DC Velocity - July 2015

62 DC VELOCITY JULY 2015 www.dcvelocity.com s pe c ia lr e p ort

TH I RD-PA R TY LO GI S TI C S

365-day return policy. Amazon’s increasing presence in this industrial space poses a real threat to incumbents such as W. W. Grainger and Fastenal.

While Amazon’s reach into both retail and industrial markets continues to expand, profits reported by the company have been meager or, as was the case in 2013, nonexistent. 3 Regardless, Bezos has been able to convince the investment community that his ventures into a wide range of industries and markets, from diapers to delivery drones to space shuttles, ultimately will be rewarded with substantial profits.

Where is all of this leading? What does Amazon want to be when it “grows up”? Bezos has often been quoted as saying that he’s not sure that retailing will be the company’s core business in the future. If it isn’t, what is it likely to be? If one examines the distribution network the company has developed, the services it provides to affiliates that sell their products through Amazon, and its recent actual and rumored moves into transportation, then it’s logical to raise the question of whether Amazon is likely to become a major third-party logistics service provider (3PL). In fact, it could be argued that the company already is a 3PL.

With those questions in mind, the authors, who conduct
annual surveys of the chief executive officers (CEOs) of
many of the world’s largest 3PLs, decided to ask executives
who participated in the 2014 surveys about Amazon’s effect
on the field of supply chain management, its impact on the
3PL industry to date, and the nature of the competitive
threat that Amazon might pose to 3PLs in the future. Their
responses to those questions are discussed below.

AMAZON AS A GAME CHANGER

First, we asked the CEOs if they believed that Amazon has had a significant effect on the field of supply chain management. Twenty of the 25 CEOs surveyed said yes. They identified a number of ways the company has had an impact, but most frequently cited the role Amazon’s high-speed delivery programs have played in raising customers’ ser-vice-level expectations. Three CEOs mentioned Amazon’s introduction of same-day delivery. Its free two-day Amazon Prime shipping program was mentioned by another CEO, as was the “power” of free home delivery. Respondents also noted that these programs have had a significant impact on traditional logistics integrators, such as UPS, FedEx, and DHL, because Amazon’s push toward next-day standard and same-day expedited service levels is reducing the use of expedited transportation services like air freight.

Amazon’s e-commerce fulfillment services were cited as a “game changer” by several CEOs; they were also mentioned as a major reason for the establishment of the many