Keynote presentation by Adrian Gonzalez at the SMC3 Connections 2016 conference

1. 
Adrian Gonzalez
President
Adelante SCM
A–Z: The Emergence of Amazon
as a Global 3PL
SMC3 Connections Conference
June 28, 2016

2. Disruptor or Distraction?

3. As E-Commerce Goes, So Goes Amazon
CAGR = 14.1%
Data Source: U.S. Commerce Department
CAGR = 28.3%
#1 E-commerce Retailer
 E-commerce: 7.3% of total retail sales,
60.4% of total retail growth in 2015.

4. Amazon’s KillerWeapon:Amazon Prime
“This analysis indicates that Amazon Prime now
has 54 million US members, spending on average
about $1,100 per year, compared to about $600
per year for non-members.”
We’ve grown Prime two-day delivery selection
from 1 million items to over 30 million, added
Sunday Delivery, and introduced Free Same-
Day Delivery on hundreds of thousands of
products for customers in more than 35 cities
around the world…
Prime Now offers members one-hour delivery
on an important subset of selection [and
serves] members in more than 30 cities around
the world.
Prime has become an all-you-can-eat,
physical-digital hybrid that members love.
Membership grew 51% [in 2015]– including
47% growth in the U.S. and even faster
internationally – and there are now tens of
millions of members worldwide.
Source: http://files.ctctcdn.com/150f9af2201/ae0b58e0-f4a5-4d83-916b-ec0757dc95db.pdf Source: Amazon Annual Report 2015

5. Amazon’s Growing Distribution Network
Source: MWPVL International (http://www.mwpvl.com/html/amazon_com.html)

6. Already a 3PL to Millions of Sellers
 In 2015, Fulfillment by Amazon (FBA) shipped over one billion units on
behalf of sellers. The number of active sellers using FBA grew more than
50% [to approx. 3 million sellers]. In Q4 2015, FBA units represented nearly
50% of total third-party units.
Source: Amazon Jan. 28, 2016 press release

7. Amazon:The 3PL Inside P&GWarehouses
“The Amazon-P&G alliance is still
running strong. According to data
from L2, P&G ranks on the first page
of results in Amazon for over 40% of
its individual products, and close to a
third of its products are among the
top 50 in their category in the
number of reviews per listing on
Amazon.”
Source: http://www.fool.com/investing/general/2015/03/06/pg-gets-caught-in-rivalry-between-amazon-and-targe.aspx

8. Shipping is a Loss Leader for Amazon
 Shipping costs exceeded
shipping revenue by $5B in 2015
 Shipping revenue YoY Growth
(2015): 45%
 Shipping cost YoY Growth
(2015): 32%
 $13.4B in Fulfillment operating
expenses in 2015 (25% YoY
growth)

9. Expanding Logistics Footprint – andAmbitions?

10. The Big Questions
 Why is Amazon investing so heavily
in expanding its logistics footprint
and capabilities?
 Why should you care? What are
the takeaways?
 What, if anything, should you do
about it?

11. Jeff Bezos: “Supplement [Capacity] Heavily”
“Amazon isn’t aiming to take over the
last mile of delivery from the likes of
FedEx, United Parcel Service or the
U.S. Postal Service, but rather to
‘supplement it heavily’ chief Jeff Bezos
said [May 30th] at a conference
hosted by technology website
Recode.”
Christmas 2013 was a wake-up call
Source: “Delivery Won’t Be the Driver at Amazon,” WSJ, June 1, 2016

12. Wall Street: Amazon the Disruptor
“We believe that global logistics is a highly
competitive and fragmented market that has yet
to capitalize fully on the emergence of web-
based technologies such as cloud computing and
data- centric analytics and optimizations that can
reduce inefficiencies within the supply chain.
As such, we believe certain segments of the
logistics market, namely last-mile parcel delivery
as well as the much larger contract logistics
space, are areas in which Amazon could provide
a compelling alternative to traditional
shipping/logistics providers.”
Source: Baird Equity Research report, October 19, 2015

13. MyView: Directly Control Customer Experience
Amazon wants to own and control the
innovation cycle — from the front end of
its operations (website) to its back end
(order fulfillment, DC automation
systems, and final delivery) — in a holistic
and integrated manner.
In essence, Amazon is taking the same
“owning the ecosystem” strategy that
Apple took in the computer industry.

14. Takeaway: End-Customers Must Become
Center ofYour Supply Chain Universe
How must you transform
your supply chain
processes, technology,
resources, and
relationships in
response?
Customers

15. Takeaway: Logistics Must Become a
CompetitiveWeapon
Cost management is still important, but leverage logistics to drive
top-line growth and profits, increase market share, and improve
customer service, experience, and loyalty

16. Takeaway: Last-Mile Delivery Becoming
New Logistics Battleground

17. Takeaway: Logistics, Commerce, and
Technology are Converging

18. What ShouldYou Do in Response?
Do’s
 Put customers at the center of your supply
chain. How must your supply chain processes,
technology, and relationships change?
 View logistics as a strategic weapon, not just a
cost center, to drive revenue growth, improve
customer loyalty, and increase market share.
 “Walk the talk” on breaking down functional
silos and collaboration.
Don’ts
 Blindly copy Amazon or
operate solely in reactive
mode
 View technology as a “silver
bullet” solution
 Take upstarts for granted or
become complacent. Past
performance is no guarantee
of future results.

19. Disruptor or Distraction?

20. If you ask Travis Kalanick, he might say…
Amazon is just a
distraction;
we’re the true
disruptor!

21. ThankYou!
Adrian Gonzalez
President
Adelante SCM
adrian@adelantescm.com
www.talkinglogistics.com