Amazon Looking to Become a Player in Global Third-Party Logistics?

Befitting the online retail giant’s existing strategy of aggressive expansion and industry domination, Amazon.com Inc. has recently made moves implying a possible venture into the world of global third-party logistics.

In January, Amazon registered its China arm as an ocean freight forwarder with the U.S. Federal Maritime Commission (FMC), allowing for a more direct and unencumbered route for its goods from overseas into U.S. ports.

A Strategic Move

Even in the face of an overseas shipping slowdown, this move is being interpreted by many as a strategic positioning. It would give the online retailer more control over shipping products from Chinese factories to U.S. shoppers.

Still, the strategic advantage is largely domestic, as Amazon has struggled in China to compete with homegrown ecommerce destinations like Alibaba and Tmall.

“Amazon’s ocean freight services will be far more attractive to Chinese sellers than to American buyers,” wrote Ryan Petersen, chief executive officer of Flexport, a San Francisco-based freight forwarder who first wrote about Amazon’s registration on his company blog. “Chinese suppliers would love direct access to Amazon’s vast American customer base.”

Controlling Costs

Beyond opening up a more direct line from manufacturers to consumers, sources within the company, speaking to EBNOnline.com, have claimed that the move is about Amazon taking increased control over its shipping in order to deliver better service. However, some remain skeptical of the supposedly good intentions.

“[Amazon] has more and more control over the supply chain of their business and it gives them the ability to squeeze (costs) even further,” said Satish Jindel, a logistics consultant and president of SJ Consulting Group, speaking to Reuters. Jindel added that this is likely to give Amazon more price negotiation power against traditional retailers.

Three-day Delivery, Now Worldwide

Sources speaking to EBNOnline.com have commented that the move is likely Amazon beginning to lay the infastructure to expand its network of three-day delivery of goods to a global scale, seeking to win territory from traditional 3PL providers.

This includes offering three-day delivery for some palatalized freight for 3PL customers in certain geographic regions–as well as expanding shipping to include air cargo.

“We plan to perfect the process within one year, and once we perfect the process we will increase the fleet size where necessary to have complete control over our cargo needs worldwide,” the source told EBNOnline.com.

Becoming a 3PL Provider?

This raises the question: Is Amazon going to attempt a 3PL offering? On the surface, experts looking at the recent FMC filings say it could prove viable as a logistics platform for some “small and medium sized Chinese businesses.” But what about American or global businesses?

“Amazon may be the only company with the fulfillment and distribution sophistication and scale to compete effectively with incumbent service providers (UPS, FedEx),” wrote Colin Sebastian, Baird Equity Research analyst. “If they can replicate globally what they do in the U.S., then yes, the delivery window worldwide would become between two and three days.”

Miles to Go

Yet even with bold talk and the FMC registration, Amazon currently seems in no position to fully enter the global 3PL sphere. Getting operations up and running could potentially be years away and the eCommerce market is heating up, forcing Amazon to make big promises simply to stay competitive. While the future is still unwritten, it seems unlikely we will be seeing cargo ships adorned with the iconic swooping arrow logo any time soon.

If you need a partner to help you strategically manage and successfully move your products out of the port and onto their final destinations, be sure to download our latest eBook — Speeding Time-To-Shelf and Cutting Costs — a must read for today’s logistics managers.