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Amazon might just transform how goods are shipped

SEATTLE • For consumers, Amazon has made shipping easy: Just choose the desired delivery date for your goodies and click. For the manufacturers, who have to get those products to you, however, shipping remains a troublesome, inefficient, stubbornly analog business.

Your "one-click" often translates into multiple phone calls, e-mails, faxes and reams of paperwork - all coordinated by a knowledgeable and well-connected professional.

Amazon, which prides itself on upending old ways of doing business, is now looking to transform the shipping industry as it has the retail industry.

Between October last year and January this year, it arranged for the shipping of at least 150 containers of goods from China to the United States. That's an infinitesimal proportion of the millions of containers sailing between the two countries every year. But Amazon is just getting started - and the company isn't alone.

Last month, Alibaba started booking space for its suppliers on Maersk container ships, joining a growing wave of e-commerce companies looking to bring greater efficiency and transparency to the US$160 billion (S$227.7 billion) business of arranging cargo shipments.

Amazon's interest in the arcane world of freight forwarding dates back to 2012, when the company first allowed Chinese suppliers to sell goods in Amazon's online marketplaces. Sellers can either ship products directly to customers or to Amazon, which then packs and delivers the products on their behalf. Currently, 62 per cent of Chinese e-tailers sell on Amazon platforms. Making shipping more straightforward - and, hopefully, cheaper - would in theory make Amazon a more attractive platform for these companies than, for instance, Alibaba or eBay.

An employee auditing outgoing shipments moving along a conveyor belt at an Amazon facility in California. The firm is looking to transform the shipping industry, says Bloomberg columnist Adam Minter.
An employee auditing outgoing shipments moving along a conveyor belt at an Amazon facility in California. The firm is looking to transform the shipping industry, says Bloomberg columnist Adam Minter. PHOTO: REUTERS

At the moment, there's nothing easy about shipping, at least not for the kind of small and medium-sized companies that tend to sell on Amazon. Large appliance brands and other major manufacturers have the scale to arrange and negotiate good rates for shipments directly. Everyone else has to engage the services of a freight forwarder.

More efficient logistics would help Amazon cut down on various transaction costs, including booking fees and government filings... And eventually, Amazon could offer services to any manufacturer, even those not selling on its platforms.

The role of the forwarder includes negotiating the best rates and most efficient use of multiple modes of transport, including trucks, rail and ocean-going vessels. The forwarder has to prepare all the accompanying paperwork as well, including customs documentation. When a problem arises, the freight forwarder is expected to have the longstanding relationships needed to get goods moving again.

The customer-service aspect of freight forwarding in particular has long resisted automation. Amazon thinks technology can eliminate many inefficiencies. More efficient logistics would help Amazon cut down on various transaction costs, like booking fees and government filings. Eventually, it could offer services to any manufacturer, even those not selling on its platforms.

Thus, for companies like Amazon and Alibaba, freight forwarding represents a side business that helps them extend their reach deeper into the global supply chain.That's good news for consumers, and a globalising economy that could use a fresh wind in its sails.

• This column does not necessarily reflect the opinion of the editorial board or Bloomberg and its owners.

A version of this article appeared in the print edition of The Straits Times on February 16, 2017, with the headline 'Amazon might just transform how goods are shipped'. Print Edition | Subscribe