Amazon.com Inc's China arm has registered as an ocean freight forwarder, according to the U.S. Federal Maritime Commission, a move that will give it more control over shipping products from Chinese factories to U.S. shoppers.
Amazon, new freight forwarder
Its new status as a freight forwarder, or “non-vessel operating common carrier,” gives Amazon, the world’s largest online retailer, a foothold in the $350 billion a year ocean freight business. It will not operate ships but subcontract that work.
Amazon is already negotiating a deal to lease 20 jets to start an air-delivery service in the United States. The retailer bought truck trailers to add shipping capacity and started a program last year that uses a fleet of on-demand drivers to deliver packages.
More than 10.000 parcels in a single container
More than 10,000 parcels can fit in a single container, so the price for the ocean freight leg could be as low as $0.135 per parcel. Here’s another way to think about that figure: Right now it costs under $10 to ship a flat screen television across the Pacific.
With ocean freight itself so low, a considerable portion of logistics costs come through labor costs - particularly compliance and coordination of cargo handoffs between different players in the chain. It’s here that automation, something no traditional freight forwarding company can do even one percent as well as Amazon can, becomes the key competitive advantage over legacy freight forwarders.
a world class logistics platform
By using software to eliminate additional transaction costs associated with government filings, status updates, pricing, booking and more, Amazon will be able to cut their costs significantly. At the same time, fulfilling products directly from China to consumers in the U.S. will cut handling costs at U.S. warehouses.
If we’ve learned anything from Amazon’s strategic playbook over the last two decades, we can expect that it will price freight as close to marginal costs as it can get.
With the integration of its worldwide network of fulfillment centers and the combination of its new fleet of cargo jets, Amazon will be able to build a world class logistics platform for small and medium sized Chinese businesses.
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