News / New end-to-end supply chain package a likely home-run for Amazon

© Simon Lehmann

Amazon’s end-to-end supply chain package, revealed this week, could be a huge success, judging from initial reactions, as the benefits for merchants seem likely to overcome reservations about sharing business data with the e-commerce giant.

Supply Chain by Amazon deviates from the firm’s previous script, as it moves up the supply chain. Combining established with new services, it matches the warehousing and distribution, fulfilment and inventory replenishment offerings with global logistics, offering merchants an integrated end-to-end service.

John Haber, chief strategy officer at Transportation Insight, was not surprised by the change in direction. he said: “It was more a matter of when is was going to happen. They already had the network pretty much put together. This is a huge area of opportunity for Amazon to grow the business.”

The service targets independent merchants, which constitute a large market. By some estimates, 60% of the products sold on Amazon are from such sellers. Moreover, the company assured merchants, when it unveiled the service at its annual Accelerate seller conference, that they could also use the service for other sales channels, including online and physical stores.

Rick Watson, founder & CEO of e-commerce specialist RW Commerce Consult, said Supply Chain by Amazon was designed to keep products in stock and to ship faster and more reliably, at significantly lower costs – “the holy trinity of logistics, and all critically important priorities for all brands”, he commented. “Especially at this moment, this message is literally pitch-perfect, from what I am hearing from my own clients.”

In its pitch to sellers, Amazon stressed cost savings and the benefits of an integrated supply chain, claiming users stand to save up to 25% on cross-border transport, with further savings from streamlined domestic transport with its Partnered Carrier Program.

In addition, merchants can store product in bulk at discounts of up to 80% compared with Fulfilment by Amazon, with no peak pricing in Q4, Mr Watson noted.

Supply chain management is not a core competence of most sellers, Mr Haber pointed out, and an integrated end-to-end service allows them to concentrate on their core business.

“They realise they need expertise in logistics. It’s a huge percentage of their overall cost, higher than for a manufacturing company,” he said.

It also saves them the effort of trying to integrate technology with logistics providers, he added.

“Tech integration is a huge obstacle for companies of all sizes. It’s costly, difficult and it takes a lot of time. This could be a very good solution for a lot of people,” said Mr Haber.

Amazon’s service could actually encourage sellers to source more from international origins. He said: “It has potential to enhance their ability to expand internationally and source more from overseas. The import/export process is time-consuming and difficult, especially for small businesses.”

The question is if these benefits can overcome sellers’ concerns about handing their data over to Amazon, giving it visibility all the way from source to distribution centre.

“I think the answer is yes, with time,” Mr Watson said. “Many people trust Amazon Web Services; it’s not a stretch to think that many growing SMBs and mid-market brands could trust Amazon because replicating this level of scale and reliability may be nearly impossible otherwise.”

Mr Haber reported positive reactions from his clientele. He said: “Initial reviews and feedback have been pretty positive. People are excited about the opportunities, if Amazon can deliver.”

He is curious how logistics firms will react, though, adding: “This will have an impact on them.”

He said Amazon was not the only player pushing for integrated end-to-end solutions. Others, notably Maersk, were also building up comprehensive end-to-end capabilities.

“We will see others move in the same direction,” he predicted.