Amazon Logistics: $1.5 Billion for an Air Hub, but Traditional Ocean Freight Forwarding

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There is still nothing new on last year’s big rumor, Amazon’s “Global Supply Chain” programe. But the company is starting to invest real capital into its ever-growing logistics arm.

Bloomberg:

Amazon will invest $1.49 billion to build the facility on 900 acres at Cincinnati/Northern Kentucky International Airport, said Mindy Kershner, an airport spokeswoman. The airport is located in Hebron, Kentucky, and is southwest of Cincinnati.

The e-commerce giant has 11 warehouses in Kentucky where inventory is stored, packed and shipped to customers ordering goods over the internet. The air hub will support the 16 planes transporting Amazon inventory around the country. Amazon last year signed agreements with two carriers to lease as many as 40 cargo planes to support its new Prime Air operation.

Recode:

The company’s foray into air cargo has come with some bumps. This holiday season, hundreds of pilots that operate Amazon’s planes went on strike to protest understaffing issues.

Beyond planes, the company has also bought thousands of its own truck trailers and is also starting to act as an ocean freight shipping operator to move goods between China and the U.S.

SCDigest is reporting on Amazon’s increasing freight forwarding operations, a crucial part in bringing Chinese sellers to the US market:

Amazon has moved 150 containers of goods from China since October, according to shipping documents collected at ports of entry that were compiled by Ocean Audit, a company specializing in ocean-freight refund recovery for shippers.

This month, Amazon has even started posting rates for new services such as sorting, labeling, and trucking shipments that traditionally are handled by third party logistics companies. The services and rates were posted under the name of its Chinese subsidiary, Beijing Century Joyo Courier Service Co., with Distribution-Publications Inc., a widely used platform for such information.

“Amazon has integrated all those services into one basket,” said Steve Ferreira, CEO of Ocean Audit. Building this type of shipping product offers “a lot of strategic value,” he added.

The moves propel Amazon further down the path of being able to provide end-to-end logistics services, including its own parcel delivery capabilities for itself and others in competition with UPS and FedEx, plans we reported on last Fall.

Amazon is taking the traditional approach of booking container space on ships:

Unlike it’s aviation strategy, where Amazon leases 767 freighters that are operated by Atlas Air Worldwide and ATSG, its maritime model appears to follow a more traditional forwarding approach, in which the Seattle-based company books space on ocean vessels and then trucks goods between warehouses and ports.

This is not surprising. There is little in the world that is as commoditized as container shipments by sea. (The standardization of containers has been a main reason for the efficiency of today’s globalization.) There might be strategic value in owning this step down the road as well, but I don’t see it today for Amazon.

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