AMAZON'S CRAZY LOGISTICS SYSTEM!

Introduction

Amazon is the largest online retailer in the world, making them the largest shipper of goods globally. Their reliance on ironclad logistics operations is crucial for their success. In 2014, Amazon spent $ 8.7 billion on shipping costs for $ 88 billion worth of products. As the company's sales grew exponentially, so did their shipping costs. By 2018, shipping costs had grown to $ 27.7 billion for $ 233 billion worth of products.

In order to cut down on their shipping expenses, Amazon needed to innovate its shipping operations. This led to the launch of Amazon Prime Air on November 1, 2015. Though Amazon owns the delivery service, its fleet of aircraft is operated by airlines such as Air Transport International, ABX Air, Atlas Air, and Southern Air. These companies handle the day-to-day operations, including pilots, planes, schedules, and maintenance. Initially launched in Seattle, Prime Air rapidly expanded across the United States, operating out of 21 airports as of 2019. From the initial 20 planes in 2015, the fleet grew to 50 by 2019, with an additional 25 aircraft on order from Boeing.

As of mid-2019, Amazon processed, shipped, and delivered 26% of its online sales without third-party logistics firms, and this percentage is expected to rise as the Prime Air fleet continues to grow. Amazon estimates it saves around $ 2 to $ 4 per package when handled internally, compared to the approximately $ 9 per package cost when using services like FedEx, UPS, or USPS. Morgan Stanley estimated that Amazon would save around $ 1 to $ 2 billion in 2019 by managing its own shipping.

Prime Air's momentum is evident as Amazon plans to open a $ 1.5 billion air hub at Cincinnati/Northern Kentucky International Airport in 2021. This hub will have the capacity for 100 planes and is expected to facilitate 200 flight landings and departures each day. Amazon's two-day shipping guarantee, which has been highly successful, initially grew its customer base by over 17%. However, speculation suggests that Amazon benefited from a favorable deal with the USPS, an assertion that has drawn criticism from people including President Trump.

As a response to potential reliance on USPS and aiming for greater control of its logistics network, Amazon ordered 20,000 delivery vans in 2018 and contracted drivers for last-mile deliveries. They also expanded a delivery service partner program, encouraging employees to start their own logistics companies with $ 10,000 and three months' salary, in addition to providing access to Amazon’s delivery technology and various discounts.

To explain Amazon’s delivery process: items eligible for Prime shipping are stored in one of 185 fulfillment centers across the U.S. Post-order, employees pack items into shipping boxes, which are then loaded onto semi-trucks heading to the nearest primary hubs. Airplanes fly to one of the 21 Prime Air airports. Upon landing, packages are sorted based on their location and transferred to FedEx, UPS, USPS, or Amazon partners for final delivery.

Amazon announced in April 2019 that they were halving delivery times for over 10 million products, aiming for one-day shipping in large cities, which would eventually spread to smaller locales. Achieving this ambitious goal will require further expansion of the Prime Air fleet. Amazon has been experimenting with advanced delivery methods, including Scout sidewalk robots and drone deliveries for packages weighing less than 5 pounds to customers within 10-20 miles of fulfillment centers.

Looking towards the future, Amazon aims to make its deliveries 100% carbon-free, launching an initiative called "Shipment Zero" that seeks to reduce the carbon footprint by 50% by 2030. Achieving this involves using biofuels for airplanes and electric semi-trucks like Tesla’s. Today, Amazon’s facilities use a mix of solar, wind, and conventional energy.

Amazon continues to pioneer in e-commerce, revolutionizing logistics and adapting to increasing consumer demands. From one-day shipping to potential drone deliveries, Amazon's innovations are set to redefine how quickly and efficiently products are delivered.

Keywords

Amazon
Prime Air
Shipping costs
Logistics
Air hub
Fulfillment centers
USPS
Delivery service partner program
One-day shipping
Shipment Zero
Carbon-free shipping

FAQ

Q1: What led Amazon to launch Prime Air? A1: Amazon launched Prime Air to innovate its shipping operations and cut down on increasing shipping expenses.

Q2: How many planes did Amazon Prime Air start with, and how has the fleet grown? A2: Amazon Prime Air started with 20 planes in 2015 and grew to 50 planes by 2019, with 25 more on order.

Q3: How does Amazon’s logistics system benefit the company financially? A3: By managing its own shipping, Amazon saves around $ 2 to $ 4 per package compared to using third-party courier services, leading to an estimated $ 1 to $ 2 billion in savings in 2019.

Q4: What is the purpose of Amazon's delivery service partner program? A4: The program encourages employees to start their own logistics companies to help with last-mile deliveries, providing them with monetary support and access to Amazon’s technology and resources.

Q5: What are Amazon's future goals concerning delivery times and environmental impact? A5: Amazon aims to achieve faster delivery times, potentially within hours of ordering, and to make its shipping 100% carbon-free with initiatives like "Shipment Zero" to cut the carbon footprint by 50% by 2030.