Amazon Proves Scale Critical in Race to Build Logistics as a Service
In the bid to transform logistics, to streamline the interplay that takes place to get goods from point A to point B, scale’s a key advantage.
There is no shortage of players and platforms seeking to use software, data and analytics to match supply and demand more adroitly, leveraging the cloud to do so and linking various modes of transport ranging from trucks to planes.
Fine-tuning is in the mix, as always, and must be so during macro volatility.
On Tuesday (July 11), Freightos said that it would lay off 13% of its staff and seek to reduce costs — moves designed to capture operational efficiencies and “reach break-even on existing funds.”
The changes come about “in light of persisting global economic headwinds,” said the company in its announcement. Revised guidance sees a range of transactions (bookings) from 973,000 to just over one million, whereas previous guidance was 1 million to 1.1 million. In fiscal year 2022, per company presentations, the transaction count in 2022 was about 668,100.
Beyond the macro headwinds, the company has noted that its growth plans hinge on “platform development” and its attendant digitization for freight forwarders, airlines and enterprises. The revised guidance, we note, still represents triple-digit growth (as measured in transactions) and points to the continued shift in logistics from phone calls and paper-based processes toward online marketplace models. Some platforms have been getting larger, as evidenced by Flexport’s acquisition of Shopify’s logistics and fulfillment operations.
Amazon Moves Ever Deeper into Fulfillment
Amazon, of course, stands out here, as the eCommerce behemoth has been building out its logistics-as-a-service efforts. Beyond simply offering a platform for transactions, in recent efforts, the company has broadened its efforts to help merchants manage inventory (through warehousing and other services) and also manage what happens after the sale (with returns). Amazon’s scale and existing infrastructure have allowed the company to extend its Buy with Prime program to make fulfillment available at checkout even for merchants not selling their wares on the platform and shorten delivery times to end customers.
In the meantime and as reported here, as of last month, most of Amazon’s $1 billion logistics fund — about 90% — has been unspent, indicating significant firepower in its fulfillment efforts.
The Amazon Industrial Innovation Fund debuted last year with the goal of investing in companies working to “incrementally increase delivery speed,” according to announcements at the time. The company’s latest annual filing with the SEC reveals that at the end of 2022, there were more than 400 million square feet of leased or owned facilities devoted to fulfillment and data center operations. Fulfillment activities now represent about 16% of net sales, Amazon has noted (which were, on a consolidated basis, $513 billion in 2022).
The transformation of logistics and the last mile was the subject of a panel discussion recently hosted by PYMNTS. Corcentric Senior Vice President of Product Management Sudarshan Ranganath; Uber Freight’s Head of Strategy and Planning Jerry Tolochko; and SmartHop CEO Guillermo Garcia told us that platforms also have proven adept at weeding out fraud, with vetting and onboarding as key, data-driven functions. Real-time payments, they said, also can improve the dynamics between freighting firms and trucking fleet operators.
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