasks that go into storing and packing orders to create cost savings and shorten order fulfillment times. One way this has been accomplished is through an army of over 30,000 material-handling robots that work in conjunction with warehouse personnel. The company even runs competitions for engineers to create new processes and technology that improve the steps that go into identifying, sorting, and packing goods from warehouse shelves.
Delivery by drones is another “innovation” Amazon has gotten a lot of attention for. How practical drones are for delivery at the moment is debatable, but regardless, it shows the company’s dedication to finding new ways to improve the experience for Amazon customers. The next frontier in the ecommerce space is the last mile, and same-day delivery by drones may be the answer.
Amazon’s motivation for improving its internal operations is self-apparent. But what’s interesting is that Amazon may also be positioning itself to provide logistics services to other shippers as well.
Logistics as a Service
Amazon’s apparent strategy of expanding from online retailer to full-service logistics provider is not a stated goal from the company — yet. But logistics is a business of scale, and the more volume is moved through a logistics network the more efficient it becomes. So, while Amazon may only be using its logistics assets for itself right now, it’s logical that in time it will be able to offer the same services to outside companies as it offers to its customers .
Along with the Amazon Prime trucks that are common on U.S. highways today, a fleet of Amazon Prime Air planes, based in N. Kentucky, are also taking to the skies. A challenge for retailers can be freight capacity during peak times of the year, and this is a move by Amazon to ensure capacity for itself.
And, by leveraging its huge shipping volume, Amazon will be able to compete with every other logistics services provider in the marketplace. This is a fact not lost on the other service providers — small parcel carriers, 3PLs, and freight forwarders alike.
Just as Amazon has transformed retail, it may do the same for the logistics industry. In its own drive to create supply chain efficiency and operating scale for itself, the company is driving innovation in ways that will eventually provide benefits to other shippers as well.