What is Amazon Logistics? Top 3 Lessons to Follow for Any Business
Have you ever wondered why Amazon delivery is considered the best? In fact, what is Amazon logistics, and how it led 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 experience? Keep reading to learn the answers.
What is Amazon logistics today?
When you click on the “Place your order” button, the product’s journey starts. First, the system sends data to the warehouse that’s the nearest to your location. The storage area of every distribution center is more than 50 thousand square meters. Amazon uses data to distribute goods among warehouses. For example, if one region buys sneakers, this type of product will be stored near consumers.
At Amazon warehouses, you can find nearly everything. A book, a cover, a charger, or iPad. However, there is no order that could be visible to a human’s eye. Warehouse workers do not know in which storage unit the item you’ve ordered lies.
Only the Amazon system keeps records of where to find the goods that should be shipped. It uses barcodes to track items’ locations. When a customer places an order, the nearest warehouse worker receives a message with a storage unit and shelf number. The order processing begins. Robots and conveyors help warehouse workers to pick and pack goods.
When your order is ready for transportation, there’s a need to ship it with the rest of the orders made just recently. Amazon uses both big rigs, trucks, and airplanes for cargo shipping. The company selects a vehicle for every type of order by location and delivery speed. Amazon’s big rigs 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.
Amazon collaborates with the largest 3PL and courier service providers in the USA to deliver more parcels at the right time.
But 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 3 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 by 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. Dotcom Distribution company researched the eCommerce domain beyond 2020. According to the report, 53% of buyers expect an order to be delivered in 3-4 days, and 40% of customers expect it in 1-2 days. Moreover, 74% of potential clients abandon their purchase if they pay for delivery.
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. Someone thought that it would increase spendings. 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 spendings.
Lesson #3. Automate last-mile delivery processes
Last-mile delivery is the hardest step in the supply chain. Large companies all over the world 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 has started to grow, the distribution centers haven’t overcome challenges.
Amazon has implemented algorithms to optimize workload between warehouses. Jeff Bezos instructed 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.
Real 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.
Companies all around the world have 2 other problems:
- Choosing courier service to deliver orders. E.g., Ukrainian eCommerce businesses collaborate with several logistics partners. Courier services set tariffs and routes differently. For example, the cost of transportation from Kyiv to Kharkiv at Justin and Nova Poshta is not the same. It’s time to recall lesson # 2 by Amazon.
- Order processing speed. An operator needs on average 30-60 seconds to send a request to courier service. But he can’t fill in the information without pause. The more requests a company receives, the higher 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 communication 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.
Last Mile Connector works with Nova Poshta, UkrPoshta, Meest Express, Justin, SAT, etc., which are Ukrainian local 3PL operators.
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.
Curious about Last Mile Connector? Learn about 3PL last mile delivery here.
Thinking of Amazon best practices
It’s often the case that the automatization seems impossible, the clients’ loyalty and the brand’s prestige are considered secondary to other ways to earn money fast, and free shipping is believed to be irrational.
Companies all over the world consider investments in IT-solutions to be expensive, long-termed, and not-for-profit.
But Amazon’s experience shows how innovations break new grounds for evolving and make a client happier. The main thing is to find a solution, which will meet a company’s business requirements.
Interested in custom solutions to cut logistics expenses? Contact us.