The Role of Transportation in the Supply Chain:
Transportation characteristics leading to an efficient supply chain.
Hua, Li
Embry Riddle Aeronautical University Student
LGMT 636 Transportation Management
William (Bill) Christensen, Ph. D.
January 17, 2022
A well-designed integrated supply chain can be reinforced or brought low by the transportation management support a company receives. Broadly, there are 5 main components to a standard supply chain: suppliers, distributors, manufacturers, wholesalers, and retailers/customers (Novack, 2019). Many companies deal with extended enterprise management, which adds an extra hurdle of product returns. One of the constant flows of the integrated supply chain is product and services support. It is here that transportation supply chain management is most has the greatest impact (Novack, 2019).
A well-known company which has pushed innovation in this sector is Amazon and its massive E-Commerce platform. Amazon focuses more on “ton mile” due to its cargo operations. Shipping costs as of 2018 were tallying up to 10-15% of the company’s net sales (Hahn, 2018). As the company focuses on reducing shipping costs, it assesses the value of service for the billions of packages it transports. The company has to determine landed costs of material procurement plus transit cost when competing against local distributors such as Walmart and Target (Novack, 2019).
Early in its growth phase, a large part of Amazons transportation support was largely dependent on postal services and third-party logistics service providers (Rodrigue, 2020). Amazon with its ambitious goals was dissatisfied with the reliability of its third-party partners particularly on one Christmas in 2013(Hahn, 2018). In this case a large number of holiday package deliveries failed to arrive by the Amazon guarantee date. These types of reliability problems force companies to increase stock on hand to, and also increases the risk that its customer base could head elsewhere (Novack, 2019).
One direct answer to this reliability dilemma was by increasing its overall capability. In 2015 Amazon Air was founded, by 2020 Amazon Air consisted of 42 leased aircraft (Rodrigue, 2020). On the ground, Amazon has purchased thousands of semi-truck trailers to handle the transportation between all steps of its supply chain (Hahn, 2018).
By directly controlling many sections of the shipping process Amazon also addresses another transportation concern, Security. Many of Amazons fulfillment centers use a combination of highly automated and low-level automated equipment (Yu, 2016). When paired with amazon transportation solutions, this ensures fewer damaged packages.
Increased transportation reliability, capability and security have greatly improved customer satisfaction. Amazon has not stopped there though, its overhauls its transportation services to allow for greatly reduced transit times.
To gain accessibility Amazon has been building distribution facilities across America and internationally. Amazon has developed “Fast Delivery Hubs” (Rodrigue, 2020). These hubs store only medium and high demand items, in regions with high customer density, and quickly deliver to the customer’s home or a predesignated locker. In these cases, the “last-mile” is still generally supported by either USPS or a subcontracted delivery company (Rodrigue, 2020).
By taking over a majority of the transportation solutions required to run its business empire, Amazon has been able to address all aspects of the service characteristics of freight demand: transit time, reliability, accessibility, capability and security. Its overall value of service is so competitive that no competitor’s landed cost seems safe from Amazon’s extent of market (Novack, 2019).
WORKS CITED
Novack, R. A., Suzuki, Y., Gibson, B. J., Coyle, J. J. (2019). Transportation: A Global Supply Chain Perspective. Cengage
Hahn, Y., Kim, D., Youn, M. (2018). A Brief Analysis of Amazon and Distribution Strategy. Journal of Distribution Science, 16(4), 17-20. http://dx.doi.org/10.15722/jds.16.3.201804.17
Rodrigue, J. P. (2020). The distribution network of Amazon and the footprint of freight digitalization. Journal of Transport Geography, 88, 102825. https://doi.org/10.1016/j.jtrangeo.2020.102825
Yu, Y., Wang, X., Zhong, R. Y., Huang, G. Q. (2016). E-commerce Logistics in Supply Chain Management: Practice Perspective. Procedia CIRP, 52, 179-185. https://doi.org/10.1016/j.procir.2016.08.002
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