How Amazon Managed To Optimize Its Supply Chain?

Created in 1995 by Jeff Bezos, Amazon is part of the first generation of e-commerce sites to have emerged. Specializing in its beginnings in the sale of books online, the startup quickly established itself as a reference bookstore for Internet users, before massively diversifying its product catalog. With more than 400 orders placed every second and annual revenue of 200 billion dollars, Amazon has become an essential digital shopping giant.

Challenge #1: Reduce Delivery Times

Reduce costs, gain a competitive advantage, offer an innovative service, and an improved customer experience: Amazon has taken up all of these challenges by placing logistics strategy at the center of its concerns. Thanks to a policy of constant innovation and a customer-oriented approach, the company has worked continuously to reduce the delivery times of its products. An Amazon customer can thus receive his product the day after his order, or even within 2 hours thanks to the “Prime now” service.

Faced with the need for responsiveness and proximity to markets, the firm’s warehouses have been placed near major French cities. And to go beyond the standard delivery levels offered by traditional players (UPS/FedEx/Chronopost), Amazon has gone further by equipping itself with its own fleet of delivery people to deliver products to customers the same day they order.

Challenge #2: Supply Chain Automation to Reduce Operating Costs

With Amazon Robotics, the company has taken a step forward in automating its supply chain.

In the warehouses, robots work in symbiosis with more than 500,000 employees in order to reach record levels of productivity. The storage location is made up of standardized cupboards containing the goods, the robots are able to automatically move these cupboards to bring them to their human collaborators, who then take care of the picking. This system has reduced the operating costs of the warehouse by 20%, the processing time for a parcel has fallen from 60 to 15 minutes, and the storage capacity per square meter has increased by 50%.

The ultimate goal is to set up a fully robotized model that will be able to choose, pack and sort shipments, all without any human intervention. As of 2019, Amazon has a fleet of over 100,000 robots spread across 20 warehouses.

“The Amazon Effect” On Competition and Customers

From the organization to the management systems, Amazon has been able to position its decoupling points in order to optimize costs and the management of its stocks. Distribution centers operate on a rolling schedule. Orders are no longer processed in batches at the end of the day but instantaneously. Its network includes 173 warehouses across the globe, leading many retail companies to rely on its network to manage the warehousing, inventory management, and delivery of their products.

Amazon has the power to offer an alternative channel to reach BtoB and BtoC markets, which often forces traditional carriers to rethink their own service offerings.

To Conclude

Amazon has shaken up, through initiatives and innovations, the way of understanding the supply chain and its management.  Third-Party supply chain automation is still in its infancy: from reseller to future leader in logistics services, the firm has implemented a distribution chain acquisition strategy that now allows it to control the journey of a product, from its sale to its delivery to the customer’s home.

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