In the last few years, it has become clear that the future of logistics will be determined by the growth of e-commerce. That world continues to change quickly in often surprising ways, so sometimes it feels like you’d need a crystal ball to predict what will happen next. Still, there’s a lot at stake, so it’s worth analyzing what data we do have, and trying to identify patterns that might signal the way ahead.
Amazon and Apple, two of the largest companies in the world, rely heavily on the efficient delivery of their goods. Their retail growth is dependent on optimizing their supply chains, especially when it comes to the last mile. Both have been incredibly successful with two very different approaches to logistics. Both can give logistics professionals insight on what’s ahead for them.
Amazon and Apple: Logistics-Lite Vs. Logistics-Heavy
Amazon’s e-commerce platform doesn’t just sell goods stocked by Amazon. It is also a marketplace that facilitates transactions between buyers and sellers while also offering sellers use of their warehouse and delivery services. You could make the case that the success of Amazon comes not just from their astounding selection of products -- of which there are nearly 500 million -- but also from how quickly they can fulfill orders.
For this, it relies on a distributed logistics stack -- goods from millions of sellers making their way to hundreds of millions of buyers through a mind-boggling array of transport combinations. Even though this strategy is complex, it can only be supported by what we call the “logistics heavy” approach ... i.e. Amazon must manage a complex web of third-party players to facilitate transactions. It would be simply impossible to own and operate all the assets and systems it needs.
Additionally, its signature service, Amazon Prime, is a pure logistics play whose main competitive advantage is free two-day shipping. While Amazon doesn’t handle last-mile delivery itself (yet), they’ve created a low-friction end-to-end supply chain process that gets orders to doorsteps in 48 hours or less (so long as you pay for the subscription, of course). While the growth of other non-retail services like AWS cloud services outpaces retail, Prime is giving retail the boost Amazon needs to stay competitive.
Apple, on the other hand, has a comparatively simple logistics stack, but it’s just as pivotal to their success, and is a critical reason why they became the world’s first $1 trillion company. No, we’re not saying their supply chain is easy to manage, but their in-house logistics needs are not as complex as Amazon’s. Apple has a much more limited range of products than Amazon does, and it primarily sells its own branded hardware. It relies on vendors to help manufacture, deliver, and sometimes distribute, its devices (no small task: over 200 million iPhones were sold in 2017) on their behalf. Compared to Amazon, you could certainly call it logistics lite.
Between them, Amazon and Apple sit on opposite ends of the e-commerce logistics spectrum. Amazon, a logistics-heavy company, is steadily maximizing its control of its supply chain. Apple, a logistics-lite company, is happy to rely on their partners, so long as their renowned supply chain is running efficiently. So, who has the right approach?
Optimizing the E-Commerce Logistics Spectrum
The world of e-commerce might seem to favor Amazon’s logistics-heavy approach. E-commerce companies usually boast a wide variety of products sourced from third parties. They would seem to favor robust distribution methods, even as they move to exert more control over necessary services. But even as Amazon continues to lead the way in e-commerce growth, there’s no one-size-fits-all solution to logistics and e-commerce.
Take eBay, which represents a kind of third way. Functionally, eBay is a marketplace like Amazon, but it occupies a totally different place on the logistics spectrum. EBay links buyers and sellers together, but it essentially leaves fulfillment up to its users.
So with such different models, how should logistics professionals proceed? Even though it’s unlikely that such different models will converge entirely, we may begin to see more uniformity based on the elements that are common to all. One constant we already see across the e-commerce logistics spectrum is that logistics needs to be an integral part of everything these companies do. And, as we frequently write, blockchain has the potential to be a fundamental underpinning of every step of the supply chain. That’s the very definition of a “common element.”
We predict freight forwarding will prove to be one of those constants -- provided it continues to innovate alongside the rest of the logistics chain. No matter the strategy, products still need to get from point A to point B, and logistics professionals serve roles that are difficult to bypass. And while some companies are testing handling their deliveries on the first- and last-mile entirely in-house, it’s good for Freight Forwarders that the method of freight management is still driving innovation. The approach that the majority of the e-commerce world adopts will have dramatic effects on the freight forwarding world.
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