What is Amazon’s Logistics? Top 7 Lessons to Follow for Any Business
- What is Amazon’s logistics today?
- Lesson #1. Improve client service at all cost
- Lesson #2. Keep the balance between delivery cost and speed
- Lesson #3. Automate last-mile delivery processes
- Lesson #4. Implement warehouse automation
- Lesson #5. Expedite order execution
- Lesson #6. Strive for perfection
- Lesson #7. Leverage long-term vision and innovation
- Solutions to work with courier services
- Our experience in developing custom logistics solutions for eCommerce
- Thinking of Amazon’s best practices
From a mere bookseller to one of the world’s largest marketplaces, Amazon’s path is impressive and insightful for businesses striving to learn from its success. The company has come a long way to achieve the leading position in the market, and its story is full of tips and lifehacks for businesses of all sizes and maturity levels.
Have you ever wondered why Amazon delivery is considered the best? In fact, what is Amazon’s logistics, and how did it lead the biggest company to success? Amazon makes the rules of flawless service and quick delivery, tests drones, and implements artificial intelligence for warehouses.
Are the world-class company’s realities too far away from most of the countries? What lessons can we draw from Amazon’s experience? Keep reading to learn the answers.
What is Amazon’s logistics today?
What is Amazon’s logistics delivery, and how does the marketplace accommodate the massive number of orders daily?
To understand how Amazon’s logistics business works, we should start by exploring the company’s supply chain. It comprises two fundamental elements: Amazon Fulfillment Centers and Amazon Delivery Fleet. Let’s take a closer look at each.
Amazon Fulfillment Centers
Amazon Fulfillment Centers are warehouses where Amazon handles products for order fulfillment. They store, pick, pack, and ship goods to B2C customers on behalf of third-party sellers, as well as Amazon’s own products.
Amazon has over 175 fulfillment centers worldwide and delivers millions of items annually. With Amazon Prime members being eligible for 2-day shipping, all Amazon Fulfillment Centers must work smoothly and handle all those deliveries timely. The company implements fulfillment techs to accommodate tremendous numbers of incoming orders. This encompasses a range of advanced technologies utilized for order processing, inventory management, and warehouse automation.
The work of Amazon Fulfillment Centers spans several core steps:
- Receiving goods. Fulfillment centers get massive numbers of products either from an Amazon facility or small businesses and entrepreneurs. The company utilizes robotics to take freight off trailers and build them into pallets.
- Items storage. Amazon’s logistics warehouses store products with the help of a computer tracking system. When warehouse managers need to process a product, they get the system’s notification pointing to the storage cell in which the product is kept.
- Orders picking. Robotics comes on the scene here again, as robots bring the ordered items to Amazon associates at pick stations. According to the information on the screen, workers distribute the items into the special yellow boxes, regarded as totes.
- Quality assurance. A symbiosis between humans and robots provides a great level of quality assurance. Humans control the correct function of robots, and the continual implementation of tech breakthroughs allows the massive Amazon logistics shipping business to prosper.
- Orders packaging. Finally, the system identifies which item belongs to which shipment, organizes and scans them, and then sends them to the pack station. At the packing location, the system recommends the respective box sizes and determines the required amount of tape. If an item is provided by a third party, it is sent in an original packaging.
Amazon Delivery Fleet
Proper storage is only part of the job. Now we are approaching the second crucial phase, which is delivering products to consumers. What is Amazon logistics shipping and how does it work?
The freight’s journey at Amazon begins at the fulfillment centers, with the following transfer to the sort centers. There, the packages are distributed according to the destination and required delivery speed. Finally, the company identifies the most efficient shipping method to transport the items.
Amazon uses big rigs, trucks, and airplanes for cargo shipping. Its vehicles can transport more than 2 thousand parcels at the same time. Airplanes fly in more than 20 airports and have a capacity of about 30 containers.
Overall, Amazon utilizes a massive delivery fleet, including a variety of vehicle types and methods, to keep up with the growing consumer demand.
- Amazon Delivery Vans and Trucks. Amazon operates a growing fleet of delivery vans and trucks. These vehicles are used for last-mile deliveries and are frequently driven by Amazon Delivery Service Partners (DSPs).
- Amazon Flex Drivers. Amazon Flex is a program that allows independent contractors to use their vehicles to deliver Amazon parcels. These drivers use their personal cars to fulfill transportation needs.
- Amazon Prime Now Vehicles. Amazon Prime Now offers ultra-fast delivery of select products. These deliveries are typically performed by specialized Prime Now vehicles, which are available in some urban areas.
- Amazon Air Cargo. Amazon Air includes a fleet of cargo planes that transport packages between airports, supporting the company’s logistics network.
- Innovative delivery methods. Amazon continually explores innovative shipping solutions, including electric delivery vehicles and autonomous delivery robots, to enhance efficiency and minimize environmental impact.
Amazon collaborates with the largest 3PL and courier service providers in the USA to deliver more parcels at the right time.
However, the company’s business processes were not always like that. It’s hard to believe, yet when Amazon was starting to grow, it used to deliver orders from week to month. To send a book to a customer, they formed a request for a distributor, waited for the goods’ arrival, and stored an item in the basement.
The company has been struggling with an expensive and slow delivery all the way, optimizing routes for years. And, as a result, Amazon has headed the worldwide market.
There are a lot of companies in different countries, which grow fast and face problems Amazon overcame. And the biggest challenge is chaos in logistics.
Check the seven key lessons from Amazon, which are relevant today for business development in any area.
Lesson #1. Improve client service at all cost
Walker, the consulting company, predicts that the clients’ experience will play a key role in choosing a brand by the end of 2020. About 86% of consumers are ready to pay more for high-quality service. But when you work on a brand, it might take time to win over the clients. Only a few companies think about long-term investments in client service. Walker’s experts propose to improve client service quality through personalization of interactions, technologies, and communications.
How it worked out for Amazon. In 2020, the company’s share prices started to fall. In the summer of the same year, the book “Harry Potter and the Goblet of Fire” was released. Amazon offered a 40% discount on buying and offered free and fast delivery at the same time. The clients received book copies on the very release day.
The company suffered a loss, everyone talked about profligacy. Jeff Bezos relied on the quality of client service. He lost money, but the tactic proved to be perfect in the longer term.
By working on client service, a company saves the customer base for a long time.
Lesson #2. Keep the balance between delivery cost and speed
Customers’ expectations of delivery speed grow. According to Sendcloud research, 44% of consumers abandon their shopping carts due to inappropriate delivery options in 2023.
When a business plans last-mile delivery, it faces 2 client types. People who want to receive an order faster belong to the first type. They are ready to pay more. The second type is those who can wait. But they don’t want to pay for the delivery.
How Amazon solved the problem. In 2000-2001, at Christmas, the company promoted a campaign with free shipping for orders worth more than 100 dollars. The campaign has taken sales to a new level.
After the success, Jeff Bezos thought about free shipping on an ongoing basis. Some thought that it would increase spending. As a result, Amazon implemented 2 delivery options. The first one is fast shipping. And the second one is free delivery. The company delivered goods at its own expense only after full transport loading. The clients’ loyalty has increased and the company has gotten rid of additional spending.
Lesson #3. Automate last-mile delivery processes
Last-mile delivery is the hardest step in the supply chain. Large companies worldwide invest in IT solutions to minimize human factors.
Some business owners can afford customized IT products. And for the smaller players, ready-to-use tools are offered in the market.
How it was at Amazon. When the company started to grow, the distribution centers didn’t overcome challenges.
Amazon has implemented algorithms to optimize workload between warehouses. Jeff Bezos instructed developers to add a new interface to the website. It would calculate the delivery date. As it turned out, at that time the company used to own the system, which didn’t meet Amazon’s business processes.
Then, the company’s software engineers developed their own algorithms to make order scenarios, which would calculate millions of delivery options.
Lesson #4. Implement warehouse automation
Warehouse automation is crucial for logistics companies as it enhances efficiency, reduces operational costs, and improves order accuracy. Automated systems, such as robots and conveyor belts, streamline picking, packing, and sorting processes, enabling prompt order fulfillment. This technology also minimizes labor requirements, increases storage capacity, and reduces errors, leading to quicker deliveries. In a fiercely competitive environment, warehouse automation is vital to comply with consumer demands and maintain a competitive edge.
Amazon extensively uses warehouse automation and robotics to minimize human labor and mistakes.Robots successfully perform order picking, packing, moving, and replenishing inventory. Automation and robotics applied together significantly save costs and expedite operations. Advanced robots can locate items all over the warehouse, even in small remote bins, thanks to radio frequency identification (RFID) codes and memory tracking technology.
Lesson #5. Expedite order execution
Quick delivery matters in the modern business world.
- 62% of buyers assert delivery speeds affect their purchasing decisions.
- 30% of online shoppers expect same-day shipping.
- 85% of buyers resign a purchase when a delivery time is too long.
Therefore, the company that attains faster shipping speeds will win the tournament for consumer attention.
Amazon operates an extensive network of fulfillment centers strategically located near major transportation hubs. Such facilities store store and ship products to reduce transit times. Furthermore, Amazon utilizes software for route optimization. Thus, the company leverages Rabbit, a proprietary tool that helps to plan the most efficient route considering traffic and other potential delays. The application helps to organize the drivers’ work and also provides real-time information about delivery status.
Such an approach allows Amazon to set standards for speedy transportation. They are praised by consumers for the same-day delivery option. Furthermore, the company suggests its customers choose the desired shipping time interval and carefully monitors the adherence to the established limits.
Ultimately, 58% of buyers purchase more from Amazon thanks to its same-day service.
Another tech that gives Amazon an extra edge is its predictive analytical systems that help correlate supply with the forecasted demand.
Lesson #6. Strive for perfection
Emerging technologies, legal regulations, altering consumer preferences, and other changes dictate the need to think out of the box.
Amazon continually identifies new areas for improvement to guarantee a perfect shopping experience for its clients. Thus, the marketplace performed several changes on its platform and its processes:
- One-click ordering.
- Product tracking and tailored recommendations according to order history.
- Instant shopping on social media.
- Parcel pick-up from Amazon hubs or Amazon lockers.
- Amazon Prime – a subscription-based program carrying an abundance of benefits to its members.
Lesson #7. Leverage long-term vision and innovation
Sustainable growth is only possible when you are planning your business operations from a long-term perspective. Keeping up with trends, forecasting, and setting long-term goals allows you to establish your company as a strong industry player.
Tech novelties are intertwined with business development as technology impacts virtually every aspect of our lives. Therefore, early adopters stay on the surge.
Amazon continually strives to outperform its own achievements in whatever area, be it product assortment (from a bookseller to a giant, all-encompassing marketplace), customer service (free delivery, convenient delivery schedule, and more), or shipment speed (same-day delivery). The company utilizes business analysis and predictive analytics to identify grounds for improvements in both short and long-term perspectives. Amazon’s development goes hand-by-hand with innovations, as the company stays in the avant-garde of new tech implementation. Thus, Amazon leverages AI and ML, AR/VR, robotics and drones, the Internet of Things, and more. For example, the company already utilizes drones for fast delivery and is about to implement even more advanced “sense and avoid” technology that allows for identifying and avoiding various kinds of obstacles. This safety tech opens the opportunity to deliver packages in tight locations such as backyards and densely populated areas.
Solutions to work with courier services
To achieve success, the founder of Amazon discovered the formula: “Sell more, transport less”. However, all over the world, more than 60% of companies outsource their logistics with courier services and 3PL providers. Experience shows it’s cheaper and more efficient. For example, for some time Ukrainian marketplace Rozetka has been trying to implement its own last-mile logistics, but the company didn’t surpass Nova Poshta, the local 3PL operator. The logistics partner saved the marketplace many troubles and cautioned against mistakes Amazon went through.
How to Create an App and Convert a Website into It? Read on our blog.
Companies all around the world have 2 other problems:
- Choosing a courier service to deliver orders. E.g., eCommerce businesses can collaborate with several logistics partners. Courier services set tariffs and routes differently. It’s time to recall lesson # 2 by Amazon, stating that you should provide a choice between delivery speed and cost for your clients.
- Order processing speed. An operator needs on average 30-60 seconds to send a request to the courier service. But he can’t fill in the information without pause. The more requests a company receives, the higher the probability of mistakes.
CoreTeka develops IT solutions for the logistics industry. That’s why we know so much about last-mile challenges for business. One day, after communicating with one of our clients, Raben, we discovered the company’s operators made 800-1100 requests for transportation manually every day. Our team set a goal to automate the process.
CoreTeka has developed the Last Mile Connector. The solution makes interaction with courier services simpler:
- Fills in data to place an order and creates requests.
- Creates waybills.
- Gives you the opportunity to manage orders in one interface.
- Calculates delivery options by price/speed.
- Helps to manage work in warehouses.
Raben company integrated Last Mile Connector with Warehouse Management System. The solution has reduced the processing time of every 1,000 orders by 30 hours.
Our experience in developing custom logistics solutions for eCommerce
Coreteka has been implementing custom logistics solutions for more than seven years. Our team boasts not only technical prowess but also domain expertise in this sector. Therefore, we know the challenges and opportunities for logistics businesses from within.
Our solutions for logistics include:
- The aforementioned Last Mile Connector that streamlines order transferring from logistics providers to courier services;
- Delivery Calculator that allows companies to assess the approximate delivery costs and compare options;
- Driver App – the solution that enhances dispatching and automates the drivers’ work;
- Transport Management System for Philip Morris – the product focusing on the TMS and EDI empowers users to reduce paperwork and benefit from real-time information exchange.
- The Digital Freight Platform IRIS – the solution that connects shippers and carriers and provides such features as delivery status, cargo/driver tracking, review for transportation companies, and more.
The range of our products does not end here. To give our clients maximum value, we thoroughly analyze their business purposes and craft the most appropriate solution.
Thinking of Amazon’s best practices
It’s often the case that automatization seems impossible, the clients’ loyalty and the brand’s prestige are considered secondary to other ways of making fast profits, and free shipping is deemed inappropriate.
Companies all over the world consider investments in IT solutions to be expensive, long-term, and not-for-profit.
However, the business landscape keeps changing, and new approaches toward strategic planning, management practices, and internal operations may be required. Meticulous business analysis, keeping up with modern trends, and learning from the experience of successful industry players are key to business growth. Amazon’s example shows how innovations break new grounds for evolving and make a client happier. The main thing is to find the right solution that will add value, reduce expenses, and help to meet the company’s business requirements.
If you’re looking for logistics solutions tailored to eCommerce domain, contact us to learn how we could help.