#INTHEAIREVERYWHERE

(Exclusive)—Rumors that Amazon is one of three bidders looking to establish a presence at Germany’s Frankfurt-Hahn Airport continue to mount. The location would offer easy access to warehouses across Europe, potentially generating cost savings and service improvements. It would also give Amazon better access to Germany, Europe’s largest economy.
     Such an investment would not be unexpected given Amazon’s recent efforts to bolster its international distribution network and reduce reliance on third parties, particularly the integrators that currently fulfill many of its global freight and last-mile services.
     Recently the company has been using a Boeing 737 freighter to link fulfillment centers in Poland, Germany, and the UK on a trial basis. A base at Hahn would enable the retail giant to reach any city in Europe as well as a few in the Middle East with the low-range B737—an option that could boost the attractiveness of the Amazon Prime program.
     Amazon China registered with the Federal Maritime Commission as a licensed Ocean Transport Intermediary earlier this year. This means it will be able to provide ocean freight services for third parties, a significant move given the company’s market clout and considering the ocean freight market’s estimated worth of around $350bn annually. Amazon could eventually offer fulfillment services from Chinese factories direct to customers in the U.S. and Europe, a strategy that could vastly reduce warehousing and other inventory costs.
     Perhaps Amazon’s boldest recent step into the transportation business was its deal in March with Air Transport Services Group (ATSG), which will operate an air freight network to serve Amazon’s U.S. customers.
     The commercial agreement includes the leasing of 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services by ATSG’s Cargo Aircraft Management, the operation of the aircraft by ATSG’s airlines—ABX Air and Air Transport International—and gateway and logistics services provided by ATSG’s LGSTX Services.
     “Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customized air cargo network can be a strong supplement to existing transportation and distribution resources,” said Joe Hete, (right) President and CEO of ATSG.
     Amazon has not been commenting much on its efforts to secure more of its own supply chain capacity, but its shipping costs have been rising for the last five years. Reports suggest the retail giant has a strategy to expand its ‘Fulfillment By Amazon’ service, which offers supply chain services to merchants that sell products on its websites.
     Elsewhere, it is claimed Amazon is planning to launch a ‘Global Supply Chain by Amazon’ service, a step that could give sellers the option to reach global markets via Amazon at reduced cost—a major potential threat to many 3PLs and forwarders.
     Wolfgang Lehmacher, Head of Supply Chain and Transport Industries at the World Economic Forum, said Amazon’s move into global logistics and air freight were designed to increase supply chain control, but does not expect this to threaten incumbents just yet, although that could change rapidly.
     “It’s similar to the move of Chinese SF Express—one of the leading private express delivery providers with its own ecommerce and retail business,” he said. “Operating an air network is costly but at the same time an important operational backbone.
     “SF Express and Amazon gain more control over service levels and can secure capacity, in particular important during peak seasons. Cost aspects might play a role as well.
     “In China, according to Reuter’s, Amazon registered a subsidiary, Beijing Century Joyo Courier Service, and filed an application with the Shanghai Shipping Exchange to serve as a shipping broker for 12 trade routes, including Shanghai to Los Angeles and Shanghai to Hamburg, Germany.
     “All this indicates that Amazon is preparing to set up a large global end-to-end logistics operation.”
     Lehmacher also noted that Amazon had already invested heavily in the infrastructure needed to manage more complex supply chains. The acquisition of Kiva Systems—now Amazon Robotics—gave it 173 logistics facilities worldwide, 104 in the North America region with the rest spread across Europe and Asia. It has also been bolstering its network of Amazon Prime Now centers to fulfill one-hour and two-hour deliveries and has invested in last-mile experience by buying stakes in Yodel in the UK and Colis Privé in France.
     “In Germany, Amazon offers last-mile delivery to customers in Munich through its own delivery operation—with more than 200 delivery vehicles operated by a subcontractor,” he said.
     “After the UK, France, and Germany, Amazon might eye the other larger European markets such as Italy, Spain, and Poland.
     “Complementary is Amazon’s plan to introduce a locker network across Europe. Currently the company is operating lockers in the U.S. and the UK. Building the capabilities to service all customer touch points opens new opportunities to Amazon.”
     According to Lehmacher, Amazon’s strategy of increasing its end-to-end supply chain control is unlikely to have a major impact on freight rates in, for example, the air cargo market. However, Amazon might set new standards, in particular for last-mile delivery. This would put pressure on traditional players in the supply chain services industry.
     “Driving the downstream logistics value chain alone requires volumes,” he said. “Amazon is probably one of the few players with sufficient volumes to set up a viable end-to-end logistics supply chain.
     “On the back of the newly built supply chain operation Amazon could offer supply chain services to small and mid-sized companies—a traditionally higher margin but difficult-to-service segment.”
     “This would well complement the current offer to the small- and mid-sized customer segment, which is core to Amazon’s strategy.
     “Whether the developments will hurt or stimulate the traditional supply chain players remains to be seen.
     “Whether Amazon will enter into frontal competition with the well-established global logistics giants will depend on the value proposition Amazon is able to create.”
SkyKing

Last week with Amazon shares skyrocketing, selling at about USD$678.00 a share, the company is wowing Wall Street. Stock value is coming from Amazon’s core e-Commerce business as well as its cloud computing division.   Although the landscape is strewn with forgotten dreams and big losses of dotcom companies which flush with cash moved into other businesses, Amazon’s move into the airline business bears some watching.   Not that Amazon does not have challenges as it takes off into the wild blue yonder.   Financial analyst Sucharita Mulpuru told USA Today, “their economics are not as strong as other retailers and are much worse than other established technology companies.”   Amazon turned a first quarter 2015 USD$57 million dollar loss into a first quarter 2016 USD$514 million dollars net income.

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