Amazon opens logistics network to enterprise businesses – and targets automotive

Amazon Supply Chain Services (ASCS), announced on May 4, makes the e-commerce group's transportation network, warehousing and parcel delivery capabilities available to outside businesses for the first time as a unified service – regardless of whether they sell through Amazon's marketplace.

The company has named automotive as one of its primary target sectors, alongside healthcare, manufacturing and retail.

The service spans ocean, air, ground and rail freight, supported by a fleet of more than 80,000 trailers, 24,000 intermodal containers and over 100 aircrafts operated with Amazon’s carrier partners.

Peter Larsen, vice president of Amazon Supply Chain Services, framed the launch as a direct parallel to the company's cloud computing business. "Amazon is bringing the infrastructure, intelligence, and scale of its supply chain services – proven over decades – to businesses everywhere, much like Amazon Web Services did for cloud computing," he said.

Procter & Gamble, 3M, Lands' End and American Eagle Outfitters have been named as the first enterprise customers. Procter & Gamble is using Amazon's freight services to transport raw materials to production facilities and move finished goods across its distribution network. 3M is using the freight service to move products from manufacturing sites to distribution centres worldwide – logistics flows closely analogous to those in automotive supply chains.

Market reaction

The announcement triggered immediate falls in logistics sector equities. Shares in UPS dropped 10.47% on May 4, its largest single-day decline in years, while FedEx fell approximately 9%. Contract logistics provider GXO Logistics was down nearly 13%, with XPO falling 2.5% and Hub Group and RXO also lower, according to reports from FX Leaders and CoinCentral, with broader falls in UPS and FedEx confirmed by CNBC, Bloomberg and 24/7 Wall St. Amazon's own shares rose around 1%.

Daniel Harrison, senior automotive analyst at Automotive Logistics said the market response overstated the near-term threat. “The equity markets’ reaction is perhaps unsurprising, but an over-reaction to Amazon entering the broader logistics space and specifically, the automotive logistics space. The highly fragmented automotive logistics sector means that it will take time for Amazon to take significant market share.”

Citibank equity analyst Ariel Rosa also offered a measured assessment, noting in a client note: "The launch of ASCS represents an incremental step forward in a risk that has existed for years (Amazon’s encroachment on logistics), but we must be cautious to not overstate this risk… Companies with hard assets, quality offerings, and entrenched customer relationships will remain competitive, with the biggest risk to asset-light logistics providers."

Supply chain analyst Satish Jindel, president of ShipMatrix, told FreightWaves: "Amazon has been offering logistics services for at least three years. This just draws new attention to those capabilities, which have been tested and proven to work with case studies of large shippers."

The Wall Street Journal also covered the launch, framing it as Amazon making for-hire a supply chain built for its own internal needs.

Implications for automotive logistics

For automotive logistics providers and OEMs, ASCS represents the most significant new market entrant in years.

“While Amazon excels in scale, efficiency and low-cost operations, it does not yet have deep experience in highly complex automotive just-in-time logistics, nor the longstanding client relationships needed to easily win business from established competitors,” Automotive Logistics’ Harrison said. “However, given current cost pressures in the automotive sector, Amazon’s reputation as a low-cost disruptor could change this dynamic.”

Amazon has been contacted for comment specific to its automotive sector strategy. Automotive Logistics will continue to track this story.