Amazon Opens Logistics Network to Everyone

Lee Klaskow (0:07)

Hi, everyone, this is Lee Klaskow, and we're Talking Transports. Welcome to Bloomberg Intelligence, Talking Transports podcast. I'm your host, Lee Klaskow, Senior Freight Transportation Logistics Analyst at Bloomberg Intelligence, Bloomberg's in-house research arm. Before we dive in, quick favor, if you enjoy the podcast, please subscribe, rate and review and share it with a friend. Your support helps us continue bringing you conversations with leaders shaping the future of transportation and logistics.

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Few companies have had a bigger impact on transportation and logistics over the past decade than Amazon. What began as an effort to deliver packages to customers faster, has grown into one of the world's most sophisticated supply chain networks. And now Amazon is making those capabilities available to businesses beyond its own marketplace through Amazon Supply Chain Services. Joining us in the Bloomberg studio is Peter Larsen, head of Amazon Supply Chain Services. Today, we'll discuss Amazon's long-term logistics strategy, where it sees the biggest growth opportunities across transportation, warehousing and supply chain services, how AI is transforming logistics, and how Amazon positions itself alongside many of the industry's legacy transportation providers. Peter, welcome to Talking Transports. It's great to have you here in New York.

Peter Larsen (1:36)

Thanks very much, Lee. I am happy to be here.

Lee Klaskow (1:39)

So, what is Amazon Supply Chain Services, and what are the problems you're trying to solve?

Peter Larsen (1:45)

Well, as you may know, Amazon is a technology company, fundamentally, that just happened to build one of the world's most sophisticated supply chains.

And we first built it for ourselves, and then we opened it up to the sellers who sell on Amazon, and we proved it at scale. We got hundreds of thousands of Amazon sellers using it. And so just recently this year, we opened it up so that any business of any type can use it. It's a little bit like the playbook we ran with AWS a number of years ago. Build it for ourselves, and then open it up for everybody to use.

Lee Klaskow (2:24)

And at what point was the decision made, you know, whether we have the scale, or we have the ability to say, let's open it up to third parties outside of your marketplace?

Peter Larsen (2:36)

Yeah, well, there were a couple interesting inflections in the journey, actually a number of interesting points in the journey. But you know, I'll tell you where a lot of this got started is that Amazon's been building its own fulfillment centers for, you know, since we got going, really. But it was in sort of 2013, the holiday season, where we were using a lot of third-party transportation companies for the last-mile delivery. And one of those companies just fell over from unexpected demand, and that meant that we shipped a lot of packages late to Prime members. So at that point, we decided, well, you know what? In addition to the fulfillment centers, we need to build our middle-mile and last-mile transportation networks as well. So we set off doing that.

Once we got that up and running for ourselves, a big part of the amazon.com business is third-party sellers. And so we opened up that logistics network to our sellers, otherwise known as FBA or fulfillment by Amazon. That took off. Sellers were really able to grow their businesses using that service. And that service is where they store their inventory in our warehouses, and we pick back and ship it on their behalf for their orders on Amazon. Those same sellers then turned to us and said, listen, we already have your inventory in the Amazon network for our Amazon sales.

How about you just let us use that same inventory for our off Amazon channels as well? So we opened it up to our Amazon sellers for their off Amazon, whether they sell it on their own direct to consumer sites or another retailer outside of Amazon. Once we did that, we had hundreds and thousands of those sellers using our supply chain services for their off Amazon volume. We decided, well, heck, why not open it up actually to any business of any sort? And so now we're offering it for ourselves, for Amazon sellers, as well as for any company out there.

Lee Klaskow (4:42)

So Amazon Supply Chain Services, we're just going to call it ASCS going forward, because it's fair enough, because we only have 40 minutes.

Peter Larsen (4:48)

Yes.

Lee Klaskow (4:49)

So, because I'm sure we're going to say it a lot, you know, outside of fulfillment, you know, a lot of folks that are listening, they know that, you know, they get an Amazon package on their doorstep. They know that part of the delivery, but you guys are offering more services beyond just the final mile. Can you talk about, you know, what markets you're in?