WEBVTT - Amazon Opens Logistics Network to Everyone 0:00:00.150 --> 0:00:10.100 Hi everyone, this is Lee Klaskow and we're Talking Transports. 0:00:10.240 --> 0:00:13.740 Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 0:00:13.780 --> 0:00:17.840 Lee Klaskow, Senior Freight Transportation Logistics Analyst at Bloomberg Intelligence, 0:00:18.360 --> 0:00:21.810 Bloomberg's in-house research arm. Before we dive in, quick favor, 0:00:21.989 --> 0:00:25.130 if you enjoy the podcast, please subscribe, rate, and review, 0:00:25.590 --> 0:00:28.130 and share it with a friend. Your support helps us 0:00:28.250 --> 0:00:32.490 continue bringing you conversations with leaders shaping the future of 0:00:32.570 --> 0:00:35.809 transportation and logistics. And if you'd like to connect, you 0:00:35.850 --> 0:00:38.510 can always find me on the Bloomberg terminal on LinkedIn 0:00:38.570 --> 0:00:41.610 or on X at Logistics Lee. Today, we're coming to 0:00:41.650 --> 0:00:45.960 you from Bloomberg's global headquarters in New York City. Few 0:00:46.060 --> 0:00:49.640 companies have had a bigger impact on transportation and logistics 0:00:49.979 --> 0:00:52.940 over the past decade than Amazon. What began as an 0:00:53.020 --> 0:00:56.650 effort to deliver packages to customers faster and has grown 0:00:56.710 --> 0:01:00.350 into one of the world's most sophisticated supply chain networks. 0:01:00.750 --> 0:01:04.270 And now Amazon is making those capabilities available to businesses 0:01:04.330 --> 0:01:09.320 beyond its own marketplace through Amazon Supply Chain Services. Joining 0:01:09.420 --> 0:01:12.700 us in the Bloomberg studio is Peter Larson, head of 0:01:12.880 --> 0:01:18.160 Amazon Supply Chain Services. Today, we'll discuss Amazon's long-term logistics strategy, 0:01:18.360 --> 0:01:22.740 where it sees the biggest growth opportunities across transportation, warehousing, 0:01:22.819 --> 0:01:27.020 and supply chain services, how AI is transforming logistics, and 0:01:27.060 --> 0:01:31.430 how Amazon positions itself alongside many of the industry's legacy 0:01:31.490 --> 0:01:35.310 transportation providers. Peter, welcome to Talking Transports. It's great to 0:01:35.350 --> 0:01:36.090 have you here in New York. 0:01:36.490 --> 0:01:38.450 Thanks very much, Lee. I am happy to be here. 0:01:39.390 --> 0:01:42.319 So, you know, what is Amazon Supply Chain Services and 0:01:42.380 --> 0:01:45.020 kind of what are the problems you're trying to solve? 0:01:46.020 --> 0:01:52.520 Well, we, as you may know, Amazon's a technology company, fundamentally. 0:01:53.610 --> 0:01:56.730 that just happened to build one of the world's most 0:01:57.140 --> 0:02:01.960 sophisticated supply chains. And we first built it for ourselves. 0:02:02.260 --> 0:02:05.020 And then we opened it up to the sellers who 0:02:05.060 --> 0:02:08.680 sell on Amazon. And we proved it at scale. We've 0:02:08.700 --> 0:02:11.300 got hundreds of thousands of Amazon sellers using it. And 0:02:11.360 --> 0:02:14.000 so just recently this year, we opened it up so 0:02:14.040 --> 0:02:17.000 that any business of any type can use it. It's 0:02:17.020 --> 0:02:19.540 a little bit like the playbook we ran with AWS 0:02:19.580 --> 0:02:22.000 a number of years ago. Build it for ourselves and 0:02:22.020 --> 0:02:23.620 then open it up for everybody to use. 0:02:24.460 --> 0:02:27.919 And at what point was the decision made, you know, 0:02:28.580 --> 0:02:30.680 whether it's we have the scale or we have the 0:02:30.740 --> 0:02:34.090 ability to say, let's open it up to third parties 0:02:34.320 --> 0:02:35.840 outside of your marketplace? 0:02:36.030 --> 0:02:43.010 Yeah. Well, there were a couple interesting inflections in the journey. Actually, 0:02:43.090 --> 0:02:46.550 a number of interesting points in the journey. But, you know, 0:02:46.630 --> 0:02:48.850 I'll tell you where a lot of this got started 0:02:48.930 --> 0:02:53.810 is that Amazon's been building its own fulfillment centers for, 0:02:53.900 --> 0:02:56.239 you know, since we got going, really. Right. But it 0:02:56.280 --> 0:03:01.620 was in sort of 2013, the holiday season, where, you know, 0:03:01.639 --> 0:03:04.900 we were using a lot of third party transportation companies 0:03:05.020 --> 0:03:08.710 for the last mile delivery. And one of those companies 0:03:08.750 --> 0:03:11.669 just fell over from unexpected demand. And that meant that 0:03:12.010 --> 0:03:14.610 we shipped a lot of packages late to prime members. 0:03:15.210 --> 0:03:17.049 So at that point we decided, well, you know what, 0:03:17.910 --> 0:03:21.510 in addition to the fulfillment centers, we need to build 0:03:21.630 --> 0:03:24.600 our middle mile and last mile transportation networks as well. 0:03:24.660 --> 0:03:29.179 So we set off doing that. Once we got that 0:03:29.220 --> 0:03:32.880 up and running for ourselves, you know, a big part 0:03:32.900 --> 0:03:37.190 of the amazon.com business is third-party sellers. And so we 0:03:37.370 --> 0:03:42.560 opened up that logistics network to our Sellers, otherwise known 0:03:42.740 --> 0:03:47.460 as FBA or Fulfillment by Amazon, that took off. Sellers 0:03:47.500 --> 0:03:50.250 were really able to grow their businesses using that service. 0:03:50.280 --> 0:03:52.670 And that service is where they store their inventory in 0:03:52.710 --> 0:03:54.650 our warehouses and we pick back and ship it on 0:03:54.670 --> 0:03:58.470 their behalf for their orders on Amazon. Those same sellers 0:03:58.570 --> 0:04:01.790 then turned to us and said, listen, we already have 0:04:01.810 --> 0:04:05.980 your inventory in the Amazon network for our Amazon sales. 0:04:07.190 --> 0:04:09.990 How about you just let us use that same inventory 0:04:10.050 --> 0:04:13.410 for our off Amazon channels as well? So we open 0:04:13.450 --> 0:04:15.790 it up to our Amazon sellers for their off Amazon, 0:04:15.830 --> 0:04:19.029 whether they sell it on their own direct to consumer 0:04:19.070 --> 0:04:24.349 sites or another retailer outside of Amazon. Once we did that, 0:04:24.490 --> 0:04:27.530 we had hundreds and thousands of those sellers using our 0:04:27.550 --> 0:04:32.080 supply chain services for their off Amazon volume. We decided, well, heck, 0:04:32.120 --> 0:04:34.920 why not open it up actually to any business of 0:04:35.040 --> 0:04:38.730 any sort? And so now we're offering it for ourselves, 0:04:38.810 --> 0:04:42.130 for Amazon sellers, as well as for any company out there. 0:04:42.650 --> 0:04:45.090 So Amazon supply chain services, we're just going to call 0:04:45.110 --> 0:04:48.550 it ASCS going forward because we only have 40 minutes. 0:04:48.650 --> 0:04:49.469 Yes. 0:04:50.070 --> 0:04:51.550 So, because I'm sure we're going to say it a lot, 0:04:51.570 --> 0:04:53.750 you know, outside of fulfillment, you know, a lot of 0:04:53.810 --> 0:04:56.850 folks that are listening, they know that, you know, they 0:04:56.870 --> 0:04:59.350 get an Amazon package on their doorstep. They know that 0:04:59.410 --> 0:05:02.210 part of the delivery, but you guys are offering more 0:05:02.270 --> 0:05:05.710 services beyond just the final mile. Uh, can you just 0:05:05.730 --> 0:05:07.930 talk about, you know, what markets you're in? 0:05:08.290 --> 0:05:11.300 Yeah. Let me set it up at a high level. 0:05:11.440 --> 0:05:15.660 So we've built, um, an end to end supply chain, really. 0:05:15.720 --> 0:05:19.099 So all the way from pick it up from the 0:05:19.140 --> 0:05:23.250 manufacturer in China, put it on a boat over the ocean, 0:05:23.670 --> 0:05:27.670 get it through customs, pick it up outside of customs, uh, 0:05:27.730 --> 0:05:32.350 with a, um, with a freight truck. Take it from 0:05:32.410 --> 0:05:35.470 that point either to a customer's warehouse or to one 0:05:35.490 --> 0:05:38.870 of our warehouses. Once it's in our warehouses, you got 0:05:38.930 --> 0:05:42.289 two options. If it's a consumer order, we can pick 0:05:42.330 --> 0:05:45.450 back and ship that on your behalf. If it happens 0:05:45.529 --> 0:05:48.890 to be you want to distribute your pallets to other 0:05:48.970 --> 0:05:54.970 downstream retailers or partners, we can pick and pack essentially 0:05:55.170 --> 0:05:56.380 pallets for you as well. 0:05:56.390 --> 0:05:56.630 Mm-hmm. 0:05:57.520 --> 0:06:01.160 And then the last option is if you want to 0:06:01.560 --> 0:06:04.120 get it over the ocean, for example, put it on 0:06:04.160 --> 0:06:06.880 our freight trucks and send it to one of your warehouses, 0:06:07.260 --> 0:06:09.560 you can easily do that. And then if you want 0:06:09.580 --> 0:06:13.490 to hire our parcel shipping to go to your warehouse 0:06:13.550 --> 0:06:16.610 to pick up the good that you need sent to 0:06:16.670 --> 0:06:19.750 your end customer, we can do that as well. So 0:06:19.770 --> 0:06:25.450 we've got multimodal freight, air, ground, rail, and ocean shipping. 0:06:26.190 --> 0:06:29.530 We've got distribution and fulfillment, and we've got parcel shipping. 0:06:29.990 --> 0:06:32.450 And so you do truckload, less than truckload. You have 0:06:32.570 --> 0:06:35.370 freight brokers and freight forwarders and all that. 0:06:35.690 --> 0:06:37.830 We got it. We got it all. You know, I mean, 0:06:37.850 --> 0:06:39.570 of course, we have a lot of work left to do, 0:06:39.710 --> 0:06:43.420 but many people don't know, for example, that we're one 0:06:43.460 --> 0:06:51.080 of the largest freight forwarders that ships containers from China 0:06:51.260 --> 0:06:55.450 over to North America and Europe. Right. Little known fact, 0:06:55.490 --> 0:06:58.650 we are one of the largest freight forwarders in the world. Also, 0:06:58.790 --> 0:07:02.409 little known fact, we have a well-established air cargo network 0:07:02.450 --> 0:07:08.440 as well, both domestically in the States, but also increasingly 0:07:08.600 --> 0:07:12.360 from outside the States into the States. So, for example, 0:07:12.800 --> 0:07:17.200 we run a lot of lanes from Latin America to 0:07:17.240 --> 0:07:21.590 the U.S. for goods, for example, for Mother's Day, for 0:07:21.650 --> 0:07:26.990 flowers or for Valentine's Day flowers. cherries from Chile, things 0:07:27.030 --> 0:07:29.770 that are created outside the U.S. but have to get 0:07:30.010 --> 0:07:34.090 in really quickly because they're perishable, we use our air 0:07:34.130 --> 0:07:35.010 cargo network for that. 0:07:35.390 --> 0:07:38.869 And what's the value proposition you guys provide to third-party 0:07:39.420 --> 0:07:42.100 shippers that are outside your network? Like, why would, if 0:07:42.130 --> 0:07:46.740 I'm a shipper, why would I use Amazon versus DSV 0:07:46.820 --> 0:07:50.500 as a freight forwarder or J.B. Hunt in trucking or C.H. 0:07:50.520 --> 0:07:53.810 Robinson in the brokerage business or you know, recently there's 0:07:53.830 --> 0:07:55.680 been a lot of news about you guys entering the 0:07:55.800 --> 0:07:59.160 LTL market. Uh, so every time there's an announcement hits the, 0:07:59.200 --> 0:08:02.000 the tape, the old, the LTL stocks get, uh, get 0:08:02.040 --> 0:08:05.260 hit pretty hard. Um, so, you know, what, what's when you, 0:08:05.320 --> 0:08:10.540 when you guys are selling your services outside of your own, um, marketplace, what, 0:08:10.580 --> 0:08:11.800 what is that value proposition? 0:08:12.720 --> 0:08:15.730 Well, I think, um, the first thing that we talk 0:08:15.790 --> 0:08:20.070 about with customers is the benefit of having that end 0:08:20.090 --> 0:08:23.240 to end network. Um, A lot of our customers have 0:08:23.260 --> 0:08:27.340 built up their supply chains over years, and they've got 0:08:27.800 --> 0:08:31.220 five or 10 different fragmented firms that they're working with. 0:08:32.220 --> 0:08:36.120 And what that means is you've got missed handoffs and 0:08:36.340 --> 0:08:38.949 visibility gaps in your supply chain. And, you know, it's 0:08:39.020 --> 0:08:43.809 such a connected system. Any sort of a visibility gap 0:08:44.170 --> 0:08:47.090 or when there's a problem, any sort of finger pointing 0:08:47.110 --> 0:08:50.709 is can really have an impact to our customer supply chain. 0:08:50.770 --> 0:08:54.429 So the first thing that we're providing is really an 0:08:54.630 --> 0:08:59.780 end to end system that provides visibility throughout. Second thing 0:08:59.840 --> 0:09:03.420 is that, you know, any disruption that hits in the world, 0:09:03.480 --> 0:09:08.390 you can be pretty sure that it's hitting Amazon at 0:09:08.450 --> 0:09:12.309 that same time. So we have built our network over 0:09:12.350 --> 0:09:15.790 the years to be resilient and Anything that happens, whether 0:09:15.809 --> 0:09:22.100 it's weather or a political issue or sort of a war, 0:09:22.660 --> 0:09:25.720 what have you, we have to deal with it for ourselves. 0:09:25.780 --> 0:09:28.570 And therefore, you get the benefit of our decades of 0:09:28.620 --> 0:09:33.550 work to proactively adjust to those disruptions so that they 0:09:33.570 --> 0:09:36.050 don't affect your end customer. Third thing that we talk 0:09:36.090 --> 0:09:39.670 about is, you know, we build for a peak that 0:09:39.690 --> 0:09:43.860 is higher than I dare say most others peaks are. 0:09:44.640 --> 0:09:50.410 So we're investing a considerable amount in our supply chain 0:09:50.530 --> 0:09:53.490 every year. And we do that because we've got the 0:09:53.510 --> 0:09:58.810 volume from Amazon.com to support that. So if you have 0:09:58.890 --> 0:10:02.550 demand spikes here, unlikely to outstrip our capacity. And at 0:10:02.620 --> 0:10:05.020 any given point, just because we build for a very 0:10:05.080 --> 0:10:09.420 large peak. And then additionally, we've got over a million robots, 0:10:09.480 --> 0:10:14.380 for example, in our facilities around the world. It's a 0:10:14.420 --> 0:10:17.459 lot of investment and, you know, a lot of time 0:10:17.500 --> 0:10:22.340 that goes into that deployment. Our ASCS customers get the 0:10:22.400 --> 0:10:25.640 benefit of all that investment we're making for Amazon. It 0:10:25.660 --> 0:10:28.500 just flows downstream to them and they get it, you know, 0:10:29.059 --> 0:10:31.180 effectively at a marginal cost. Right. 0:10:31.320 --> 0:10:34.160 And obviously, you know, Amazon's a tech company, but you're 0:10:34.200 --> 0:10:38.160 obviously a retailer as well. You know, I get it 0:10:38.200 --> 0:10:41.140 probably either a box or an envelope from Amazon every 0:10:41.179 --> 0:10:41.959 day at my house. 0:10:42.160 --> 0:10:42.599 Thank you, sir. 0:10:43.400 --> 0:10:46.640 You can thank my family. They're the ones that are 0:10:46.660 --> 0:10:47.620 doing most of the buying. 0:10:47.990 --> 0:10:49.910 We're in the same boat in my house, believe me. 0:10:50.690 --> 0:10:55.670 But, you know, we love the convenience. But that being 0:10:55.710 --> 0:10:59.330 that said, are there certain markets where it's tough for 0:10:59.370 --> 0:11:02.730 you to enter? Because I would imagine a competitor like 0:11:02.770 --> 0:11:05.470 a Walmart, for example, might not want to leverage you 0:11:05.530 --> 0:11:09.240 for their LTL freight because, you know, you're competitors. They 0:11:09.280 --> 0:11:10.460 don't want to necessarily. 0:11:10.160 --> 0:11:10.780 Give you the business. 0:11:11.340 --> 0:11:15.670 Are there markets like that where you're having problems? kind 0:11:15.710 --> 0:11:18.770 of getting more of a footing because of that competitive 0:11:18.809 --> 0:11:20.510 nature with other shippers? 0:11:21.390 --> 0:11:25.750 Well, I'm not sure we see a ton of that 0:11:25.880 --> 0:11:31.620 per se. Like we do, for example, distribute packages based 0:11:32.900 --> 0:11:38.500 off of Walmart orders or TikTok orders or Sheen orders, 0:11:38.830 --> 0:11:41.070 you know, pretty much name any marketplace in the book. 0:11:41.170 --> 0:11:44.540 And if you use Amazon supply chain services, we can 0:11:44.620 --> 0:11:49.630 fulfill for those marketplaces. You know, I will say that 0:11:49.650 --> 0:11:52.770 there are certain segments of customers that we're still chipping 0:11:52.790 --> 0:12:00.100 away at. You know, Amazon does really well at goods 0:12:00.380 --> 0:12:05.460 that sell on Amazon. Now, the good news there is 0:12:05.480 --> 0:12:08.819 that we've got over 400 million SKUs on Amazon. So 0:12:08.840 --> 0:12:12.329 that basket of goods we sell is actually very broad, much, 0:12:12.410 --> 0:12:15.870 much broader than most people think, but it's not everything. 0:12:16.340 --> 0:12:19.960 And so you might get some customers who are, um, 0:12:20.160 --> 0:12:25.959 interested in specialized services, for example, cold chain with GLP 0:12:26.340 --> 0:12:30.560 right now, booming for obvious reasons. You know, we're, we're, 0:12:30.660 --> 0:12:31.920 you know, we do a lot of that work in 0:12:31.940 --> 0:12:34.620 our grocery business and our pharmacy business, but in our 0:12:34.640 --> 0:12:38.300 sort of core mainline logistics network, we're still working on 0:12:38.360 --> 0:12:42.690 things like, uh, cold chain, transportation. Those are, you know, 0:12:42.750 --> 0:12:45.490 those are some examples of places we're still working at 0:12:45.550 --> 0:12:45.990 to try to. 0:12:46.270 --> 0:12:49.230 And in the same, like, frenemies vein, you know, obviously, 0:12:49.670 --> 0:12:52.510 given your size, you're a huge purchaser of transportation, even 0:12:52.530 --> 0:12:54.670 though you're doing a lot of stuff in-house. You know, 0:12:54.910 --> 0:12:58.820 how do you view companies like DHL or DSV or C.H. 0:12:58.840 --> 0:13:02.059 Robinson or EPS or J.B. Hunt, for that matter, you know, 0:13:02.179 --> 0:13:05.760 as competitors, partners, both? Like, how does that relationship work? 0:13:05.780 --> 0:13:08.959 Because because we've seen UPS kind of glide down their 0:13:08.980 --> 0:13:12.240 exposure to Amazon over the years. Um, you know, how 0:13:12.260 --> 0:13:13.859 do you see that relationship going? 0:13:13.900 --> 0:13:17.850 Yeah, we, we, you know, um, the, the logistics market 0:13:17.950 --> 0:13:22.210 needless to say is, is, is giant and it's growing. 0:13:22.270 --> 0:13:26.050 And so, you know, we don't really see it as 0:13:26.130 --> 0:13:28.550 a zero sum game where, you know, we're trying to 0:13:28.730 --> 0:13:33.270 add new capabilities, uh, for customers rather than sort of 0:13:33.690 --> 0:13:37.440 take share away from competitors. Um, One of the things 0:13:37.480 --> 0:13:40.900 that Amazon.com has driven is what I like to think 0:13:40.940 --> 0:13:47.020 of as a secular change in speed expectations. And so, 0:13:47.040 --> 0:13:49.530 you know, because we have the prime program and we've 0:13:49.550 --> 0:13:53.930 just been getting faster and faster and more reliable each 0:13:54.010 --> 0:13:57.050 year on those last mile shipments, we've had to build 0:13:57.110 --> 0:14:01.080 our entire network around that speed and certainty. That then 0:14:01.140 --> 0:14:05.520 increases expectations of Customers who shop outside of Amazon, they're like, well, 0:14:05.540 --> 0:14:07.250 why can't I get it in one or two days? 0:14:07.520 --> 0:14:09.430 And why doesn't it arrive when you say it will, 0:14:09.850 --> 0:14:12.329 just like I do on Amazon? That's a part of 0:14:12.390 --> 0:14:15.550 the logistics market segment that we're really helping to drive, 0:14:15.590 --> 0:14:17.050 which we think raises all boats. 0:14:18.110 --> 0:14:21.130 So, you know, in transportation, the stuff that you guys do, 0:14:21.410 --> 0:14:23.640 you tend to have like an asset light or a 0:14:23.680 --> 0:14:26.300 non-asset model where you use a lot of third party 0:14:26.320 --> 0:14:31.550 capacity to do the movement of freight. are there any 0:14:31.610 --> 0:14:35.230 markets where maybe that model doesn't necessarily work if you 0:14:35.570 --> 0:14:40.170 truly want to be more of a competitor? Like the 0:14:40.290 --> 0:14:44.230 LTL space, for example, you know, cross-stock facilities are very 0:14:44.270 --> 0:14:48.030 important for LTL. They need to be strategically placed across 0:14:48.370 --> 0:14:51.820 the country. You know, you guys, from what I understand, 0:14:51.890 --> 0:14:54.119 and please correct me if I'm wrong, you guys are 0:14:54.140 --> 0:14:56.860 doing most of the movements like from your fulfillment centers 0:14:57.700 --> 0:15:00.540 when you're consolidating freight. So can you talk about like 0:15:00.940 --> 0:15:04.640 You know, does Amazon have plans maybe to take more 0:15:04.660 --> 0:15:08.320 of an asset-based approach to any of these modes of transportation? 0:15:09.160 --> 0:15:11.880 Well, I think it's a mix, honestly, Lee. You know, 0:15:11.940 --> 0:15:13.740 if you look at any one of our modes, we 0:15:13.780 --> 0:15:19.120 have a mix of owned assets and third-party assets. And 0:15:19.140 --> 0:15:22.820 that goes across the, you know, across the chain. The 0:15:22.860 --> 0:15:27.370 truth of the matter is at our scale, it's very, 0:15:27.450 --> 0:15:34.040 very hard to... own 100% of the assets yourself. It's 0:15:34.060 --> 0:15:37.550 just too hard to execute on that. And then similarly, 0:15:38.630 --> 0:15:41.350 you don't want to be all third party because then 0:15:41.410 --> 0:15:45.870 you lose a sense of ownership and control over the 0:15:45.890 --> 0:15:48.990 customer experience, which is really important to us. So across 0:15:49.030 --> 0:15:53.890 the board, really, it's a mix for us. The thing 0:15:53.930 --> 0:16:00.580 we do is we use technology to make... Ourselves and 0:16:00.620 --> 0:16:05.580 our customers relatively agnostic on whether it's a first party 0:16:05.720 --> 0:16:10.870 asset or a third party asset. Our network operators, in fact, 0:16:11.630 --> 0:16:14.310 usually don't even know if it's our asset or a 0:16:14.330 --> 0:16:17.810 third party asset because they're using the same set of 0:16:18.050 --> 0:16:22.200 technology tools to run the network. And that works pretty 0:16:22.220 --> 0:16:22.600 well for us. 0:16:23.110 --> 0:16:27.140 And so for ASCS, where do you see the greatest opportunities? 0:16:27.240 --> 0:16:30.080 Is it the domestic transportation market here in the U.S. 0:16:30.220 --> 0:16:33.480 or is it outside of the U.S.? Well. 0:16:35.190 --> 0:16:38.990 So first off, ASCS is growing really, really well, I think. 0:16:39.310 --> 0:16:43.130 And the thing that I've sort of learned over the 0:16:43.170 --> 0:16:47.200 past few months here is that, you know, there's not 0:16:47.240 --> 0:16:51.060 a demand, you know, there's plenty of demand. Folks are 0:16:51.640 --> 0:16:56.650 really interested in having sort of an alternative out there 0:16:56.690 --> 0:17:00.609 with an end to end supply chain for them to 0:17:00.650 --> 0:17:04.450 be able to use. They just like the competitive dynamic 0:17:05.320 --> 0:17:08.870 in the market. They also just like the customer obsession 0:17:08.910 --> 0:17:11.590 that Amazon brings to it. Like we've been doing it 0:17:11.630 --> 0:17:14.609 for ourselves for years and they like our attention to 0:17:14.650 --> 0:17:18.130 detail and our high bar there. I will say that 0:17:18.210 --> 0:17:21.650 the sort of the non-U.S. market is a huge area 0:17:21.670 --> 0:17:25.950 of opportunity. You know, there are some things that we've 0:17:26.010 --> 0:17:29.389 had time to mature in the States that that are 0:17:29.410 --> 0:17:31.780 a little bit less mature, uh, if you go outside 0:17:31.820 --> 0:17:38.980 the States, for example, that end to end visibility and, uh, disruption, uh, management, um, 0:17:39.740 --> 0:17:42.700 those things we've got pretty well tuned here in the States. 0:17:42.740 --> 0:17:44.640 And as you go outside the States, we have some 0:17:44.820 --> 0:17:49.470 really nice opportunity for improvement there. Uh, we also, uh, 0:17:49.530 --> 0:17:52.450 just because outside the, you know, outside the States, most 0:17:52.530 --> 0:17:55.659 countries just aren't as large. And so it's, definitionally a 0:17:55.680 --> 0:18:00.800 little bit more fragmented outside the US. So our technology binding, 0:18:00.859 --> 0:18:03.240 so to speak, can really play a good role in 0:18:03.780 --> 0:18:06.200 getting rid of the fragmentation a lot of customers have 0:18:06.220 --> 0:18:08.359 to deal with on a daily basis and just making 0:18:08.400 --> 0:18:11.459 it look like one easy to use network. Here's one 0:18:11.510 --> 0:18:15.150 quick example. Over in the EU, for example, as a customer, 0:18:15.210 --> 0:18:17.290 you can store your inventory in one of our warehouses, 0:18:17.330 --> 0:18:21.590 let's say in Germany, but you can actually fulfill across 20, 0:18:21.590 --> 0:18:25.879 I think it's 27, 26 EU states from that one 0:18:25.960 --> 0:18:29.300 pool of inventory in Germany. And that's seamless to the 0:18:29.359 --> 0:18:31.720 end customer. You don't have to have your inventory in 0:18:31.720 --> 0:18:34.200 26 different spots. You can have it in one. Gotcha. 0:18:34.540 --> 0:18:37.100 And so looking here in the domestic market, where do 0:18:37.119 --> 0:18:42.200 you guys see the most growth for ASCS? Is it 0:18:42.220 --> 0:18:44.420 the LTL side? Is it the freight brokerage side? Is 0:18:44.460 --> 0:18:45.159 it forwarding? 0:18:45.220 --> 0:18:46.000 Is it fulfillment? 0:18:46.380 --> 0:18:49.070 Where is the growth for the organization? 0:18:49.090 --> 0:18:52.740 Yeah. Well... I'll tell you, all of the modes are 0:18:52.780 --> 0:18:57.700 growing very nicely. I'll say that our partial shipping business 0:18:58.070 --> 0:19:01.130 is cooking with gas, as one of my former bosses 0:19:01.190 --> 0:19:04.690 used to say. That's growing really, really quickly. And I 0:19:04.770 --> 0:19:09.609 think it's because the same last mile network that does 0:19:09.750 --> 0:19:14.369 the delivery to end customers for Amazon is now doing 0:19:14.410 --> 0:19:16.830 it for business of all shapes and sizes. So you 0:19:16.869 --> 0:19:21.639 get the same speed, same delivery. same resilience. You get 0:19:21.680 --> 0:19:23.639 the little maps that show up on your phone that 0:19:23.660 --> 0:19:26.260 show where it is. I think those are. 0:19:26.780 --> 0:19:29.330 And your cost to serve is lower than the legacy players. 0:19:29.430 --> 0:19:32.449 Cost to serve is strong as well. We like to 0:19:32.490 --> 0:19:34.910 think of it as we deliver the most value per 0:19:36.030 --> 0:19:40.370 dollar spent. You know, we are unlikely to ever be 0:19:40.430 --> 0:19:44.060 the sort of the cheapest alternative out there. That's just 0:19:44.119 --> 0:19:46.260 not how we think about it. We want to provide 0:19:46.619 --> 0:19:50.380 the most services per dollar of anybody else. Um, So 0:19:50.480 --> 0:19:52.700 you don't really use us if you want like the 0:19:52.760 --> 0:19:55.700 cheapest and the slowest. You use us if you want 0:19:55.920 --> 0:19:59.770 the best service, which then can hopefully grow your overall business. Because, 0:20:00.410 --> 0:20:02.230 you know, we said Amazon, if there's one thing we've 0:20:02.250 --> 0:20:04.270 learned over the past 25 years or so is that 0:20:04.290 --> 0:20:07.450 supply chain is actually a growth driver, not just a 0:20:07.470 --> 0:20:07.860 cost center. 0:20:08.650 --> 0:20:11.680 And so, you know, obviously within Amazon's DNA, you're a 0:20:11.700 --> 0:20:16.780 technology company that happens to do other things and do 0:20:16.820 --> 0:20:20.340 them quite well. There's been a huge conversation about how 0:20:20.480 --> 0:20:23.619 AI is going to be disrupting the supply chain and 0:20:23.869 --> 0:20:27.130 logistics industries. Can you talk about, you know, how Amazon 0:20:27.170 --> 0:20:31.050 is using AI within its supply chain and kind of 0:20:31.109 --> 0:20:33.530 where you see the benefits and where you see that 0:20:33.570 --> 0:20:34.369 going going forward? 0:20:34.800 --> 0:20:38.220 Yeah, we've been using AI for a number of years, 0:20:38.260 --> 0:20:42.400 of course, beginning really with machine learning. And now it's 0:20:43.380 --> 0:20:48.899 moving as quickly as I've ever seen any technology transition 0:20:48.980 --> 0:20:53.750 into large language model and agents. The things that have 0:20:53.770 --> 0:20:56.050 been working for a number of years for us with 0:20:56.090 --> 0:21:02.160 regards to AI, the first is disruption management. which is 0:21:03.100 --> 0:21:06.710 something happens in the world and we need to reroute 0:21:06.750 --> 0:21:12.530 our network. All that's been happening automatically for a number 0:21:12.570 --> 0:21:18.270 of years. Second thing, a place where we have a 0:21:18.350 --> 0:21:23.139 heavy use of AI is in inventory placement. We have 0:21:23.180 --> 0:21:25.960 over 400 million SKUs, as I said a little bit earlier, 0:21:26.160 --> 0:21:36.030 for sale on Amazon.com. And we have to forecast placement 0:21:36.070 --> 0:21:43.650 for that inventory on an almost real-time basis. And that 0:21:43.690 --> 0:21:49.720 really matters these days, particularly for our ASCS customers, because 0:21:49.740 --> 0:21:53.179 they're not just selling on Amazon. They're also selling on 0:21:53.220 --> 0:21:57.040 marketplaces like TikTok, for example. And they can have real 0:21:57.300 --> 0:22:01.010 demand spikes on TikTok. And they need to make sure 0:22:01.030 --> 0:22:03.909 that their inventory is in the right warehouse to fulfill 0:22:03.950 --> 0:22:12.350 that demand. Our AI inventory placement algorithms are behind a 0:22:12.369 --> 0:22:15.510 lot of that placement for us. I think that the trend, 0:22:15.530 --> 0:22:21.360 of course, along with everybody, is to move to not 0:22:21.480 --> 0:22:27.820 only detection and monitoring, but then following on to action. 0:22:29.710 --> 0:22:34.950 If I am using AI to figure out where inventory 0:22:34.990 --> 0:22:36.650 needs to be in the network and I don't have 0:22:36.730 --> 0:22:40.580 enough in a particular location, right now a human being 0:22:40.619 --> 0:22:43.619 has to step in and make that inventory transfer. Very, 0:22:43.660 --> 0:22:47.860 very shortly, agents are going to be making that inventory transfer. 0:22:48.480 --> 0:22:50.479 And the human beings are going to be more focused 0:22:50.580 --> 0:22:52.800 on strategy and scenario planning. 0:22:52.820 --> 0:22:58.240 Okay. And as leading ASCS in your seat, is there 0:22:58.280 --> 0:23:01.920 a technology that you're really excited about, whether it's, you know, 0:23:02.940 --> 0:23:07.620 automation or autonomous trucking or, you know, developments in AI 0:23:08.000 --> 0:23:11.500 that you really think are going to, you know, benefit 0:23:12.080 --> 0:23:12.960 your supply chains? 0:23:13.680 --> 0:23:17.520 Well, the two that come to mind immediately is, you know, 0:23:17.540 --> 0:23:22.129 I do think AI is going to make our sustainability 0:23:22.170 --> 0:23:28.389 program even more effective. Getting a package from place A 0:23:28.390 --> 0:23:34.560 to place B in the shortest, most efficient route in 0:23:34.580 --> 0:23:39.040 the face of disruptions, I think we're going to save 0:23:39.100 --> 0:23:40.780 a lot of miles on the road and a lot 0:23:40.800 --> 0:23:43.260 of miles in the air because of AI because of that, 0:23:43.340 --> 0:23:46.510 and the world will be better off for it. I 0:23:46.550 --> 0:23:50.659 think the second thing is robotics. As I said a 0:23:50.660 --> 0:23:54.340 little bit earlier, we've got over a million robots deployed 0:23:54.359 --> 0:23:59.720 in our networks today. And the pace of improvement of 0:23:59.780 --> 0:24:05.590 what those robots can do is amazing, quite frankly. And 0:24:05.690 --> 0:24:10.510 we have moved from moving pallets of things across warehouses 0:24:10.630 --> 0:24:14.260 within a divine zone for the robots to picking and 0:24:14.300 --> 0:24:20.500 packing with arms or robots that can move throughout the 0:24:20.520 --> 0:24:27.980 warehouse intermingled with our associates at a very high rate. 0:24:28.040 --> 0:24:31.899 And I think that is going to keep accelerating over 0:24:31.920 --> 0:24:36.260 the next few years here. That's important because all of 0:24:36.320 --> 0:24:41.120 that both improves safety, but it also lets us get 0:24:41.270 --> 0:24:45.860 more demand over through the same network. And that, of course, 0:24:45.900 --> 0:24:49.480 decreases variable costs. We can pass those lower costs on 0:24:49.500 --> 0:24:50.660 to our ASCS customers. 0:24:51.640 --> 0:24:54.100