The world’s largest retailers are planning to not only grow into the world’s biggest logistics companies, but to completely revolutionize the industry. Both Amazon and Alibaba have recently made significant investments to their supply chain capabilities and in the not distant future they will soon handle more shipments than most specialist delivery postal and courier companies.
In effect, these companies are building their own streamlined delivery systems that may replace the more established specialists.
Earlier this month, Amazon signed a new deal to lease more cargo jets, in effect doubling the size of its fleet. This is partly a response to increasing demand (shifted 27% more units in last quarter) but also a part of a grander plan.
The aim for these internet giants is nothing less than the obliteration of all alternative forms of retail. When it comes to sales, Wal-Mart dwarfs Amazon by a factor of four. Jeff Bezos, Amazon CEO, plan is to undermine these lead by competing for consumer attention in ways that Wal-Mart can never match. That is, by offering a nearly infinite menu of goods, same-day delivery and liberating from the tiresome trip to the busy out-of-town store.
Bezos wants to make it ‘irresponsible’ for people not to be members of Amazon Prime, the company’s video streaming and speedy delivery service. Given the increasingly popularity of his offering, this future may not be far away. Amazon shipped 1 billion parcels of its own goods last year. It is forecast to handle a greater volume than FedEx in 2019.
Amazon’s main rival, Alibaba, also made similar moves in the logistics space. Cainiao, a logistics company formed by Alibaba and others three years ago, announced plans for $16 billion supply chain investment.
The monies were released to provide enhanced data quality and route planning information, as well a physical investments into 1,800 distribution centers and 97,000 delivery stations in more than 600 cities across 31 Chinese provinces.
Cainiao president Judy Tong told Freight Week that the funds were planned “to make it easy to deliver goods to anywhere”.
Aside from these short-term, tactical investments into capacity, the retailers are increasingly looking to disrupt the foundations of the logistics market. Amazon has long-trailed its drone-delivery. It hopes to deliver goods within 30 minutes of order, through a fleet of specially developed drones that combine airplane, helicopter and advanced sensory systems to expedite an entirely automated delivery.
Drones are seen as the way forward for countries are well as companies. Rwanda, for instance, is looking to leap-frog the need to build an expensive ground delivery system with a network of automated drones to dispatch medical supplies to remote, upland locations.
Interestingly, the answer to all these quandaries lies in the supply chain. Smooth operations was always important for retailers, but now a useful side-function is now becoming the critical success factor. By investing into old-fashioned logistics in the immediate future and revolutionizing the industry in the long-term, both Amazon and Alibaba are positioning themselves as major disruptors to new markets.
The main issue with Amazon’s business model is that it is hampered by expensive and slow delivery systems that have been in place since the 19th century. Bezos’ visionary response to this limitation is to circumvent these channels and build his own network. In effect, converting his internet bookseller into the world’s biggest supply chain company.