As an e-commerce leader and tech giant, Amazon is well positioned to take advantage of rapid advances in supply chain digitalization, consumer tech development, and automation to improve its operations and continue to stay ahead of competitors.<\/p>\n
As Amazon\u2019s e-commerce operations have grown explosively, so have its shipping and logistics costs. In 2011 Amazon spent over $11B annually on shipping alone [1]\u00a0and those costs can easily rise as Amazon demands more and more speed from its shipping partners. Both shipping price and speed are key to Amazon\u2019s strategy to woo consumers away from brick and mortar shopping, and even minor improvements in either can greatly increase its competitiveness and dominance in the US market while delivering a best in class customer experience. Developing new ways of applying technology advances to all phases of fulfillment (warehousing, packing, freight transit, last mile shipping, etc.) is Amazon\u2019s best bet for capturing improved value that can be passed on to the consumer.<\/p>\n
Recently, Amazon has rolled out new products and services that greatly improve efficiencies and experience for both external and internal customers. These developments seek to reduce cost by improving inventory placement, delivery speed, and successful delivery completion through innovative takes on the end-to-end fulfillment.<\/p>\n
On the internal side, Amazon\u2019s experiments with anticipatory shipping have been designed to leverage its deep understanding of its customers to move inventory close to their predicted destinations before consumers even make a purchase decision. With its recent patent for anticipatory shipping [2] Amazon revealed its plan use advances in machine intelligence to move inventory across its fulfillment centers using cheaper (but slower) freight haulers ahead of time in order to avoid costlier forms of rush shipping to satisfy consumers\u2019 demand for rapid fulfillment. This strategy is further supported by Amazon\u2019s existing \u201cSubscribe & Save\u201d product (which is also consumer-facing) which offers consumers 5-15% discounts [3] in exchange for bundling monthly shipments of regularly consumed goods. This bundling strategy enables Amazon to leverage the same lower-cost shipping methods to get inventory close to consumers at predictable demand and cost.<\/p>\n
On the consumer-side, Amazon has recently begun experimenting with new means of ensuring delivery completion with Amazon Hub and Amazon Key. These were developed to combat the high costs of replacing packages stolen from customers\u2019 doorsteps and are low-hanging fruit for improving operations through digitalization at the final step of the fulfillment chain [4]. Both products tackle the same problem of securing package pickup but for different consumers; multi-unit building dwellers and single-family home residents respectively. While Amazon Hub utilizes fairly straightforward technology (it\u2019s a glorified smart locker), Amazon Key is a much more innovative IoT solution. Amazon customers who purchase a Key kit enable Amazon carriers to securely deliver packages inside a home, utilizing the included smart lock for the front door and Amazon Cloud Cam to record and secure the process [5]. If this unique digital strategy is successful, Amazon will simultaneously please its customers and bottom-line with the elimination of lost packages at the last mile.<\/p>\n
Looking forward a few years, Amazon is beginning to make moves towards applying its digital prowess towards the \u201cmiddle mile\u201d portion of the supply chain through experiments in freight ground and air transportation. Amazon recently announced new leases of freight aircraft and trucks [6] and its believed that Amazon could save as much as $1B by shipping its own packages [7]. It\u2019s easy to see that once Amazon better learns the intricacies of managing freight logistics on its own it can begin to build innovative digital solutions (a la Amazon Key \/ anticipatory shipping) to further improve those cost savings. To that end, new leaks have shown that Amazon is already experimenting with driverless trucking [8] and new means of managing truck fleets with an \u201cUber for trucks\u201d [9]. Amazon has a unique opportunity here (despite Uber\u2019s recent launch of an identical product [10]) because it can guarantee demand for participating drivers as a result of its massive package volume.<\/p>\n
To keep up this rapid pace of digitalization in its supply chain, Amazon needs to continue investing in experiments at leveraging its strengths in big data and machine learning to further improve end-to-end fulfillment. As the established dominant player in its market, Amazon has the freedom to try wild ideas (such as Amazon Go) that upend the current logistics paradigms. It\u2019d be great to see Amazon use its impressive resources to push into new realms such as reforming the US rail system, improving truck load utilization, moving towards all-renewable fuel sources, and utilizing last-mile manufacturing, all powered by efficiencies gained through digitalization, in ways that only Amazon can.<\/p>\n
For Amazon to win in improving its fulfillment processes will lead to wins for the consumer, in lower costs, improved experience, and better environmentalism. However much of these wins will be achieved through digitalization of the supply chain that inevitably involves cutting human jobs, which may be a major political and human issue for Amazon to solve in its future.<\/p>\n
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[1<\/a>]\u00a0Bensinger, G. & Stevens, L. 2016, Amazon’s Newest Ambition — Company, a partner to UPS and FedEx, plots to deliver its own packages amid rising shipping costs<\/i>, Europe edn, Brussels.<\/p>\n [2<\/a>]\u00a0Lomas, N. (2017). Amazon Patents \u201cAnticipatory\u201d Shipping \u2014 To Start Sending Stuff Before You\u2019ve Bought\u00a0It<\/i>. [online] TechCrunch. Available at: https:\/\/techcrunch.com\/2014\/01\/18\/amazon-pre-ships\/ [Accessed 15 Nov. 2017].<\/p>\n [3<\/a>]\u00a0Amazon.com. (2017). Amazon.com: : Subscribe & Save Learn More<\/i>. [online] Available at: https:\/\/www.amazon.com\/b?node=15283820011 [Accessed 15 Nov. 2017].<\/p>\n [4<\/a>] Popper, B. (2017). Amazon Key is a new service that lets couriers unlock your front door<\/i>. [online] The Verge. Available at: https:\/\/www.theverge.com\/2017\/10\/25\/16538834\/amazon-key-in-home-delivery-unlock-door-prime-cloud-cam-smart-lock [Accessed 15 Nov. 2017].<\/p>\n [5<\/a>] Popper, B. (2017). Amazon Key is a new service that lets couriers unlock your front door<\/i>. [online] The Verge. Available at: https:\/\/www.theverge.com\/2017\/10\/25\/16538834\/amazon-key-in-home-delivery-unlock-door-prime-cloud-cam-smart-lock [Accessed 15 Nov. 2017].<\/p>\n [6<\/a>]\u00a0Bensinger, G. & Stevens, L. 2016, Amazon’s Newest Ambition — Company, a partner to UPS and FedEx, plots to deliver its own packages amid rising shipping costs<\/i>, Europe edn, Brussels.<\/p>\n [7<\/a>]\u00a0Bensinger, G. & Stevens, L. 2016, Amazon’s Newest Ambition — Company, a partner to UPS and FedEx, plots to deliver its own packages amid rising shipping costs<\/i>, Europe edn, Brussels.<\/p>\n [8<\/a>]\u00a0Amazon Studies Driverless Ideas — WSJ<\/i> 2017, , New York.<\/p>\n