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The supply chain, once considered merely a fundamental element in a company’s success or failure, has now evolved into a pivotal force driving the top line for many enterprises. Logistics companies traditionally structured their network infrastructure to cater primarily to their immediate customers, with every decision regarding network design, topology, and transportation being heavily influenced by these clients.
However, the world has undergone significant technological advancements and a more critical transformation in consumer behavior. Over the years, we’ve witnessed fluctuations in total demand and observed the dispersion of demand across various geographic regions and multiple channels. These changes have prompted companies to reevaluate their supply chain strategies and find ways to optimize their investments in physical infrastructure.
Businesses have come to realize that, in order to handle the high variability in demand and the uncertainty surrounding the global economic outlook, they need to be open to externalizing their supply chain to enhance the overall utilization of their network.
Today, we are witnessing a surge in companies seizing this opportunity. One of the early pioneers in this domain is Charan Lalwani, who held leadership positions at Amazon and led planning organizations. In 2018, he devised a groundbreaking network design that enabled Amazon to launch its “Amazon Shipping” product, essentially externalizing its extensive infrastructure of fulfillment, sortation, and last-mile delivery networks to shippers across the country.
Lalwani who recently presented at the NextGen Conference, has dedicated his entire career to innovating and solving some of the most complex supply chain problems, embarked on an approach that would prove novel and game-changing for a company traditionally known for its e-commerce and web-service offerings.
His goal was to address the fragmented, labor-intensive, and suboptimal state of the supply chain industry, characterized by a multitude of suppliers and sellers with varying technological capabilities and scales. His idea was to offer sellers the unprecedented opportunity to leverage Amazon’s vast infrastructure as a parcel carrier. According to Lalwani, “A carrier network differs significantly from a fulfillment network, but over the years, Amazon has continued to invest and evolve its topology.”
He transformed his idea into an intricate plan that considered Amazon’s existing network infrastructure and overlaid a network design that provided sellers with faster shipping speeds compared to established carriers while reducing shipping costs by 30-40% because these parcels would be traveling within an existing network.
This idea materialized into a comprehensive carrier offering that enabled essential functions like first-mile pickups through Amazon logistics, middle-mile commingling, where Amazon’s fulfillment shipments (AFN) and seller parcels travel together, significantly reducing middle-mile costs. Furthermore, it offered last-mile deliveries through Amazon’s own AMZL network, complemented by USPS to ensure 100% population coverage for sellers.
Today, “Amazon Shipping” has become a core component of Amazon’s overall Supply Chain product, and industry experts draw parallels between “Supply Chain by Amazon” and Amazon Web Services (AWS), often dubbed the company’s profit machine. The consensus among these experts is that Amazon’s new supply chain program has the potential to add a staggering $100 billion in revenue over the coming years, given its vast scale and transformative capabilities.
Innovations like Amazon Shipping coming from Lalwani’s network design engineering have already disrupted the supply chain industry, as evidenced by the growing number of Fortune 500 companies increasing their investments in this space and attempting to replicate the “Amazon Shipping” model. However, the big question remains: can they catch up to Amazon’s offering and its capabilities, given the years of investment in network design and technology?
