Today’s top contenders in the logistics arena have already come to terms with the sky-high expectations they must meet in order to become the best. This struggle is due to a logistics trend called “Amazonization.”[1]
The term is used to describe Amazon’s highly productive business model. By embracing the latest in digital technology, Amazon can deliver products to customers’ doors in just one day or less. Amazonization uses a well-oiled logistics strategy that global companies can adopt.
“The combination of sophisticated information technology, an extensive network of warehouses, multi-tier inventory management and excellent transportation makes Amazon’s supply chain the most efficient among all the major companies in the world.”[2]
Even though Amazon isn’t recognized as a traditional 3PL, it has driven a change within the logistics industry that’s setting a precedent for other leaders. Here are three of the top global logistics companies.
DHL Supply Chain & Global Forwarding
Established in 1969, DHL operates in 220 countries and territories, delivering more than 1.5 billion parcels per year. It offers global logistics services including ocean freight, airfreight, warehousing and more. The company had a modest beginning before dominating the global supply chain.
“At over $26 billion a year, DHL Supply Chain and Global Forwarding ranks as one of the world’s largest logistics providers. And while they have all but disappeared off the residential streets of the U.S., they are one of the go-to logistics providers in the rest of the world.”[3]
DHL’s success integrates a highly digitized supply chain, similar to the Amazonization trend but on a global basis. According to DHL CEO Greg Hewitt, the company’s interest in digitization began in the late 1970s.[4]
“Aside from the DHL Express business starting in the late 1960’s, it would be in the late 1970s and early 1980s when we built our own computer, the DHL 1000 Word Processor, to automate preparation of customs documentation. It was a matter of how do we speed up the creation of customs documents and labels and make things easier for the customer to move documents.”
“You also had the advent of scanning technologies and it started to occur within facilities as part of material handling equipment and definitely on the road as couriers capture the checkpoint…and obviously capture the signature digitally for the first time. That ties into the growth of the Internet and this start of access to information becoming very important in our business. And that launched the idea that customers are now demanding and wanting real-time information on the status of their shipments. That is tied into a time in the 1980s, moving from just documents to parcels and physical content…now it is not just a case of paper, it is actual physical goods with value. So, of course, the demand for information goes higher and higher.”
UPS Supply Chain Solutions
UPS is recognized for its air/ocean freight forwarding, dedicated contract carriage, freight brokerage, inventory management and packaging, warehousing and distribution, transportation management and more. The company’s strength stems from its expertise in efficiency in transporting products from the e-commerce space to customers – similar to Amazon’s model.[5]
“They see logistics as having a much bigger role in retail success, and to help themselves better navigate through the e-commerce way, online merchants rely on package delivery companies such as UPS to make the final connections to their customers.”
“UPS manages all its businesses, such as air, ground, domestic, international, commercial and residential, through a single pickup and delivery network. The single network structure has allowed UPS to gain competitive strengths by maximizing network efficiency and asset utilization.”
XPO Logistics
Founded in 2011, “XPO Logistics, Inc. is a transportation and logistics company, which provides comprehensive supply chain solutions to the customers. It operates its business through the Transportation and Logistics segments. The Transportation segment provides freight brokerage, last mile, expedite, intermodal, Less-Than-Truckload (LTL), full truckload, and global forwarding services. Freight brokerage, last mile, expedite and global forwarding are all non-asset or asset-light businesses.”[6]
The company is known for its online digital portal that helps ensure customers receive their products in a timely fashion. Last April, Amazon launched its digital freight brokerage website with pricing that’s about 30% less than market rate, according to Supply Chain Dive.[7] “In response to questions about Amazon’s new threat to XPO Logistics, “CEO Brad Jacobs fielded questions from analysts on the company’s first-quarter earnings call about the impact of such a player entering the brokerage space. Jacobs, while avoiding the specific subject of Amazon, laid out his view of where the growing digital freight brokerage field is headed.”
Jacobs said that “Technology will lead to leaner operations a lower operations costs for brokers,” but did not directly mention Amazon.
It can be difficult to define success given that each global logistics company has a different history and strategy. It’s not always a case of money, either. In some cases, a logistics company may be able to accomplish more with less money by using a strategy that’s simplistic, yet highly efficient. Revenue within one year could be less than a competitor’s, but could be more profitable over five years with a strategic business model. One of the most crucial measurements for success is understanding the customer. Success isn’t always an issue of the quantity of packages delivered, but the quality of the service itself.
Many of the world’s top logistics companies compete by integrating the Amazonian effect into their own business models while Amazon has relied on other logistics companies to become more successful. But Amazon’s efforts to become independent could make global leaders lose profit.
“In September of last year, Amazon more than quadrupled their order of delivery vans from 4,500 to 20,000. These vans will be driven by contract drivers who want to start their own delivery service. Amazon has also been building a fleet of Boeing 767 cargo planes with the idea that they will acquire some control over shipping.”[8]
Winning a title of global success is akin to receiving any award. It’s exciting, but over time it becomes less relevant if you can’t keep up with your competitors. Every company must explore what this means for their own identity and how it translates to customers with high expectations. Wherever their introspections take them, success will certainly include tighter internal controls through advancing digital technologies.
