Amazon’s Recalibration Is Boosting Delivery Efficiency
Amazon’s fulfillment network shift exceeds expectations
Higher local in-stock levels paired with improved connectivity between facilities is driving speedier deliveries.
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Amazon's transition to a regional distribution system surpassed their projections, having a "greater effect than we had hoped for," remarked President and CEO Andrew Jassy during a Q3 financial discussion.
In the wake of the pandemic-induced e-commerce surge stabilizing, Amazon has been recalibrating its nationwide distribution framework over the past twelve months.
This change offers multiple advantages such as increased inventory, enhanced links between various facilities, and shorter delivery pathways, leading to quicker delivery times, explained Jassy to analysts.
While Amazon has pivoted away from aggressively expanding its operational capacity via new property acquisitions, its dedication to enhancing delivery speeds hasn’t wavered.
“The first substantial rearchitecture centered on the regionalization change,” Jassy said. “We obviously like the results but don’t think we fully realize all the benefits yet and we continue to make steady improvements in fine-tuning the placement algorithms to enable even more in-region fulfillment and to further increase consolidation into fewer shipments.”
Earlier in the year, Amazon transitioned from a single national distribution hub in the U.S. to eight unique regions, aiming to cut expenses and fine-tune delivery rates. Before this, if a local center was out of an item, Amazon would have to ship from across the nation, causing delays.
Amazon has been steadily decreasing its distribution investments, simplifying its distribution procedures, and cutting costs. They are now exploring alternative methods to refine their operations and accelerate delivery for Prime subscribers.
“Shorter travel distances and fewer touches mean lower cost to serve,” Jassy said. “But perhaps most importantly, shorter distances and fewer touches mean that customers are getting their shipments faster. We remain on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history.”
This strategy encompasses fine-tuning inventory levels within their regional framework via placement algorithms. Such measures are leading to cost savings, Jassy mentioned. He added that Amazon modified many connections between its distribution and sorting hubs to foster direct links between distribution sites and delivery points, a task made simpler with localized stock availability.
