In its second such deal in the last 12 months, Amazon has announced a deal with Atlas Air, the Air Cargo Carrier, for the leasing of 20 Boeing jets. Sound familiar? That’s because not that long ago, Amazon made a similar deal with an Ohio based company for the same amount of planes.
More interestingly, the deal is structured so that Amazon has the option to acquire up to 30% of the company at a set price of $37.50 a share in 5-7 years.
We’ve seen this story before.
In May 2014, Amazon purchased a 25% stake in the French shipping company Colis Prive’. Just 2 years later, Amazon bought the company outright. This was seen as a huge step towards Amazon becoming a full fledged shipping company. That suspicion was given more credence when not too long after a secret document surfaced showing that Amazon had plans to own its entire supply chain by becoming its own shipping company, which would decrease its dependence on third party logistics companies (3PLs).
While this might seem like reading between the lines, its actually quite a reasonable assumption. Amazon has local deliveries, through services like Amazon Prime Now, that provides same-day local deliveries. They have purchased a fleet of trucks to transport goods to its own fulfillment centers, and now they have leased 2 fleets of freight planes.
This new deal also sheds an interesting light on another recent story regarding Amazon’s interest in purchasing an airport in Germany that is located close to one of its largest European fulfillment centers.
All of this paints a picture of the world of logistics as a whole. Shipping costs are a heavy burden on businesses, including 3PLs. eCommerce, in particular, has put pressure on the system like never before and increased customer expectations about delivery times, prices, and their overall experience during the delivery process has forced companies to innovate in ways they never had to before.
It’s clear that Amazon feels that taking control over the entire process is their only way to guarantee the streamlining of their supply chain. Amazon is the canary in the coal mine. They realize that innovation is required to create the kind of supply chain that will enable them to meet the needs of the market.
Incumbents, particularly 3PLs and parcel companies should take note. Implementing technological innovations of their own, particularly on the operational and customer experience side, is critical to retaining their positions in the years to come. The good news is that this has become common knowledge, and many companies are researching and investing in new processes and technologies.
What will happen next with Amazon and their push to revolutionize their own supply chain, and the entire world of logistics? It seems that things are moving faster than anyone could have expected, so the next few months will be very telling.