UPS and FedEx shares slid more than 6% Monday after Amazon opened its entire logistics network to any business, converting its internal supply chain into a product anyone can buy. The new Amazon Supply Chain Services (ASCS) extends the company's freight, distribution, fulfillment and parcel shipping capabilities to businesses of all types and sizes, not just the third-party sellers who have used it for years. The service covers ocean, road, rail and air transport, supported by a fleet of more than 100 cargo planes, 80,000 trailers and 24,000 intermodal containers.
"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," said Peter Larsen, vice president of Amazon Supply Chain Services, in the announcement. The AWS parallel is intentional. Amazon built cloud infrastructure to run its own business, then sold it.
Now it's doing the same with logistics. The company notes its supply chain was never just a function but "our differentiator", the reason it could offer delivery speeds competitors couldn't match.
Four major brands have already signed on. 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 leveraging Amazon's freight to move products from manufacturing sites to distribution centers worldwide. Lands' End is using a unified inventory pool within Amazon's network to fulfill orders across multiple sales channels.
American Eagle Outfitters is using Amazon's parcel shipping network to deliver online orders from its American Eagle and Aerie websites directly to customers.
ASCS targets the business-to-business shipping market, a high-margin segment where deliveries are denser, more predictable and cheaper to serve than consumer shipments. Companies can use the service across all sales channels, their own websites, social media and physical stores, with Amazon's two-to-five-day delivery timelines and inventory forecasting tools. The move "is Amazon trying to convert logistics from a cost burden into an infrastructure product," said Parth Talsania, CEO of Equisights Research, as reported by Reuters. "For UPS and FedEx. This is not immediate disruption, but it is a structural warning shot, especially in e-commerce-heavy lanes where Amazon already has density, data and delivery-speed advantages."
Amazon has become America's largest parcel carrier by volume, according to ShipMatrix, and has operated as the world's largest third-party logistics company for over two decades by servicing its marketplace sellers. ASCS formalizes and expands that business into a broader offering for any company in industries including healthcare, automotive, manufacturing and retail.
Amazon shares rose 1% Monday.
