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.

Outlines

00:00

📦 Amazon's Shipping and Logistics Innovations

Amazon, the world's largest online retailer, has seen its shipping costs rise from $8.7 billion in 2014 to $27.7 billion in 2018, reflecting the exponential growth of its sales. To manage these costs, Amazon launched Amazon Prime Air in 2015, a delivery service operated by third-party companies. The service started in Seattle and expanded across the U.S., operating from 21 airports by 2019. Amazon's fleet grew from 20 to 50 planes in the same period, with 25 more on order. Amazon estimates savings of $2 to $4 per package with Prime Air, compared to third-party carriers like FedEx and UPS, which cost about $9 per package. This initiative is expected to save Amazon around $1 to $2 billion in shipping costs annually. Amazon's logistics network is also expanding with a $1.5 billion air hub in Cincinnati, set to accommodate 100 planes and schedule 200 flights daily by 2021. Amazon's push for faster delivery times, such as one-day shipping, puts pressure on the shipping industry and has led to the exploration of advanced delivery methods like Scout sidewalk robots and drone deliveries. The company's supply chain management involves keeping eligible items in fulfillment centers, packing them upon order, and then shipping them to primary hubs for final delivery via various carriers. Amazon's goal is to take more control of its supply chain, reduce reliance on USPS, and innovate in logistics to meet customer expectations and delivery deadlines.

05:02

🚀 Amazon's Future in Logistics and Carbon-Neutral Shipping

Amazon is not only aiming to revolutionize the logistics industry but also to achieve ambitious environmental goals. The company has been testing advanced delivery methods like Scout robots and the Shipping with Amazon program, which offers competitive shipping rates. One of the most anticipated services is drone delivery, which promises to deliver packages weighing less than 5 pounds within 10 to 20 miles of fulfillment centers in under an hour. Amazon has faced challenges in implementing this service but is nearing a fully operational program. The company's future mission for Prime Air includes making deliveries faster and achieving 100% carbon-free shipping. Amazon has launched the Shipment Zero initiative, aiming to reduce its carbon footprint by 50% before 2030. To reach this goal, Amazon is exploring the use of electric semi-trucks, biofuels, and renewable energy sources like solar and wind power. As consumer demands evolve, Amazon is expected to continue innovating in delivery times and methods, potentially leading to even faster and more sustainable shipping solutions. The video concludes by inviting viewers to share their thoughts on Amazon's logistics system and potential future developments.

Keywords

💡Amazon Prime Air

Amazon Prime Air is Amazon's delivery service that uses Amazon-branded aircraft to transport goods. It is a crucial part of Amazon's logistics operations, aimed at reducing shipping costs and increasing efficiency. The service began in Seattle and has since expanded across the United States, operating out of 21 airports as of 2019. The script mentions that Amazon Prime Air allows the company to handle a significant portion of its shipping without third-party assistance, which is expected to save billions in shipping costs.

💡Logistics

Logistics refers to the detailed organization and implementation of a complex operation. In the context of the video, it pertains to Amazon's management of the supply chain, which includes the transportation and delivery of goods to customers. The video highlights Amazon's reliance on logistics operations as a key factor in its success, especially with the exponential growth of its sales and the need to manage corresponding shipping costs.

💡Shipping Costs

Shipping costs are the expenses incurred in transporting goods from one location to another. The video discusses how Amazon's shipping costs grew from $8.7 billion in 2014 to $27.7 billion in 2018, reflecting the company's massive scale of operations. Amazon's efforts to innovate and optimize its shipping operations, such as through Amazon Prime Air, are aimed at reducing these costs.

💡Supply Chain Management

Supply chain management is the oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to the final consumer. The video emphasizes Amazon's desire to take more control of its supply chain management, which includes initiatives like ordering 20,000 vans and expanding the delivery service partner program to ensure timely and efficient delivery of packages.

💡Fulfillment Centers

Fulfillment centers are warehouses operated by Amazon where products are stored, picked, packed, and shipped to customers. The video mentions that items eligible for Prime shipping are kept in one of 185 fulfillment centers across the United States, which play a central role in Amazon's supply chain by preparing orders for delivery.

💡Sustainable Shipping

Sustainable shipping refers to the practice of reducing the environmental impact of shipping operations. Amazon has launched an initiative called 'Shipment Zero' with the goal of making 50% of its shipments carbon neutral by 2030. The video discusses Amazon's efforts to use renewable energy sources and explore options like electric trucks and biofuels to achieve this goal.

💡Drone Delivery

Drone delivery is the use of unmanned aerial vehicles to transport goods. Amazon has been testing drone delivery as a means to expedite the delivery process, particularly for lightweight packages within a certain range of its fulfillment centers. The video mentions that if successful, this could revolutionize the speed of deliveries, with the potential to deliver packages in less than an hour.

💡Delivery Service Partner Program

The Delivery Service Partner Program is an initiative by Amazon that encourages current employees to start their own delivery businesses, with Amazon providing support in the form of training, technology, and other resources. The video describes this program as a way for Amazon to expand its delivery capabilities and meet growing customer demands for faster shipping.

💡One-Day Shipping

One-day shipping is a service承诺 that guarantees the delivery of products within one day of the order being placed. The video discusses Amazon's introduction of one-day shipping for millions of products, which is expected to put pressure on the shipping industry and requires significant logistical capabilities to fulfill.

💡Third-Party Shipping

Third-party shipping involves using external carriers, such as FedEx, UPS, or USPS, to handle the delivery of goods. The video explains that Amazon has been reducing its reliance on third-party shippers by handling more of its shipping through Amazon Prime Air and other in-house initiatives, which is expected to save the company significant amounts in shipping costs.

Highlights

Amazon is the largest online retailer and shipper of goods in the world.

Amazon's shipping costs grew from $8.7 billion in 2014 to $27.7 billion in 2018.

Amazon Prime Air was launched on November 1st, 2015, to innovate shipping operations.

Amazon owns the delivery service but outsources operations to other companies.

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

The fleet size increased from 20 to 50 planes between 2015 and 2019.

Amazon processes and delivers 26% of their online sales without third-party help.

Amazon estimates savings of $2 to $4 per package with Prime Air.

Morgan Stanley estimates Amazon could save $1 to $2 billion in shipping costs in 2019.

Amazon opened a $1.5 billion air hub in Cincinnati in 2021.

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

Amazon's deal with USPS was criticized, leading to a push for more independent logistics.

Amazon ordered 20,000 vans and expanded the delivery service partner program in 2018.

Amazon's supply chain includes 185 fulfillment centers for Prime-eligible items.

Amazon aims to reduce delivery times with advanced methods like Scout robots and drone delivery.

Amazon's drone delivery program has been in development since 2015.

Amazon's Shipment Zero initiative aims for 100% carbon-neutral shipping by 2030.

Amazon is pioneering in the e-commerce and logistics industry, aiming for faster and greener deliveries.

Transcripts

amazon is the largest online retailer in

the world which makes them the largest

shipper of goods in the world their

reliance on ironclad logistics

operations is crucial for their success

in 2014 Amazon spent eight point seven

billion dollars in shipping costs for

eighty eight billion dollars worth of

products it was on realized that as the

company's sales grew exponentially so

would shipping costs and they were right

in 2018 those shipping costs grew to

twenty seven point seven billion dollars

on the two hundred and thirty three

billion dollars worth of products in

order for Amazon to cut down on their

shipping expenses they need to innovate

their shipping operations and that is

why on November 1st 2015

Amazon Prime air was launched Amazon

owns the delivery service using Amazon

branded aircraft however the fleet is

operated by Air Transport international

ABX air Atlas air and southern air these

companies take care of the day-to-day

operations of the air fleet from their

pilots planes schedules and maintenance

the service began in Seattle where

Amazon headquarters is based out of then

they quickly spread throughout the

United States there are 21 airports that

Amazon Prime air operates out of as of

2019 also from the 20 planes they

started with in 2015 they grew to 50 in

2019 with 25 more on order with Boeing

as of mid 2019 Amazon processes ships

and delivers 26% of their online sales

without the help of third-party

companies and that number is expected to

grow as the prime air fleet grows Amazon

estimates that it saves around two to

four dollars per package at destination

if packages are handled by FedEx UPS

USPS will cost around nine dollars per

package Morgan Stanley estimates that in

2019 Amazon will save around one to two

billion dollars in shipping costs by

handling its own shipping prime air

keeps moving fast Amazon will open

a 1.5 billion dollar air hub in

Cincinnati Northern Kentucky

International Airport in 2021 it will

have the capacity for 100 planes double

the number of its fleet now and we'll

plan to schedule 200 flight landings and

departure each day when Amazon started

the highly attractive two-day shipping

guaranteed to Prime members it grew its

customer base by over 17% this attracted

a lot of eyeballs on how Amazon can meet

that commitment and be profitable at the

same time a lot of people speculate that

Amazon made a very favorable deal with

the United States Postal Service where

they were paying below average rates

this leads people to believe that USPS

was losing money because of it someone

that has been very critical about this

deal is President Trump after president

Trump's attack on Amazon's deal with the

post office

Amazon felt more inclined to develop

their own logistics network more so they

could rely on the post office less in

the future one huge hurdle that amazon

has encountered is that the USPS has a

long reach overall the United States the

USPS handles the very remote homes where

it would not be economically feasible

for Amazon to have shipping

infrastructure in this is the main

reason why Amazon relies so heavily on

the USPS Amazon wants to take more

control of their supply chain management

that's why Amazon ordered 20,000 vans

and 2018 and contract drivers to do the

final step in the delivery system to

land the package on the doorstep also to

meet delivery deadlines the company

expanded the delivery service partner

program which offered current Amazon

employees with $10,000 in three months

salary to start their own logistics

company and deliver Amazon packages the

partner program first announced last

year includes access to Amazon's

delivery technology hands-on training

and a suite of other discounts in assets

and services like vehicle leasing and

insurer

to get a better understanding on how

Amazon customers get their packages it's

important to explain every step in the

Amazon supply chain management items

eligible for prime shipping are kept in

one of 185 fulfillment centers across

the United States once the order comes

in employees pack the items into Amazon

shipping boxes the package is then put

in a bin where it is loaded onto a

semi-truck heading to the closest

primary hub the airplane will fly to one

of 21 airports that Amazon Prime air

operates out of once the airplane lands

the bins are uploaded and packages are

sorted by location then they are

transferred to FedEx UPS USPS or an

Amazon partner for delivery to its final

destination in April 20 1999 set they

were slashing delivery time in half for

more than 10 million of their products

one-day shipping was going to be made

available to large cities and eventually

spread down to smaller cities this move

is definitely going to put a strain on

the shipping industry in order for

Amazon to meet this ambitious goal prime

air will need to grow Amazon has began

testing more advanced delivery methods

like Scout sidewalk robots in Los

Angeles and London it's testing out a

program called shipping with Amazon

sellers who have used the service say

amazon offers shipping rates at half the

price of UPS the most anticipated is the

drone delivery if you live within 10 to

20 miles of amazon's fulfillment centers

they will be able to send a drone with

your package as long as it weighs less

than 5 pounds it will be on your door in

less than an hour the drone program

being in the works since 2015 when it

was announced has been a challenge for

Amazon engineers to get everything right

Amazon says that they are close to

having a working program amazon's future

mission for prime air is not only

extremely ambitious with plans to make

deliveries even faster than today but to

do it 100% carbon-free Amazon launched a

new initiative that wants its shipping

to be done 100% carbon neutral the

initiative

called shipment and zero and their

immediate goal is to lower the carbon

footprint by 50% before the year 2030

currently their facilities are powered

by solar and wind power but only a

portion of their energy consumption is

complemented by renewable energy in

addition to the electricity consumption

provided by conventional means in

regards to the actual shipping of the

packages the development of electric

semi trucks like Tesla's and the use of

biofuels and airplanes can help Amazon

reach this goal Amazon is a pioneer in

the e-commerce industry and they are

revolutionising the logistics industry

as well as society becomes more

demanding one day shipping is not going

to be enough we're going to want to have

our purchased products in our hands

within hours or minutes of us pressing

the order button Amazon knows this and

will come up with new ways to improve

their delivery times and what method

they used to do so the sky's the limit

for Amazon literally what do you think

of Amazon's logistics system what method

of delivery do you think Amazon should

look into to improve their delivery

times do you think that they will take

the place of the post office post your

comments in the comment box below if you

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