Amazon Launches “Fully Managed Supply Chain” Service: 3 Questions to Ask Before You Dive In
Amazon is rolling out its new Supply Chain by Amazon service, offering sellers a “fully managed” logistics solution that could reshape how eCommerce businesses operate. In this service, sellers provide the product quantities and pickup locations, and Amazon takes it from there—managing warehousing, transportation, and even cross-border customs. With machine learning driving optimized product movement, Amazon promises potential cost savings of up to 25% on storage fees and 15% on transportation costs. The service is launching in the U.S. this October, with global expansion plans by the end of the year.
For businesses, particularly small and medium-sized sellers, the idea of offloading the complexities of logistics to Amazon is enticing. After all, fewer headaches around warehousing and distribution means more focus on growing your brand. But before you hand over your entire supply chain to Amazon, it’s important to ask a few key questions to determine if it’s the right move for your business.
At FlexChain, we’re all for businesses partnering with 3PLs and service providers to streamline operations. Amazon has certainly proven its capability in revolutionizing supply chains and logistics, but no solution is a one-size-fits-all. Here are three critical factors you should consider before signing up for their fully managed supply chain service.
1) Is a One-Size-Fits-All Solution Right for Your Business?
Amazon is a giant, and their new supply chain solution will likely be designed to serve an incredibly diverse range of sellers and product types. While their vast scale and machine learning capabilities are impressive, a “one-size-fits-all” approach may not address the specific needs of every business, especially medium to large companies with annual revenues above $10 million.
For example, your business might have unique supply chain needs, whether it’s the handling of specialized products, unique storage requirements, or internal processes you’ve fine-tuned over the years. Larger businesses often have tailored solutions that help them operate efficiently. In contrast, Amazon’s solution may not provide that same degree of flexibility. As you consider Amazon’s offering, ask yourself: Will my business be able to maintain the level of control and customization I need to stay competitive?
A generic platform might lack the personal touch or advanced capabilities your supply chain requires. Sure, automation is great—but not if it’s not aligned with your business’s operational nuances.
2) What Happens When Capacity Is Tight?
When you turn over your supply chain to a provider like Amazon, you’re trusting them to manage your inventory, shipments, and logistics. However, Amazon has its own priorities. Their logistics network serves millions of sellers, as well as their own retail operations. So, in times of high demand—whether due to holidays, natural disasters, or pandemics—how can you be sure that your business will get the attention it deserves?
Without specific Service Level Agreements (SLAs) in place, there’s a risk that your orders could be deprioritized during peak times. You could find yourself waiting longer for fulfillment when Amazon is focusing on its highest-priority or most profitable customers. If you rely on tight fulfillment windows, it’s worth considering whether this lack of guaranteed priority could disrupt your operations. Will your business be vulnerable if Amazon’s capacity gets stretched?
3) Is Amazon a Competitor in Your Industry?
Amazon is not just a marketplace and logistics provider. It’s also a product brand, developing and selling its own goods. Over the years, there have been multiple instances where third-party sellers have found themselves in direct competition with Amazon. By giving Amazon access to all the intricate details of your supply chain—supplier relationships, product costs, transportation data—are you potentially arming a competitor with insights that could work against you?
While we’re not suggesting that Amazon would immediately undercut every seller, it’s important to be aware of the potential risks. If your product has strong margins or high sales volume, consider the implications of Amazon having this level of visibility into your business. Could Amazon use this information to its advantage and develop competing products?
So, Should You Consider Amazon’s Fully Managed Supply Chain?
Let’s be clear: We’re not here to knock Amazon’s solution. Far from it. We admire Amazon’s ability to innovate and grow, and there’s no doubt that their fully managed service will offer meaningful value to many businesses. However, these decisions are rarely straightforward.
If you run a small business (under $10M in annual revenue) that lacks the resources or expertise to manage a complex supply chain, Amazon’s solution could be a game-changer. It’s particularly attractive for businesses that already do a large share of their sales through Amazon. Automating logistics and outsourcing warehousing could free up your time and resources to focus on growth.
On the other hand, medium to large businesses should proceed with a bit more caution. Think critically about how this service fits with your existing supply chain strategy, and make sure you’ve weighed the potential risks before diving in.
At FlexChain, we’re all about helping businesses make informed decisions that work for their unique needs. Whether you’re just starting out or you’re a seasoned player in the eCommerce space, the right supply chain strategy can make all the difference.
If you’d like to explore your options, including alternative supply chain solutions that provide more flexibility and personalization, reach out to us anytime. We’re here to help you navigate these big decisions with confidence and clarity.
Good luck, and happy scaling!
