Amazon Logistics 2017

Amazon Logistics 2017

Release date: January 10th, 2017 (109 pages)
PDF/Powerpoint format. Price: GBP1,990.00


Shipping has always been a principal driver of Amazon’s strategic investments.

Arguably the most innovative Amazon business unit is currently Amazon logistics. The unit deals with much more than just the logistics by which it ships orders to its customers. Amazon is edging closer to operating a full end-to-end retail model as it beefs up its logistics operations with the ultimate aim of reducing its reliance on thirdparty delivery companies.

And building out a huge logistics network is classic marketplace thinking: better and faster logistics attracts more shoppers and this in turn attracts more 3P sellers, so the flywheel effect will start to kick in again.

In future Amazon could expand Amazon Logistics to become the de facto carrier for all Amazon sales. (This would point to classic ecosystem thinking). The new logistics business will open cross-border commerce to smaller merchants who otherwise wouldn’t bother with it. That in turn would make many more products available to Amazon shoppers around the world.

In future working with Amazon logistics means partnering suppliers will need to optimise and speed up their processes too. Amazon will steer these processes among various suppliers, as it is the only player in this system who can do so and coordinate. Once again more flexibility as a result of picking up from suppliers is also a key concern for Amazon.

In short, Amazon wants to control every link in the supply chain, from sourcing the product to warehousing and now delivery to the doorstep. In certain categories, such as book publishing, it is also manufacturing the product. Owning its own trucking network and drones are part of the last-mile strategy. Such dominance helps iron out inefficiencies in the system, yielding margins. It also enables the company to offer a radically innovative and much better logistics solution (from Prime Now to drones) than currently available on the market.

Moreover in terms of the last mile, Amazon is building out a proprietary infrastructure and network without investing that much into new employees, logistics fleets or by founding a standalone company. For Amazon delivering parcels does not mean running their own service. All it needs is a DC in or close to the city and instead of cooperating with the established logistics providers the online retailer can hire citizen couriers akin to Uber drivers for the last mile. By doing so, much of the risk is outsourced as well.

Amazon is betting that there is soon to be a disruption in distribution processes and costs, both in terms of driverless cars and trucks and fuel (EV, etc). Amazon think that being in that space as those changes begin can be valuable as disruptions mean that market leaders are no longer automatically leaders. And when things change one can really grow.

Table of contents

Executive summary p7
Data p15
Logistics: introduction – the most innovative business unit at Amazon? p16
Marketplace: Net product, service sales, units shipped, 3P % share 2009-15 p17
Marketplace: The main marketplace winner, 1P and 3P contribution in US $m 2010-15 p18
Marketplace: 3P sales in US$m in 2010 – 2015, 3P bigger than 1P p19
Marketplace: Amazon Marketplace 2015 record year p20
Marketplace: UK stats, 3P and 1P neck on neck p21
Data: Average annual spend 11 – 15, USA, DE, Japan, UK, France in local currency p22
Data and KPIs: Average annual spend 2011 – 15e on AMZN 1P, Analysis p23
Data: 1P by geography, average price, total units, customers, frequency 2015 p24
Data: total units shipped 1P and 3P, frequency per country, Analysis p25
Data: shipping costs 2013-15 – the opportunity p26
Data: shipping costs analysis p27
Amazon logistics: costs, items shipped in 2015, a logistics marketplace p28
Data: shipping costs 2015 – cost per unit stable, fixed cost p29
Amazon logistics: US shipping charges per providers, UPS, Fedex p30
Amazon logistics: exceptions, USPS, others, discounts p31
Amazon logistics: price changes in 2016, shipping costs go up again p32
Introduction: future strategy p33
Amazon logistics: a full end-to-end model p34
Amazon logistics: Is Amazon aiming to take over the last mile? p35
Amazon Logistics: the most innovative business unit at Amazon? p36
Amazon logistics: the holiday snafu in 2013/4 and the development of prime Now p37
Amazon logistics: Q2 shipping costs and FBA point to more investments into DCs p38
Global Supply Chain by Amazon p39
Logistics: Project Dragon Boat, one click-ship for seamless international trade p41
Logistics: automate the entire international supply chain, eliminate legacy waste p42
Logistics: Project Dragon Boat, providing ocean freight services p43
EU: ocean shipping similar to trucking and air cargo programmes? p44
In bound logistics p45
EU: new FFC strategy – inbound logistics, “Inbound Preferred Carrier” programme p46
EU: new FFC strategy, “Inbound Preferred Carrier” – how it works p47
EU: The Polish strategy – supporting Amazon’s most important foreign market p48
Logistics: Use of Amazon Logistics to become mandatory for Amazon Retailers? p49
Fulfillment p51
Fulfillment: airfreight operation at Wilmington Air Park p53
Fulfillment: operation Aerosmith, 1m packages a day p54
Fulfillment: Air Operator’s Certificate, could begin offering shipping for 3P in 2017 p55
Fulfillment: taking a 30% Stake in a Large Cargo Airline? p56
Fulfillment: The Amazon deal would transform Atlas p57
Fulfillment: an unprecedented level of retail disruption p58
Outbound shipping p59
Outbound shipping: tackling the last mile p60
Outbound shipping: Fedex dismissal p61
Same Day deliveries p62
UK: % of Amazon Sales by Carrier p64
July 2016: Essex Fullfillment centre and Kiva robots p65
Same Day deliveries: tackling the last mile, Germany p66
EU: new FFC strategy, same day delivery in Munich p67
EU: new FFC strategy, dividing cities into zones, enabling local knowledge p68
EU: new FFC strategy, the neighbourhood in geo location data p69
EU: offsetting conversion with missed deliveries, data, 10-15% fulfilled by partners p70
EU: How dangerous is Amazon Logistics to the competition? p71
EU: Germany new DCs, better space utilisation through kiva and network effects p72
EU: AmazonFresh set up different to USA p73
USA: Amazon’s reach of the shopper population p74
USA: new FFC strategy – stats p75
Lockers p76
Lockers: reasons for the roll out p78
Lockers: the costs of the lockers, Keba AG p79
Lockers: utilisation rate p80
Lockers: Lockers Germany, moving away from the packstations p81
Lockers: France - Amazon deciding against acquiring Colis Privé p82
Lockers: the Hermes approach – viable? p83
Lockers: Closed loop versus open systems p84
Consume the city p85
Consume the city: going head to head with UPS and Fedex p86
Consume the city: damaging efficiencies at 3PL partners p 87 Consume the city: the focus on the last mile p88
Consume the city: Uber and Flex drivers, outsourcing costs p89
Shipping: in home deliveries, innovation and trials p90
Drones p91
PrimeAir: leaving roads and a creaking infrastructure behind, goin’ up in the air p93
PrimeAir: Pony Express-like drone delivery patent p94
PrimeAir: docking stations on vertical structure for a relay race p95
PrimeAir: docking stations to provide free Wi-Fi p96
PrimeAir: route density problems, driverless trucks, “Swarm” logistics p97
PrimeAir: combining trucks and drones; self driving trucks as mobile warehouses p98
Logistics: Drones and trucks p100
Logistics: Drones and trucks - anticipatory shipping p101
Logistics: Drones and trucks - pragmatic and practical solutions p102
Logistics: Drones - hitch rides on trucks/buses en route to delivery location p103
Outlook p106
Sources p109
Table 1: Net product, service sales, units shipped, 3P % share 2009-15 p17
Table 2: Average annual spend 11 – 15, USA, DE, Japan, UK, France in local currency p22
Table 3: 1P by geography, average price, total units, customers, frequency 2015 p24
Table 4: Data: shipping costs 2013-15 – the opportunity p26
Table 5: Data: shipping costs 2015 – cost per unit stable, fixed cost p29
Table 6: UK: % of Amazon Sales by Carrier p64
Chart 1: The main marketplace winner, 1P and 3P contribution in US $m 2010-15 p18
Chart 2: 3P sales in US$m in 2010 – 2015, 3P bigger than 1P p19