Former VP, Amazon Logistics Europe
Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at Amazon.com. He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to Amazon.co.uk (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university. Read moreView Profile Page
Philippe, great to be with you, welcome.
Nice to be here.
As we open up our conversation, could you share a little bit about what you’ve been up to, for the last few decades?
I’m an expert in logistics. I’ve been working in logistics all my life. I was lucky enough, in 2000, to join a start-up. It was five years old at that time, an American company, called Amazon. They wanted to open their business in France and they asked me to build their logistics in France. I spent 17 years in this company and ended up being vice president of the European supply chain and transportation. I worked at different stages, with Amazon, but only in the supply chain.
Could you give us a description of the end to end supply chain structure?
First, I will describe a bit about the end to end supply chain, not necessarily focusing on the Amazon way to look at the end to end supply chain. End to end supply chain could be multi-dimensional. It literally is, from the start of the product, wherever you put the start of the product, to the consumer of the product and all of the stages in between. Now it’s very commonly accepted where the end of the chain is and what the different steps are. Now you decide on the full process, to go further down in your processes, to understand.
Particularly now, we see the importance of this end to end, when you try to understand where your products are coming from and where is the beginning of the chain and even where the product or parts of your product are coming from, in order for you to get your product. That is the end to end supply chain. Understanding every single part of a product. Where is it coming from, how is it getting to you? How do you transform it and how is it going to be stored and distributed and, finally, being at the end, with the customer. Is it a store or it’s an online distribution, for example?
That’s the bigger picture in which logistics operations fit. Could we begin to relate this to Amazon’s operations and actually explore the practicalities and the real structure of a supply chain and logistics process, within the context of the evolution of Amazon’s business, over the years?
Absolutely. Amazon did start with a very narrow part of this end to end. Amazon started from, I buy a finished product, and I store it and when a customer orders it, online, I send it to the customer. They thought they were really at the very end of the chain. They had the buying of the product, the storage of the product and after, the fulfilment of the order. Now that’s a very simple model, where Amazon started, therefore, to own their own warehouse, the part of the supply chain they really needed to master, in this new way of fulfilling orders. When you compare e-commerce, or the Amazon supply chain, the e-commerce supply chain, you remove some steps. You don’t have wholesalers or distributors anymore, like the traditional retailers have and you don’t have a shop.
Therefore, Amazon has really stripped out, due to the model, all these small pieces, which were in the chain of distribution, in the supply chain and has created just a model where there were warehouses. The product was coming from the vendor and those products were going directly to the consumer, without touching any other part of the chain. Only the transportation, taking the product there. Amazon started to build from there, a network of warehouses. Amazon has always made it a priority to build their own warehouses. They didn’t want to give that to anyone.
There were two pieces that Amazon wanted to manage. Obviously, the website, which is the technology part of Amazon, all the features and how the website was set up. The second part was the distribution centers, which are called fulfilment centers, in Amazon’s world and which are the places where the products are received and sent to customers.
That was a very simple thing. Everywhere else they were using third party or a supplier, to fulfil their part. For example, they were buying their product from the brands directly, and the brands were delivering to them, to the fulfilment center. The products were stored by Amazon people, in the warehouse, all fulfilled, prepared and packed by Amazon people, and were handed over to carriers, directly, who were in charge of delivery to the customer.
Over time, Amazon stepped into those pieces, as well. As Amazon got bigger, it started to step into the space where they think they can bring a value, on top of what the other carrier was doing. Therefore, they started to do some of the inbound, for example. Amazon started to go and collect from vendors, from suppliers, because they thought that taking care of the transportation, to manage that chain even better, is where you should step into, to start to collect from the vendor directly, in order to manage and be in control of the lead time to get the product. Indeed, it helped them to get better inventory management.
After, and it took a while, but they started to step into the outbound piece of it, the outbound transportation. Instead of just delivering to the carrier, there were two things they did. First, they started to understand the carrier network and try to take a piece of that. Meaning that the first stage that they did, was in the US and was the sorting center. In the US, they went to what they call the middle man. Instead of giving the parcel to the carrier, from their own door, from Reno Fulfilment Centre in Nevada, for example, to fulfil in New York, based on the size they are, they can carry the parcel from Nevada to the area of New York and give to the final mile carrier, mostly frequently USPS in the US, or even UPS. For the US, they were basically cutting the rule and carrying the products themselves, to the area where it should be delivered.
In Europe, there is no zone and there was a country by country organization, which is still the case. It was more rare to have those products being on one side of Europe, for the other side a country has their own fulfilment network. Therefore, instead of doing that, we jumped directly to the last mile and Amazon started to get interested in, instead of just giving to the last mile carrier ultimately, just to go and deliver to the door. In 2011, 2012, we started to test doing our own delivery, to the customer’s door, to again, step into this last mile business.
If you’re talking about Europe, you’ve got the postal network, first of all, which were really the major players in the last mile delivery of parcels, but also a lot of other carriers, such as DHL, DPD, FedEx, which is a little bit less present in Europe, than it is in the US. Amazon decided to step into that, in order to bring what Amazon do the best, meaning its operational experience, as well as its technology, into this area.
Could you make explicit the principles that govern the evolution of Amazon’s involvement in logistics operations?
That’s pretty easy, because it’s driven by only one thing. It’s driven by the customer experience and the ability of Amazon to be able to fulfil their job, at the same level of quality and cost, that they’ve always done. Therefore, Amazon is only driven by making sure that every time they could make a substantial impact on the business. They started to have larger volume, because the small start-up I mentioned at the beginning, had evolved drastically. Amazon really has the capacity and the size to make differences in whatever they do.
Amazon is a very operational driven company. People have seen Amazon, over time, as a technological company. Yes, indeed, but not only as a website or the cloud, which I’m going to put aside now, which is another part of Amazon that has developed, but really, technologically, an inventive operation. Amazon has considered logistics as being the key element in making e-commerce part of the business successful. Therefore, every time that Amazon thinks that it could influence the experience of the customer, getting his product on time, and the right product, as well as the cost of getting this product to the customer, Amazon has invested some money and time and people. That’s the key thing, as well. Each of the business phases, were just driven by the size of the Amazon business and the ability to influence it.
Just to take an example, if you are talking about the last mile, I’m going to give you a very concrete example of what happened in the UK. The first time Amazon stepped into the last mile, it was in the UK and I was in charge of the transportation, at that time. Back in 2007, 2008, I took over transportation in Europe, which meant dealing with all our carriers in Europe, in each of the countries where we were operating. During some of the negotiations, in 2008, one of the carriers in the UK told me, when you have 80 million parcels to deliver, a year, you may be able to deliver yourself. At that time, Amazon was not that big in the UK. That was it; that was the discussion during the negotiation. Someone said, yes, maybe you will be big enough to do it yourself.