Amazon Reshapes its Fulfillment Network
The e-commerce giant has targeted 66 planned or existing facilities in what experts say amounts to a reconfiguration of its fulfillment in local U.S. markets
Amazon.com Inc. appears to be fine-tuning its distribution strategy as it pauses its warehouse expansion across the U.S., consolidating operations in some areas while pulling back growth plans in secondary markets, according to logistics experts.
The e-commerce giant has canceled, closed and delayed facilities at each stage of its order fulfillment process, while continuing to move forward with large distribution centers that funnel goods into its home-delivery network since it announced earlier this year that it was pausing its ambitious U.S. logistics expansion. Amazon has shut down, called off or pushed back the openings of 66 delivery stations, fulfillment centers and other facilities as of this week, according to data from supply-chain consulting firm MWPVL International Inc.
Fourteen of the 15 buildings Amazon has closed have been delivery stations, the smaller facilities where the company prepares online orders for delivery to customers’ homes, said Marc Wulfraat, founder and president of MWPVL. Those sites have largely been in areas where the company had multiple facilities close to one another, he said, suggesting Amazon will consolidate the operations in fewer stations.
Ten of the planned 25 projects Amazon has canceled have been larger fulfillment centers slated for development in markets including Louisville, Ky., Greensboro, N.C., and Kansas City, Mo., according to MWPVL data.
“These have tended to be more capital-intensive projects,” Mr. Wulfraat said, “and so they decided to nix the project to preserve capital and to reduce operating expenses.”
An Amazon spokesperson said the company takes a variety of factors into account when deciding where to develop future sites and to maintain a presence.
“While we’re closing some of our older sites, we’re also enhancing some of our facilities and we continue to open new sites as well,” the spokesperson said.
Amazon has continued investing in its logistics strategy. The company on Friday said it has acquired D. Cloostermans–Huwaert NV, a Belgian company that designs technology to manage the flow of robots through warehouses. The acquisition is Amazon’s latest in a series of warehouse-automation investments since buying Kiva Systems Inc. for $775 million in 2012.
Amazon accelerated its logistics expansion during the pandemic as e-commerce demand boomed. The company added tens of millions of square feet of warehouse space, bought trucks and vans, and hired tens of thousands of workers to keep up with demand. Its warehouse footprint grew from 165 million square feet before the pandemic to 379 million square feet by May 2022, according to MWPVL.
Amazon Chief Executive Andy Jassy said recently that the company in 24 months had doubled the size of a fulfillment network that it had built up over 25 years.
E-commerce growth more recently has stalled as high inflation hits Americans’ pocketbooks and consumers return to in-person shopping.
The pullback in online sales demand and broader signs of an economic slowdown have many companies reassessing their logistics footprints, said Jason Tolliver, executive managing director of logistics and industrial for commercial real-estate services firm Cushman & Wakefield.
“The natural business reaction to that is to pause, because your margin for error in an environment of complexity and increasing costs shrinks, and the cost of a mistake rises,” Mr. Tolliver said.
Amazon is moving forward with plans for several new warehouses, including more of its sprawling distribution centers, where it transports goods in bulk to middle-mile and last-mile facilities.
“If there is a financial benefit to opening a new building, then Amazon will stay the course,” Mr. Wulfraat said.
