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March 18 2019

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10 The Journal of Commerce | March 18 2019 Cover Story AMAZON HAS PERMANENTLY redefined what supply chains mean to end-con- sumers, and its increased use of its ocean forwarding arm suggests two ways the online giant will make an impact on the container shipping in- dustry — one moderate and one major. Through its non-vessel-operating common carrier (NVO), launched in 2016, Amazon is certainly exerting greater control over its internal supply chain, but, more grandly, it might also be building a supply chain platform it could market as a distinct service, even selling to shippers outside of its marketplace network. Whether Amazon becomes a full-fledged third-party logistics provider (3PL) or not, it will have an indelible impact on the future of ocean freight shippers and the logistics companies that serve them. If Amazon chooses to only leverage its budding ocean freight prowess internally, it will have created effi- ciencies for itself and its community of sellers that will be hard for other companies to match over time. If, however, Amazon chooses to create a global logistics platform capable of serving any shipper, it would redraw how ocean freight fits within the larger context of global supply chains, and that would force shippers to make difficult decisions about working with a company that resides in the gray area between competitor and service provider. Underlining this whole discus- sion is the environment that Ama- zon has largely helped to create, one in which — as one freight forwarder told The Journal of Commerce — the power of the consumer has overtak- en the power of the large beneficial cargo owner (BCO). Since Amazon created this environment, it stands to reason it would be best positioned to thrive within it. This dynamic has already become clear in the domestic parcel space, where Amazon has weaned itself off a total dependence on courier and final-mile services to be- E-tailer's full impact on container shipping and expansive supply chain is emerging By Eric Johnson come a potential competitor to the oligopoly of US integrators. It's not hard to imagine Amazon wishing to create similar autonomy on the international side of its parcel busi- ness, ultimately moving to freight. Building out transportation That Amazon has made tangi- ble progress as an NVO is clear, as detailed in a January USA Today report on its business of consolidat- ing freight from Chinese sellers on its marketplace. It has also thrown away all pretenses that it doesn't have plans to build out its logistics business, not only admitting in its 2018 annual filing with the US Se- curities and Exchange Commission that it considers transportation and logistics companies to be competi- tors, but carving transportation out into a distinct operating unit as well. New entrants spring up in the NVO space from time to time, but with Amazon's scale and ubiquity, the company's expansion into ocean freight has the container shipping industry grappling with some deeper, existential questions around what it actually means. For now, the volume moved by Amazon's NVO, Beijing Century Joyo Courier Service, is small relative to even a midsize competitor on a single ocean lane. According to data from PIERS, a sister product of The Journal of Commerce within IHS Markit, Amazon was listed as the shipper on 123,000 TEU imported to the United States in 2018, a small slice of the 24.7 million TEU of total US imports. The volume moved by Beijing Century Joyo — roughly 10,000 TEU last year, according to the USA Today report — is tied almost exclusively to Chinese companies selling to the US market via the retailer's Fulfill- ment by Amazon (FBA) service. By definition, that means the for- warder's business is not tied to the large-volume BCOs that the largest freight forwarders, NVOs, and ocean carriers target as customers.

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