Amazon Unveils Supply Chain Solution to Expand Retail Infrastructure
In an effort to solidify its position as a retail infrastructure provider, Amazon has introduced Supply Chain by Amazon. This comprehensive solution aims to manage the entire journey of a product, from its departure from the manufacturer to its delivery to the customer. The most significant change is that Amazon is now extending its logistics and fulfillment services beyond its own platform to cater to non-Amazon sales channels.
Supply Chain by Amazon is comprised of three layers. The first layer focuses on importing goods from factories and local suppliers. The second layer involves warehousing solutions for storing and supplying these goods to various sales channels, including Amazon, physical stores, and other online platforms. The final layer encompasses fulfillment services on Amazon through FBA (Fulfillment by Amazon), as well as other channels through MCF (Multi-Channel Fulfillment) and Buy with Prime.
Previously, Amazon’s warehousing solution, known as Amazon Warehousing Distribution (AWD), exclusively served to resupply FBA. However, with the recent announcement, this service has transformed into an omnichannel solution, catering to a wider range of sales channels.
Amazon now operates two tiers of warehousing. The first tier, AWD, introduced just a year ago, focuses on long-term storage and resupplying fulfillment warehouses. The second tier, FBA, initially provided both warehousing and fulfillment services when it was launched in 2006. However, over time, it shifted its focus solely to fulfillment in order to facilitate faster inventory turnover. Both tiers can now be utilized independently.
With this new system, sellers have the flexibility to import and store months’ worth of supply in AWD warehouses. This allows them to fulfill orders not only on Amazon but also on other platforms such as Walmart’s WFS (Walmart Fulfillment Services). Additionally, Shopify merchants can utilize this flow to replenish a third-party logistics provider (3PL) for e-commerce orders and FBA for Buy with Prime. Even brands that do not sell online can leverage this solution to import goods and restock their physical stores as needed.
According to Dharmesh Mehta, vice president of selling partner services at Amazon, Supply Chain by Amazon aims to simplify the process for sellers by managing their supply chain, including inventory pickup, shipping, customs clearance, and ground transportation. While sellers are still responsible for finding manufacturers and suppliers and managing sales channels, Amazon’s solution aims to alleviate the burden of supply chain management.
However, it is important to note that Amazon’s services stack still has some gaps compared to other third-party logistics providers. Custom packaging, for example, is a feature offered by many 3PLs that Amazon does not currently provide. Additionally, Amazon’s inventory limits and fee hikes in recent years have raised concerns about flexibility for sellers. Nevertheless, Amazon’s scale and physical footprint give it a competitive advantage in terms of cost efficiency.
The initial target users for Supply Chain by Amazon are existing Amazon sellers who can now expand their use of these services. However, the ultimate goal is to attract sellers who are not currently on Amazon’s platform. By enticing them to join its supply chain solution, Amazon aims to further solidify its position as a leading retail infrastructure provider.