This article talks about Amazon’s new logistic move towards taking control of its own transportation system. The company is trying to lower the costs of transportation to ensure that they are able to maintain their one-day shipping offer. As a result, freight broker companies, like XPO Logistics have been very concerned because this means that they would have to compete with the giant e-commerce leader.
Amazon launched an online freight brokerage platform that aims to connect shippers with available trucks that they are now testing in five states of the United States. This move makes Amazon the latest business to invest in the shipping business but with a more technological view since they plan on digitizing the inefficient business of booking freight transport. Other companies that have also invested in logistics similar to what Amazon is doing are now experiencing exponential growth in their profits, so Amazon knows that they are investing in a very profitable area. For example, “Uber Freight’s online platform generated $359 million in gross freight” according to the Wall Street Journal.
The e-commerce company is developing a platform in which they want to offer the best shipping rates for its customers, who can also get instant rate quotes online. Also, they are taking advantage of their already existing freight network and their relationship with truck companies in order to negotiate better prices. Subsequently, they opened their platform to carriers and truck companies, creating a win-win relationship in which truck companies get more customers and Amazon gets to have a bigger network.
Amazon has also been decreasing its use of third-party logistics providers as it develops control over its distribution networks. These third party companies that used to work with Amazon have been experiencing an enormous loss, while others already know its power and are working carefully to make sure that they do not rely on this customer only.
The article is very interesting as Amazon is one of the leader of Supply Chain management along with companies like Walmart. I think this big move is very smart and something that we might expect from a company as powerful as Amazon. This is a perfect example of how to improve an important aspect of marketing, which is transportation. As we have learned, storing is costly, especially for companies like Amazon that carry a wide range of products. However, now they are going to be able to rotate their warehouse inventory much faster. Also, Amazon will be able to offer a faster, more convenient and effective one-day shipping service to its customers at an affordable price, and competitors will have a hard time finding a way to compete with this. Therefore, this move not only improves its operations but also secures its place as the leader of the e-commerce market.
Link to article: https://www.wsj.com/articles/xpo-logistics-earnings-slide-in-weaker-freight-market-11556753330
By: Adriana Chacon
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