Amazon and logistical perfection

Online shopping experiences have changed dramatically over the past 50 years, from ordering in catalogs to the first online shopping experiences. Amazon has had the single most significant impact on how consumers shop.

There are many ways Amazon has left its mark on society, but the biggest of all is simple - they gave consumers the power of now. Hyperbole sure, Amazon does not materialize items into your home like old school futuristic movies, but they do the next best thing. 48-hour delivery anywhere in the U.S. on almost all items. Paying for shipping and items taking many days or even a few weeks to arrive dissuaded many consumers from going fully online for their shopping. However, two-day, one-day, and even four-hour-delivery wrapped up in a low cost per year membership can certainly convince anyone. Amazon’s fulfillment and shipping process is a marvel, and one that should be reviewed and considered by every business as a model for logistical perfection.

The secret to Amazon’s logistical masterpiece is simple - intelligence. Not MENSA registered geniuses but customer intelligence with mass amounts of data. Amazon’s two-day shipping doesn’t start with the trucks or planes but rather with the stocking of fulfillment centers. Each regional fulfillment center is unique in its product distribution. It is far easier to get an ice pick - on Amazon, in Alaska, than it is to get a pair of swim trunks. This is because Amazon starts by stocking its fulfillment centers with what is common to that area. Considering customer purchase patterns, Amazon can load their regional centers with what they know will be purchased. The intelligent data enables Amazon to immediately cut down on the complexity of the shipping process, as the most purchased items in that area will be close to their destination from the start. This workflow is a primary example of Predictive Visibility and its importance in supply chain planning. Amazon’s successes with its logistical model have led to companies like Walmart and Target emulating them for their online products. Without knowing the what, who, where, and when of a consumer purchase decision, Amazon best positions itself for any outcome, utilizing data in an intelligent way that is received through its applications.

After a product is picked up at a fulfillment center, the magic truly begins. Amazon’s logistics network is perfectly optimized for cost and efficiency. Amazon’s system is wildly complex, and there are many scenarios for delivery, but the core of their model is data-driven decision-making to maximize efficiency where possible.

Amazon set the absolute standard for online delivery. Quick, reliable, and accessible. The broader retail market has been forced to adapt to the Amazon model. Target and Walmart both offer two-day delivery options, and they have been able to do so quickly through the creative use of existing space. Target and Walmart brick-and-mortar replenish store inventory, then take that inventory and expose it to the end consumer to purchase in-store or online to be delivered locally via USPS. The simplicity is stark, but it is a direct result of the Amazon model. Target and Walmart both use approaches that seem simple, but they all hinge upon the central concept of predictive visibility. Both stores use their data to understand roadblocks and inefficiencies in their supply chain and optimize their fulfillment channels for this. They use their data to truly improve their models and have seen the rewards. Since Target rolled out its two-day shipping model in 2019, they have seen a 175% increase in sales. Walmart’s online business has grown 75% in the first year (2020) of its rapid delivery model. Amazon changed what consumers expect starting in 2005 with two-day shipping, which has led to innovation in traditional sales channels that have benefitted the customer and business.