eBay partners with third-party logistics on fulfillment
End-to-end fulfillment service provides opportunities for third-party logistics providers
John Paul Hampstead | Associate Editor, FreightWaves • 07.30.2019
E-commerce retailer eBay (NASDAQ: EBAY) announced on July 24 that it would launch an end-to-end fulfillment service called Managed Delivery in 2020. The move is intended to drive uniformity and improvements in service levels across eBay’s network of third-party sellers and bring it into closer competition with Amazon (NASDAQ: AMZN), which has made short transit times and low-cost delivery a key differentiator.
Unlike Amazon, though, eBay will partner with a number of third-party logistics providers (3PLs) on transportation, warehousing and packaging services. While Amazon has decided to in-source transportation and logistics – the point of investing more than $800 million on next-day Prime delivery – eBay is betting that outsourcing will be a faster and more capital-efficient way to scale.
Jason Lockard, senior vice president for enterprise at BlueGrace Logistics, a Tampa-based freight brokerage, spoke to FreightWaves by telephone about the recent entry by e-commerce companies into transportation markets.
Lockard said that eBay was trying to gain more visibility into and control over its inventory and supply chain so that it could improve service.
“The more control eBay has over the inventory and the supply chain, the more it can meet the demands of its customers,” Lockard said. “The bar has been set higher as it relates to being able to select something online and receive it at the front door without damage or exception.”
Amazon has built an extensive network of distribution and fulfillment centers as well as the transportation assets needed to move goods between the facilities. In April, FreightWaves reported on Amazon’s digital brokerage platform and then conducted further research on how shippers, carriers and brokers reacted to the news. FreightWaves found that shippers viewed Amazon’s digital brokerage platform perhaps less negatively than they should; after all, they have the most to lose by giving Amazon access to their supply chain data.
Lockard suggested that less sophisticated shippers focused on sales growth without worrying about giving up control to their most powerful competitor.
“Non-savvy shippers just see demand and sales increasing,” Lockard said. “They don’t have buying power for carriers, and they start having exceptions and other issues. Amazon takes care of issues very quickly, putting it back on the suppliers.”
One of BlueGrace’s most important offerings to shippers trying to take advantage of e-commerce distribution channels is its proprietary load-planning technology, BlueShip. While BlueGrace’s core competence is domestic truckload and less-than-truckload freight brokerage, the company found that many of its customers needed help upstream to streamline their broad supply chain operations and increase efficiency.
“You’ve got to get creative to keep costs down and meet the expectations of the customer,” Lockard said. “Upstream it’s the expectations of the distribution center and the manufacturing facility to the distribution center, all the way up to raw materials planning.”
Rather than BlueGrace’s customers sending it shipment-level execution information, Lockard explained, the shippers pass along their orders and data about on-time and in-full requirements and desired delivery dates instead. Then BlueGrace creates a load plan and tells its customers how to build the shipments and when to move the freight, and the shipper works backwards from that.
“Too often shippers are trying to solve a warehouse or supply chain issue with a transportation solution,” Lockard said. “It’s very difficult to fix something at the end of the process,” he said, noting that faster information flows and streamlined upstream operations can take much of the pressure off of transportation providers.
After a very tight cycle when BlueGrace was trying to maintain service levels and keep its customers happy, Lockard said that capacity has opened back up. Over the past year, national tender rejections (OTRI.USA) have fallen from about 19 percent of all loads tendered by shippers to 4.2 percent, indicating that carriers have fewer options when it comes to selecting freight. Average spot prices (DATVF.VNU) have fallen alongside turndowns, from approximately $1.80/mile to $1.40/mile.
Now carriers are more willing to negotiate rates down and BlueGrace can re-establish some margin. It’s also a period when BlueGrace can use a bit of breathing room to re-evaluate its own processes and technology and improve how its brokers work.
“Anything that’s manual today is being evaluated,” Lockard said.