How Amazon's Super-Complex Shipping System Works

Summary

This video explores Amazon's intricate logistics system, which, despite being more complex than UPS or FedEx, is key to its success. Amazon's fulfillment process varies based on package size and whether it's fulfilled by Amazon or a third-party seller. The company uses predictive modeling to stock items closer to likely buyers, employs automation like the Kiva robot, and has a specialized system for large non-sortable items. Amazon Air, with its fleet of aircraft, complements this system for efficient long-distance shipping, highlighting Amazon's innovative approach to maintaining its competitive edge in e-commerce.

Takeaways

• 🛍️ Amazon handles approximately 13 million orders daily, with a complex and automated fulfillment system that contributes to its success.
• 📦 About 25% of sales in the US are fulfilled by sellers directly, using their own shipping methods, while the rest are fulfilled by Amazon.
• 🏭 Amazon's fulfillment centers are categorized into small sortable, large sortable, and large non-sortable based on item size and weight, affecting automation levels.
• 🤖 Amazon utilizes robots like Kiva to automate the picking process, significantly increasing efficiency and reducing reliance on human labor.
• 📊 Amazon employs predictive modeling to stock items closer to areas with higher demand, optimizing delivery times based on big-data analytics.
• 🚚 Large non-sortable items are often shipped from separate facilities and may involve more manual processes, including custom box creation for odd-sized items.
• ✈️ Amazon Air, launched in 2015, operates a fleet of aircraft for transporting packages, with a focus on a two-day delivery model rather than overnight.
• 🌐 Amazon's delivery strategy involves a combination of its own logistics, USPS for less populated areas, and UPS for very rural deliveries, leveraging the most cost-effective methods.
• 🛫 Amazon Air flights often have direct routes, reducing the need for multiple loading and unloading stops, which cuts costs and increases efficiency.
• 📈 Amazon's logistics network is seen as a competitive advantage, with the potential to offer delivery services to other companies in the future.
• 🔄 The script highlights the contrast between Amazon's innovative and complex logistics system and the more traditional methods of UPS and FedEx.

Q & A

How often do customers place orders on Amazon according to the video?

Customers place orders on Amazon approximately 13 million times per day.

Why is Amazon's fulfillment system considered more complex than UPS, FedEx, or DHL?

Amazon's fulfillment system is more complex because it is designed to handle a wider variety of package sizes and types, and it incorporates advanced automation and predictive modeling to optimize delivery.

What percentage of sales in the US are fulfilled directly by the seller on Amazon?

About one fourth of sales in the US are fulfilled directly by the seller.

How does Amazon categorize its fulfillment centers based on the size of the packages?

Amazon categorizes its fulfillment centers into three types: small sortable, large sortable, and large non-sortable.

What is the advantage of using robots like Kiva in Amazon's fulfillment process?

Kiva robots bring the shelves with the required products to the picker, reducing the distance walked by human pickers and increasing the picking rate to 300-400 items per hour.

What is Amazon's strategy for stocking products in their fulfillment centers?

Amazon uses predictive modeling to stock products closest to the consumers most likely to buy them, based on demand patterns and big-data analytics.

How does Amazon handle the fulfillment of large non-sortable items?

Large non-sortable items are shipped from specialized fulfillment centers with less automation and may involve custom box creation for odd-sized items. Some of these items are sent to third-party logistics providers for delivery.

What is the significance of Amazon Air in Amazon's delivery system?

Amazon Air, started in 2015, is a fleet of aircraft that transports packages between fulfillment centers and sortation centers, allowing for faster and more direct delivery routes.

Why does Amazon's departure time for its cargo planes differ from UPS and FedEx?

Amazon's planes depart in the morning because they focus on two-day delivery, whereas UPS and FedEx aim for overnight delivery, so their planes depart in the evening.

How does Amazon utilize Cincinnati airport for its operations?

Amazon leases the DHL facility at Cincinnati airport for daytime use, allowing them to sort and dispatch packages to their next destinations efficiently.

What are the different delivery methods Amazon uses for rural areas?

For rural areas, Amazon often relies on the USPS for last-mile delivery due to their low rates, or uses UPS for areas that are too sparse or remote for cost-effective delivery.

How does Amazon's logistics system compare to traditional delivery companies like UPS and FedEx?

Amazon's logistics system is more complex and innovative, utilizing a combination of advanced automation, predictive analytics, and a network of fulfillment and sortation centers, as well as its own air cargo service, to optimize delivery times and costs.