What an Amazon shipping service means for 3PLs
Rumors of Amazon's plans to launch its own shipping service to compete with traditional 3PLs such as FedEx and UPS rocked the news cycle last Friday.
While Amazon has yet to confirm this announcement, one analyst Supply Chain Dive spoke with said the move is completely in line with everything Amazon has been building toward.
To help 3PLs, supply chain managers and retailers understand how this new move could affect them, Supply Chain Dive put together a quick guide for making sense of the event and how it could impact logistics and operations.
Here's what we know:
- The Wall Street Journal broke news from anonymous sources that Amazon will launch its own shipping service, "Shipping with Amazon" or SWA, which will provide all shipping and logistics for Amazon and its third-party sellers in-house.
- Amazon also allegedly plans to "undercut" the competition's pricing: we can't say with surety whether that means cheaper or better rates, or what kind of terms and deals Amazon would offer.
- The real kicker is that, besides moving shipping and logistics in-house, Amazon allegedly plans to offer SWA to other businesses outside the Amazon network.
What will SWA disrupt?
It's apparent how SWA would disrupt logistics: right now Amazon uses 3PLs like everyone else, but once it launches its own shipping service, those 3PLs will likely lose Amazon's business and then have to fight Amazon for market share.
But there are also some not-so-obvious implications:
- An Amazon shipping service means third-party sellers on the marketplace will be even more beholden to the company's demands, policies and overall vision. They won't have a lot of control over how their products are advertised, stocked, found, bought and shipped if sold through Amazon.
- The second "Amazon effect:" Amazon could spur more technological innovation within the logistics industry, as 3PLs seek to be on Amazon's level.
- Consultancy firm AArete's Director of Retail Practice Sean Maharaj said "undisciplined" 3PLs will be the losers. Amazon is so tech-savvy, organized and disciplined that if you aren't tightly controlling operations and using data effectively, you aren't going to stand a chance when Amazon launches SWA.
Why does this matter?
Amazon is seeking full control of its supply chain, something which Maharaj said was just a matter of time.
"This is just a continuation of the growth of the Amazon empire," he told Supply Chain Dive.
But it's more than that: because of the nature of the company, Amazon's presence in the logistics industry will dramatically change how 3PLs operate. Here's what you need to know:
- Predictive analytics and data optimization will be critical for 3PLs trying to compete with Amazon, so get ready for another tech revolution. "You’re going to see very precise data points and execution with Amazon," Maharaj said. Right now, "3PLs aren't able to drive down costs as quickly and effectively as Amazon can."
- Technology-driven 3PLs will succeed, even with competition from Amazon. Examples of 3PLs that are doing well and likely to continue doing well are XPO Logistics and Schneider, according to Maharaj.
- But, Amazon could acquire the more innovative 3PLs while squashing the weaker ones. Amazon wants to dominate trends, so 3PLs not looking to get acquired need to be savvier than ever.
Amazon's shipping service comes as no real surprise, though. The e-commerce giant has been disrupting nearly every industry and proving it is faster, smarter and more efficient at just about everything. But that doesn't necessarily mean Amazon will win; it just means 3PLs need to step up their game.
- The Wall Street Journal Amazon to launch delivery service that would vie with FedEx, UPS
- Supply Chain Dive Amazon reportedly challenges FedEx, UPS with shipping service
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