Amazon Expands Supply Chain Services to Non-Amazon Sales Channels
In an effort to become the go-to retail infrastructure for all shopping needs, Amazon has unveiled 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 to non-Amazon sales channels, marking a shift from its previous focus on serving Amazon sellers exclusively.
Supply Chain by Amazon consists of three layers. The first layer includes services for importing goods from factories and local suppliers. The second layer offers a warehousing solution for storing these goods and supplying them to various sales channels, including Amazon, physical stores, and other online platforms. The final layer involves fulfillment 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, only resupplied FBA. However, this recent change has transformed it into an omnichannel solution.
Amazon now operates two tiers of warehousing. The first tier, Amazon Warehousing Distribution (AWD), was introduced just a year ago and is primarily used for long-term storage and resupplying fulfillment warehouses. The second tier is Fulfillment by Amazon (FBA), which initially served both warehousing and fulfillment purposes when it launched in 2006. However, over time, FBA shifted its focus exclusively to fulfillment in order to facilitate faster inventory turnover. Both tiers can now be utilized independently of each other.
With these new developments, sellers have more flexibility in their supply chain management. For instance, they can import months’ worth of supply and store it in AWD warehouses, which can then be used to resupply not only Amazon’s FBA but also other platforms like Walmart’s WFS. Alternatively, Shopify merchants can follow a similar process to resupply 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 store them in AWD, ensuring a steady supply for their physical stores.
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 entire supply chain. This not only offers simplicity but also brings efficiency and cost savings. However, it is important to note that Amazon’s services may not provide the same level of flexibility and features as some other third-party logistics providers. Additionally, sellers must still handle the sourcing of manufacturers and suppliers, as well as manage their sales channels.
While the initial focus of Supply Chain by Amazon will be on Amazon sellers who can now take advantage of these expanded services, the ultimate goal is to attract non-Amazon sellers as well. Even if these sellers choose not to sell on Amazon, Amazon hopes to become their preferred supply chain solution. By leveraging its vast scale and physical footprint, Amazon aims to offer lower costs compared to its competitors.
As Amazon continues to expand its reach in the retail industry, it remains to be seen how sellers and other players in the market will respond. While there are clear benefits to utilizing Amazon’s services, there are also concerns about relinquishing control and becoming overly dependent on the e-commerce giant. Nevertheless, Amazon’s Supply Chain services have the potential to reshape the retail landscape and provide a more streamlined experience for sellers and customers alike.