DC Velocity - July 2015

online “stores” that rely upon those services to meet their customers’ needs. That expansion has subsequently led to a greater demand for e-fulfillment services. Amazon was also credited with demonstrating the power of bringing a broad range of supply chain resources under one platform, and as such was mentioned as the “obvious choice” for many new, small-scale online retailers that do not have the resources to manage fulfillment. Respondents also noted the increased interest among traditional retailers in developing omnichannel strategies to compete with Amazon as it takes a steadily increasing share of the market from brick-and-mortar stores.

The CEOs offered some other interesting observations. Some said that Amazon is driving 3PLs to develop new short- and long-term plans to support online retailers with business-to-consumer and business-to-business solutions. Others noted that Amazon’s aggressive infrastructure expansion has affected real estate values and labor markets, particularly when it opens a new facility. Respondents also mentioned the company’s success in increasing shipment visibility, as well as its ability to reduce the service areas covered by individual distribution centers while at the same time increasing shipment velocity to customers.

Not all of the comments were complimentary. One
CEO said that Amazon has substantial market clout, but it
“wields it so violently that it is not a customer of choice or
a desired client.” Another suggested that the company “kills
firms with low prices.”

THE IMPACT TO DATE ON 3PLs

In today’s business world, a company may simultaneously be another’s competitor, customer, and supplier. With that in mind, we asked the 3PL CEOs if their companies provide logistics services to Amazon, and nine of them said that Amazon was one of their customers. Those nine were then asked to identify the services they provide, which included the following: distribution, value-added warehousing, transportation services, bulky-goods fulfillment, and import/export services.

One respondent described a rather interesting relationship between Amazon and his company. Amazon employees are working in some of that 3PL’s distribution centers to support some of the 3PL’s customers that do business with Amazon. This relationship is similar to several others that Amazon has with key customers, including Procter & Gamble and Georgia-Pacific. 4 In those cases, the retailer positions its own employees in the customers’ distribution centers to manage the distribution of the products those companies sell through Amazon.