Wednesday, May 18, 2016

Amazon Looking to License or Acquire Freight-Management Technology: Online retail firm has previously leased cargo planes, registered to arrange cargo shipments

The Wall Street Journal
By Erica E. Phillips
Updated May 18, 2016 11:40 a.m. ET Inc. is on the hunt for technology to help it run its rapidly expanding freight-transportation network, according to people at companies that have been contacted by the retailer.

The online retail firm recently signed deals to lease cargo planes and registered to arrange ocean-cargo shipments, marking the company’s entry into the $150 billion-a-year global business of freight forwarding. Analysts believe the moves are part of a larger effort to reduce shipping costs for sellers on the company’s website, cutting out the middlemen for shipments of goods from Asian factories to Amazon warehouses in the U.S.

Now, Amazon is looking to license or acquire technology that could find the most efficient shipping routes and hire fleets of trucks, ships and planes to move sellers’ goods. In the last two weeks, Amazon has reached out to several freight-services-technology companies requesting information about their offerings, people at the companies said. A person at one of those companies said an Amazon representative told him the retailer is seeking out existing technology to save time on development.

A representative for Amazon didn’t respond to a request for comment.

Most large retailers and manufacturers use transportation-management software to manage the flow of goods through their supply chains. But many smaller companies still book space on a ship or cargo plane via phone call, or even fax, and often their goods are tracked using emailed spreadsheets. Freight startups, including Flexport Inc. and Haven Engineering Inc., say they want to make arranging freight transportation as easy as booking a vacation online, and provide tracking for shipments as they make their way around the world.

It is a field that has attracted funding from Silicon Valley investors, though the new crop of companies have yet to pose a serious threat to the world’s leading forwarders, many of which are working on similar technology of their own.

For Amazon, acquiring a freight-forwarding platform would allow the company to drive more volume toward its own cargo-handling arm, driving down costs for sellers, who in turn can keep prices low for customers, said Satish Jindel, president of SJ Consulting Group Inc., a logistics-research firm.

Amazon appears to be “saying to its sellers, ‘We’re going to give you the Amazon experience,’ ” he said. “You’re outsourcing production anyway, why not outsource your entire supply chain?”

With the right technology, Amazon’s plans could pose a threat to established forwarders as well, by winning over their small- and medium-size clients—many of whose goods are destined for Amazon distribution centers anyway.

Amazon’s entry into the freight forwarding business would also present a direct challenge to the startups. Ryan Petersen, chief executive of Flexport, said when Amazon asked for a presentation on his company’s technology, “I declined politely.”

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