Yesterday, I had an Amazon Prime home delivery made for some basics. As I answered my doorbell, I saw a young man get out of a rented Enterprise cargo van, full of Amazon Prime deliveries. He reached my house using Amazon routing software and concluded the delivery scan with his mobile phone, using the same Amazon software. My Amazon app instantly alerted me that my delivery had been received by me, as I shut the door. This man started working a few days ago as an independent for Amazon Logistics. Thousands are following worldwide, a la Uber, as Amazon leverages the gig economy for home delivery and more.
It is widely expected that Amazon Logistics aims to build a source to consumer logistics network that will compete head-on with established third party logistics organisations, freight forwarders and home delivery service providers. This strategy is in line with AWS’, its computing arm, which disrupted (and reinvented) the computing infrastructure-as-a-service industry. With its recent announcement aimed at soliciting Chinese manufacturers, who are looking to expand their cargo & drop ship network into Europe and USA, Amazon Logistics has already begun expanding its Fulfilled by Amazon (FBA) program to become a full service contract logistics arm. Amazon is now adding independent (i.e. low cost) small businesses to provide last mile delivery service and eventually pick-pack-drop ship through the vendor network. This is all powered by Amazon’s logistics technology.
The math affecting the logistics industry is simple: with free shipping voraciously devouring margins, Amazon has to bring disruption into this market for its own long term survival. In this winner-takes-all game, other large innovating competitors of Amazon will follow suit with competing strategies. This disruption will affect the entire supply chain market and I already see the discomfort at many 3PL and transportation companies as competition intensifies and volumes drop.
Amazon Supply, its wholesale and B2B arm that has already disrupted the Australian office products market, is now busy taking on the U.K. It will soon turn up the heat in Canada for established distributors across several categories, from office products to industrial supplies.
Even established “brands” are watching these events carefully. Amazon’s private label program for staple products, Amazon Basics, is picking up steam and reported to be growing over 20% year-over-year. As Amazon invites CPG companies to join their marketplace, several brands are looking at alternative strategies to build and manage alternative marketplaces and channels.
The information technology industry, which includes application providers, cloud integrators and data managers are all watching as Amazon is set to disrupt our own industry by expanding AWS. We have to work harder every day, innovate and collaborate to stay ahead. One way that our industry competes is by rapid collaboration among would-be competitors, aimed at providing a larger and more complete software-as-a-service offering as part of the “API Economy.”
Mediocre retailers are already in the fight of their lives for survival. It is time that many other industries played close attention to Amazon.
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About the Author
Neel has held senior roles at various technology firms and is currently a Partner at SPICE Technology Group, Inc. Neel is a well recognized technologist within the North American Manufacturing, Retail & Distribution sectors. Amongst the early pioneers in the “cloud” computing market, Neel has been working since the nineties with customers across the globe to achieve technology-driven, quick-time-to-market capabilities for modern commerce and complex supply chains. He brings expertise in digital commerce, supply chain, analytics and in emerging information technologies that are propelling organizations towards new business models. Some of these technologies and their modern applications include “Internet of Things (IoT),” “The API Economy,” “The Sharing Economy” and collectively: “Industry 4.0”
Neel is the Program Chair & Board Member of the Council of Supply Chain Management Professionals (CSCMP – Toronto Roundtable). He is also the Chairperson of the Program Advisory Committee for Business Process Management at Sheridan Institute of Technology and Advanced Learning.