Dive Brief:
- After announcing Q4 2017 earnings, Amazon hinted at an intent to manage its own last-mile delivery sector, The Loadstar announced last week. Industry experts believe this indicates the company is moving toward operating as much of its own supply chain as possible.
- Q4 2017 revenues were up 38% at $60.5 billion dollars and operating income up 69% at $2.1 billion. Total revenue for 2017 came in at $177.9 billion, up 31% YoY.
- Q4 transport and supply chain costs increased by 31% YoY, which were in line with Amazon fulfillment volumes.
Dive Insight:
Whether Amazon truly intends to displace its 3PLs in favor of internal management remains to be seen.
Last mile inefficiencies are problematic, despite ongoing efforts to resolve delays with AI-assisted predictive analytics, more efficient supply chain visibility tracking tools and even mid-route lockers.
While DHL, FedEx and UPS continue to invest heavily in their logistics networks, projects like Amazon's FBA Onsite — which gives sellers the ability to ship directly from their own storage sites under the Amazon umbrella — unsettle those wondering just how far into its own supply chain the giant's reach will extend.
Still, industry experts are reluctant to view these moves as an outright declaration of delivery independence. Rather, it appears as though Amazon is issuing a challenge to 3PLs, reminding them that the company intends to control its own supply chain one way or another.
"I don't see Amazon displacing its traditional 3PLs," Anshu Prasad, CEO of Logistics Exchange told Supply Chain Dive. "However, they do need a service level able to keep pace with their speed of growth, so they're setting the pace and sending a signal about what they need to their service providers."
"Amazon is saying, 'We as a company need to get bigger, faster, with improved capabilities and integrated end to end service," Prasad said. "'We need our providers to respond to consumers in an Amazon-like style, by providing same-day or rush deliveries with visibility. And when it doesn't go right, we need them to offer the same kind of simple fix.'"
