Fronetics Logo - navy
Get started

Is an Amazon Logistics Service Finally Launching?

by | Sep 3, 2019 | Blog, Current Events, Logistics, Supply Chain

The long-rumored launch of an Amazon logistics service is unlikely to be rumor much longer. Here’s what 3PLs need to know.

Highlights:

  • Amazon recently invited select shippers to use a service called Amazon Shipping.
  • The retail giant boasts a global logistics footprint that covers 243.5 million square feet – and counting.
  • Amazon’s hiring plans offer insights into its plans for logistics services.

Rumors of an Amazon logistics service have been swirling for nearly two years. In February 2018, the Wall Street Journal predicted that Amazon was planning to launch a “delivery service that would vie with FedEx, UPS.”

In April of this year, Amazon re-stoked discussion of its long-rumored logistics service by inviting select shippers in three major U.S. cities to use a service called Amazon Shipping. While more recent reports indicate that this Amazon logistics service may not be attractive to all shippers, it’s time to consider the possibility that Amazon is about to become a player in the logistics sector.

The growth of Amazon Logistics

Shortly before the April 2019 reports surfaced, Amstrong & Associates Inc., a logistics industry research and consulting firm, published a detailed report on Amazon Logistics. Summing up the report’s conclusions, A&A President Evan Armstrong said, “Amazon is acting increasingly like a 3PL.”

Armstrong’s report estimates that Amazon provides logistics services for 12% of B2C shipments worldwide, noting that third-party sellers account for more than half of all units sold through the Amazon platform. Eytan Buchman, vice president of marketing at Freightos, points to Amazon’s massive logistics footprint at 243.5 million square feet.

The network of warehouses and distribution centers that make up Amazon Logistics comprises 386 facilities in the U.S. alone. That includes 159 fulfillment centers, 47 inbound and outbound sortation hubs, 52 Prime Now hubs, and 115 local delivery stations, according to data compiled by Montreal-based research firm MWPVL International.

Amazon CEO Jeff Bezos has often emphasized the importance of “how fast [a product] will ship or be available for pickup,” as in his 2017 letter to shareholders. As evidence of Amazon’s focus on logistics, Buchman points to the company’s 2018 competition assessment, identifying “companies that provide fulfillment and logistics services for themselves” as competition.

Yet experts remain divided when it comes to labeling Amazon outright as a 3PL. Armstrong, for example, doesn’t place Amazon in the same category as 3PLs because logistics “is just part of their business.” On the other hand, Satish Jindel of SJ Consulting Group estimates that Amazon generated $42.5 billion in gross revenue from logistics services worldwide in 2018, making it the world’s leading 3PL.

Hiring plans for Amazon Logistics

In doing a deep dive into the nearly 17,700 full-time vacancies listed on Amazon’s website, Buchman formed some interesting insights into Amazon’s plans. Here are the key points he found:

  • 920 (or 5%) of the 17,700 jobs listed are in the logistics and transportation sector.
  • About half of these logistics and transportation jobs are in the U.S.
  • More than half of the vacancies require at least 4 years’ experience.
  • More than 10% require at least 7 years’ experience.
  • 14 jobs require more than 10 years’ experience.

Based on his analysis, Buchman believes that it’s “clear exactly where the company is moving – cross-border trade and international logistics, while improving courier delivery.”

What does Amazon Logistics mean for the sector?

The Amazon effect is the subject of much discussion, speculation, and anxiety for manufacturers and distributors, and Amazon Logistics is no exception. Other 3PLs, such as FedEx, have publicly insisted that Amazon poses no threat – despite statements to the contrary from Wall Street analysts.

In contemplating where Amazon logistics leaves other 3PLs, Buchman concludes that while “few operate at the same scope as Amazon’s level of business… most do already have the expertise, physical networks, and internal technological capabilities to differentiate.” He concludes on the relatively gloomy note: “Doubling down on improving user experience had recently become the way to stay ahead. But now, it’s looking like the way not to fall behind.”

At Fronetics, we’ve written before about the challenges that the Amazon effect poses for supply chain and logistics companies – and why it’s ultimately a net positive. Amazon’s disruptions to the sector are likely to continue, and, as they do, the rest of the industry has the opportunity to refine and sharpen its practices.

Related posts:

New Call-to-action