BY ROBERT C. LIEB AND KRISTIN J. LIEB
THIRD-PARTY LOGISTICS
EAMAZON.COM HAS COME A LONG WAY SINCE ITS FOUNDER AND CHIEF EXEC- utive officer, Jeff Bezos, envisioned the company as a virtual bookstore. It has evolved into an online retail giant that generated $74.45 billion in revenues in 2013, much of that coming from its support of more than 2 million companies that used Amazon to sell their products online and distribute them to customers. Under the company’s various pro- grams, Amazon not only provides its customers with a means of advertising and selling
their products, but also offers to store those products in its fulfillment centers; pick, pack,
and ship them; and provide customer service, including handling returns.
In the process of developing its network to support those services, Amazon has built out
an infrastructure that by one recent account now includes 145 warehouses around the
world ( 84 in the United States, four in Canada,
29 in Europe, 15 in China, 10 in Japan, and
seven in India), which collectively account
for more than 40 million square feet of
space. Amazon has also made substantial
investments in material handling systems, including the acquisition of Kiva
Systems for $775 million in 2012.1 Kiva,
now a wholly owned subsidiary of Amazon,
designs robots, software, workstations, and
other hardware that has been used in the
distribution facilities of companies such as
Staples, Office Depot, and The Gap. The systems produced by Kiva are expected to be an
integral part of the distribution network now being
developed by Amazon. Amazon has also made major
investments in cloud computing. At the same time, the
company has been developing transportation capabilities to
support its Amazon Fresh same-day grocery business.
Much of Amazon’s recent growth has been fueled by its Amazon
Prime program and Amazon Supply operations. Amazon Prime,
which offers “free” two-day delivery to its more than 27 million
subscribers for $99 dollars per year, doesn’t come close to recover-
ing Amazon’s related transportation costs, but on average Amazon
Prime customers buy twice as much merchandise per year as do
other customers. 2 Amazon Supply, which provides a marketplace
for thousands of industrial suppliers, represents a major move by
the retailer into the business-to-business space. Amazon advertises
it as offering 750,000 “essential” products for business and indus-
try, with free two-day shipping for orders of $50 or more and a
specialreport
As Amazon expands into logistics services, the giant retailer is taking
on more of the characteristics of a third-party logistics (3PL) company.
How might that shape the industry’s competitive landscape?
Is Amazon a 3PL?
This story first appeared
in the Quarter 3/2014
edition of CSCMP’s Supply
Chain Quarterly, a journal
of thought leadership for the
supply chain management
profession and a sister publication to AGiLE Business
Media’s DC VELOCITY.
Readers can obtain a subscription by joining the
Council of Supply Chain
Management Professionals
(whose membership dues
include the Quarterly’s subscription fee). Subscriptions
are also available to nonmembers for $34.95 (digital)
or $89 a year (print). For
more information, visit www.
SupplyChainQuarterly.com.
