With Much Unknown, Stakeholders Pay Close Attention to Amazon’s Supply Chain Plans

Why would bringing shipping and logistics “in house” be considered advantageous for Amazon? Most industry observers they are better off partnering with FedEx and the USPS as they currently already are?
For the same reason any business looks to vertically integrate their value chain, Amazon could stand to benefit by cutting out the middle man - in this case for their logistics and distribution function. You rarely see companies bringing asset-intensive logistics business in house, but that is only due to the scale and capital needed to make it happen. A business of Amazon’s size can realistically consider these kinds of moves because they have the requisite capital and network.

The recent news about Amazon leasing 20 Boeing 767 freighter aircraft from ATSG was viewed as a way to help smooth out high inventory levels by many. Do you view this move as the first of many in which Amazon attempts to gain more control of transportation assets?
Absolutely. Amazon is looking to improve service, cut costs, and in essence cut the cord that their transportation providers hold.

Should Amazon continue to take steps to gain more control of its transportation and logistics operations? Will it be able to truly reduce in house logistics and shipping/logistics costs, given that its margins are still pretty low, coupled with its massive scale and shipping volumes?
Massive scale and shipping volumes work in Amazon’s favor in terms of reducing costs by bringing logistics in house. Needless to say, along with their scale and volumes they deal with vast complexity (especially when dealing with regulation, maintenance, hub management, multiple 3rd parties, etc. involved with cargo air freight) – which makes this undertaking an incredibly ambitious one.

As with any other “non-core” business acquired, there will be a significant learning curve for Amazon as it struggles to manage their freight anywhere close to as efficiently as a FedEx or USPS – which perform this work as a core competency. As such, it’s important to conduct detailed business casing, or to engage a consulting firm like ours, with a conservative learning curve ramp up to realistically understand the up-front losses expected before the long-term gains are realized.

Generally speaking, how will Amazon’s logistics’ presence impact the industry, logistics and supply chain industries, specifically?
Amazon’s logistics presence could have a significant impact on the logistics industry (carriers, brokers, and shippers alike); however, it seems very unrealistic that this transition could happen in any short-term scenario.

If Amazon truly believes this is an effective cost-savings and service win strategy when considering all of the involved factors, the transition would likely be glacial and would still include common carriers as partners for the foreseeable future. If we are to consider a reality where Amazon manages its own proprietary fleet, the peripheral industry impacts would be straight forward in my eyes (i.e., lost volume and revenues for carriers and brokers, which could cascade to more expensive rates for other shippers as their carrier base loses important volume to support their fixed cost base).