Amazon continues vertical integration of its supply chain

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Amazon has been in the headlines a lot recently but one of its very important but less in-the-spotlight moves has been its investment into supply chain management, specifically around ocean shipping from China to the U.S. The company understands how integral supply chain management is to its overall strategy and it is taking steps to control its supply chain from beginning to end.

Almost three years ago, Amazon’s affiliate in China obtained a license from the U.S. Federal Maritime Commission that puts it on the official list of  a non-vessel operating common carriers (NVOCCs) from China to the U.S. A NVOCC (otherwise known as a Freight Forwarder) is an person or entity who leases space on freight-liners and arranges shipments of goods to different markets. Amazon has since been growing its ocean shipping and at last count was shipping a volume of 4.7 million cartons of goods from China, up from just 5,300 this time last year.

Why is Amazon doing this? Vertically integrating its supply chain to include shipping from China is allowing Amazon to reduce some of the variability of having to depend on multiple third parties for shipping. It also allows the company to participate in a $220 billion industry and to start making money off of a step in its supply chain that previously introduced risk and difficult-to-control cost into its system.


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