Fighting amazon’s supply chain takeover

This is an excerpt of the original article. It was written for the November 2016 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2016

Is supply chain management strategic or tactical? Are the best supply chains collaborative? Should the goal be an integrated supply chain or an integrative supply chain? The answers are a mixed bag, according to this month’s contributors.

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In late 2015, Amazon received a license from the U.S. government to act as a freight forwarder for ocean container shipping. That approval came on the heels of Amazon winning a similar license from the Chinese Ministry of Commerce. Armed with licenses from both countries, the online retailer is now positioned to buy space on container ships at wholesale rates and resell at retail rates, which will allow the company to connect two of the world’s largest markets while cutting out competitors.

Then came another bold step: Amazon signed a deal with Air Transport Services Group to lease 20 Boeing 767 aircraft to shuttle merchandise around the U.S. as part of the online retailer’s efforts to reduce its high shipping expenses. Combined, these moves confirm earlier reports that Amazon is planning a global expansion of its “Fulfillment by Amazon” service, which provides storage, packing and shipping to small independent merchants that sell products on Amazon’s Website—a project dubbed “Dragon Boat.”

By signing the Air Transport Services Group deal and receiving a license to act as a wholesaler for ocean container shipping, Amazon once again can reduce its inflated shipping costs and reliance on third-party logistics providers. As evident from the recent Hanjin bankruptcy, shipping and air cargo companies can expect to see a continued shrinking market as Amazon enters the fray.

Just as Amazon’s retail competitors have had to develop new strategies in order to survive, Amazon’s newest competitors will need to determine what they can learn from the online retail conglomerate, and then move resources to the most advantageous and vulnerable areas of their industry.

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