Amazon announced at the end of the first quarter of 2019 that it intends to improve the Prime 1-day delivery service level. Amazon Prime members now pay $119 a year to receive free 2-day delivery, in addition to access to other services (music, video catalog and exclusive offers). The company already offered 1-day or even same-day delivery for some items, but only for orders of at least $35. In order to complete the transition, Brian Olsavsky, CFO of the company, announced that 800 million dollars will be invested in the second quarter of 2019 alone.
Over the past 4 years, Amazon has practically tripled its logistics infrastructure. Today, it has around 400 active installations, including fulfillment centers, hubs, sortation centers and delivery stations. Each type of installation plays a different role in the network, totaling around 13 million m². According to RBC Capital Markets, the company's current logistics network already allows it to reach 72% of the US population in up to 1 day.
Figure 1 – Amazon logistics network June/2019. Adapted from MWPVL
The company reported that many changes will not be necessary in the operation of the fulfillment centers, but in the transport operations: in transfers and in the last-mile. One of the changes is linked to the expansion of the Amazon Flex fleet (a last-mile delivery program launched by the company in 2015, which hires drivers interested in making deliveries for Amazon, as if it were an Uber for delivering packages for the company).
The plan will be implemented gradually, but the intention is that the approximately 100 million products currently available for delivery within 2 days can be delivered within 1 day. Thus, in addition to changes in transport operations, greater decentralization of inventory in the chain will be necessary: sellers (independent sellers) represented about 58% of Amazon sales in 2018 (the other 42% were direct sales from Amazon).
In order to get stock available on the network, the company began offering discounts of up to 75% on storage fees to sellers. The promotion started in June of this year (2019) and runs until January 2020. To participate, sellers must have sold at least 60 units of a product per month, or have a portfolio specifically selected by Amazon. Sellers must keep 4 to 8 weeks of inventory in the company's network. On June 3rd, Amazon announced that there were already around 10 million items available for 1-day delivery.
Just a few days later, Walmart announced its own free 1-Day Delivery program, starting in Phoenix and Las Vegas on May 14, 2019, for purchases as low as $35. The program covers a catalog of 220 items, and has no fee/annual fee. The company's goal is to reach 75% of the US population by the end of 2019. Unlike Amazon, Walmart has a pulverized network of thousands of physical stores.
ILOS will carry out the United States International Logistics Mission (https://ilos.com.br/web/missoes-internacionais-de-logistica/) from July 21 to 26, 2019. Among the 12 technical visits on the schedule are Amazon and Walmart operations in Reno, Nevada.
References:
Supply Chain Dive – Amazon: 1-day delivery doesn't require changes at fulfillment centers. https://www.supplychaindive.com/news/amazon-wont-change-fulfillment-centers-1-day-delivery/553901/
Supply Chain Dive – Amazon transitions free Prime shipping from 2-day to 1-day. https://www.supplychaindive.com/news/amazon-2-day-shipping-1-day-prime/553500/
Supply Chain Dive – Report: Amazon offers discounted warehouse space for fuel 1-day shipping. https://www.supplychaindive.com/news/amazon-seller-discounted-warehouse-space-1-day-shipping/555633/
Supply Chain Digest – Supply Chain News: Amazon Roils eCommerce Market with Free One Day Shipping, as Walmart and Target Quietly Pursuing Same Day. http://www.scdigest.com/ontarget/19-04-30-1.php?cid=15434
CNBC – Amazon can already ship to 72% of US population within a day, this map shows. https://www.cnbc.com/2019/05/05/amazon-can-already-ship-to-72percent-of-us-population-in-a-day-map-shows.html
MWPVL – Amazon Global Fulfillment Center Network. http://www.mwpvl.com/html/amazon_com.html
Techcrunch – Walmart announces next-day delivery on 200K+ items in select markets. https://techcrunch.com/2019/05/13/walmart-announces-launch-of-nextday-delivery-on-200k-items-in-select-markets/
Thatiana Nomi
5 years of experience in consulting projects in Logistics and Supply Chain. Worked on logistics network optimization projects, service cost, logistics master plan, inventory policy definition, sales forecast, S&OP (Sales and Operations Planning) and transportation planning and management.
