Wednesday, October 11, 2017

'Flex'-ing its Muscles

Amazon wants to control everything – but you knew that.

The massive online retailer is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to people familiar with the plan, which will push the online retailer deeper into functions handled by longtime partners United Parcel Service Inc. and FedEx Corp. The service began two years ago in India, and has been slowly marketing it to U.S. merchants in preparation for a national expansion. Amazon is calling the confidential project Seller Flex, and began it on a trial basis this year in West Coast states with a broader roll out planned in 2018, sources said. Amazon declined to comment.

Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on and their delivery to customers’ homes – work that is now often handled by UPS and FedEx. Amazon could still use these couriers for delivery, but Amazon will decide how a package is sent instead of leaving it up to the seller. Handling more deliveries itself would give Amazon greater flexibility and control over the last mile to shoppers’ doorsteps, let it save money through volume discounts, and help avoid congestion in its own warehouses by keeping merchandise in the outside sellers’ own facilities.

Last year, Amazon introduced Seller Fulfilled Prime, which lets merchants who don’t stow items in Amazon warehouses still have their products listed with the Prime badge, meaning they’ll be delivered within two days. The merchants had to demonstrate they could meet Amazon’s delivery pledge, and many used UPS and FedEx for deliveries. The new service gives Amazon control over those deliveries instead, even if it continues to use third-party couriers. Seller Flex would also give Seattle-based Amazon more visibility into the warehousing and delivery operations of its merchant partners, potentially helping it make full use of their product inventory, storage space and proximity to customers while still guaranteeing quick delivery.

The project underscores Amazon’s ambitions to expand its logistics operations and wean itself off the delivery networks of UPS and FedEx. A rush of last-minute holiday orders in 2013 forced Amazon to issue refunds to shoppers who didn’t get gifts in time, highlighting the perils of being overly dependent on outside parcel services for a main part of its business pledge – quick, reliable delivery.

Amazon is relentless in developing innovative technology to increase efficiency in its supply chain. That focus can and should ‘deliver’ a message to the rest of us.

Kirk Shearer
800-989-0054 x103

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