AMAZON'S CRAZY LOGISTICS SYSTEM!

Summary

Amazon, the world's largest online retailer, has seen shipping costs soar from $8.7 billion in 2014 to $27.7 billion in 2018. To combat this, Amazon Prime Air was launched in 2015, expanding from 20 to 50 planes by 2019 with more on order. This in-house delivery service, operated by partner companies, has reduced costs and increased efficiency, with Amazon processing and delivering 26% of its online sales without third-party help. Amazon also plans a $1.5 billion air hub in Kentucky for 100 planes by 2021, aiming to be 100% carbon-free by 2030, showcasing its commitment to innovation and sustainability in logistics.

Takeaways

• 🌐 Amazon is the world's largest online retailer and consequently has the largest logistics operations, spending billions on shipping costs.
• 🚀 To reduce shipping expenses, Amazon launched Amazon Prime Air in 2015, a delivery service using Amazon-branded aircraft operated by partner airlines.
• 📈 Amazon's shipping costs increased from $8.7 billion in 2014 to $27.7 billion in 2018, highlighting the need for efficient logistics solutions.
• 🛫 Amazon Prime Air started in Seattle and expanded across the U.S., operating from 21 airports and growing its fleet from 20 to 50 planes by 2019.
• 💰 Amazon estimates savings of $2 to $4 per package with Prime Air, potentially saving billions in shipping costs annually.
• 🏢 Amazon is building a $1.5 billion air hub in Cincinnati, expected to accommodate 100 planes and schedule 200 flights daily.
• 📦 Amazon handles 26% of its online sales without third-party shippers, a figure expected to rise as Prime Air expands.
• 🔄 Amazon's two-day shipping promise to Prime members increased its customer base by over 17%, putting pressure on logistics to meet commitments profitably.
• 🚚 Amazon ordered 20,000 vans in 2018 and expanded its Delivery Service Partner program to take more control of the supply chain.
• 🌿 Amazon aims to make its shipping 100% carbon-free and has launched 'Shipment Zero', targeting a 50% reduction in carbon footprint by 2030.
• 🔝 Amazon is testing advanced delivery methods like Scout robots and drone deliveries, aiming to revolutionize the logistics industry further.

Q & A

What is Amazon's position in the online retail and shipping industry?

Amazon is the largest online retailer in the world, which also makes them the largest shipper of goods globally.

How much did Amazon spend on shipping costs in 2014 and what was the value of the products shipped?

In 2014, Amazon spent $8.7 billion on shipping costs for products worth $88 billion.

What was the increase in Amazon's shipping costs by 2018?

By 2018, Amazon's shipping costs had grown to $27.7 billion.

Why did Amazon launch Amazon Prime Air?

Amazon launched Amazon Prime Air on November 1st, 2015, to innovate their shipping operations and cut down on shipping expenses.

Which companies operate Amazon's branded aircraft for Prime Air?

Amazon's branded aircraft for Prime Air are operated by Air Transport International, ABX Air, Atlas Air, and Southern Air.

How many airports does Amazon Prime Air operate from as of 2019?

As of 2019, Amazon Prime Air operates from 21 airports in the United States.

What was the growth in Amazon's fleet size from 2015 to 2019?

Amazon's fleet size grew from 20 planes in 2015 to 50 in 2019, with an additional 25 more on order with Boeing.

What percentage of Amazon's online sales are processed, shipped, and delivered without third-party companies?

As of mid-2019, Amazon processes, ships, and delivers 26% of their online sales without the help of third-party companies.

How much does Amazon estimate to save per package by handling its own shipping with Prime Air?

Amazon estimates that it saves around $2 to $4 per package by handling its own shipping with Prime Air.

What is the estimated saving for Amazon in shipping costs by handling its own shipping in 2019 according to Morgan Stanley?

Morgan Stanley estimates that in 2019, Amazon will save around $1 to $2 billion in shipping costs by handling its own shipping.

What is the purpose of Amazon's 1.5 billion dollar air hub in Cincinnati Northern Kentucky International Airport?

The air hub, set to open in 2021, will have the capacity for 100 planes, doubling the number of Amazon's fleet, and plans to schedule 200 flight landings and departures each day.

How has Amazon's two-day shipping guarantee for Prime members impacted its customer base?

The two-day shipping guarantee for Prime members grew Amazon's customer base by over 17%.

What challenges has Amazon faced in its logistics network, particularly with USPS?

Amazon has faced challenges with USPS, particularly in handling the very remote homes where it would not be economically feasible for Amazon to have shipping infrastructure.

What steps has Amazon taken to take more control of its supply chain management?

Amazon has ordered 20,000 vans and contracted drivers for the final step in the delivery system, and expanded the Delivery Service Partner program to encourage employees to start their own logistics companies.

What are some advanced delivery methods Amazon is testing to improve delivery times?

Amazon is testing advanced delivery methods like Scout sidewalk robots, Shipping with Amazon, and drone delivery for packages weighing less than 5 pounds within 10 to 20 miles of fulfillment centers.

What is Amazon's Shipment Zero initiative and its goal for carbon footprint reduction?

Amazon's Shipment Zero initiative aims for 100% carbon-neutral shipping. Its immediate goal is to lower the carbon footprint by 50% before the year 2030.

How does Amazon plan to achieve its carbon-neutral shipping goals?

Amazon plans to achieve carbon-neutral shipping by using renewable energy sources, developing electric semi-trucks, and utilizing biofuels in airplanes.