The Logistics of E-Commerce

The Logistics of E-Commerce. The largest E-commerce company in the world is amazon, and they need a large logistics operations to be able to reach every customer that orders using their website. This video we talk about their logistics operations and their future vision.
#amazon #E-commerce #logistics
All footage used in this video was created by Amazon Inc. and the
USPS.
Graphics by Luis Reyes. luis@luisreyes.com

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Amazon, is the largest online retailer in the world which makes them the largest shipper of goods in the world. Their reliance on an ironclad logistics operation is crucial for their success. In 2014 Amazon spent $8.7 Billion in shipping costs for $88B worth of products. Amazon realized that as the company sales grew exponentially so would shipping costs and they were right. In 2018 those shipping costs grew to $27.7 Billion on $233B worth of products. In order for amazon to cut down on their shipping expenses they needed to innovate their shipping operations and that is why on November 1, 2015, Amazon Prime Air was launched. It initially started with a fleet of 20 Boeing 767 aircraft. 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, maintenance, et cetera.

This service began in Seattle where Amazon headquarters are based off. Then it 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 on order with Boeing. As of mid 2019 Amazon processes, ships and delivers 26% of their online sales without the help of a 3 party company and that number is expected to grow as the prime air fleet grows. Amazon estimates that it saves around $2-$4 dollar per package at destination. If packages are handled by FEDEX, UPS, USPS or third party shipper it would cost around $9 per package. Morgan Stanley estimates that in 2019 Amazon will save around $1-$2 Billion in shipping costs by handling its own shipping.

Prime Air keeps growing fast, Amazon will open a $1.5 billion air hub at Cincinnati/Northern Kentucky International Airport in 2021. It will have capacity for 100 planes — double the number in its fleet now — and will plan to schedule 200 flight landings and departures each day.
When Amazon started the highly attractive 2 day shipping guarantee 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 being 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 logistics network more so they can rely on the post office less in the future. One huge hurdle that Amazon has encounter is that the USPS has a long reach all over the United States. The very remote homes, where it would not be economically feasible for Amazon to build shipping infrastructure in. This is the main reason why Amazon relies so heavily in the USPS.


Amazon wants to take more control of their supply chain management That’s why Amazon ordered 20,000 vans in 2018 and contracts drivers to do that final step in the delivery system to land packages at doorsteps. Also to meet delivery deadlines the company expanded the delivery service partner program which offered current Amazon employees with $10k and 3 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 for assets and services like vehicle leasing and insurance.

To get a better understanding on how amazon customers get their packages, it's important to explain every step in amazon supply chain management. Packages eligible for prime shipping, are kept in one of 185 fullfillment centers across the United States. Once the order comes in, employees pack the items into Amazon shipping boxes. The package is then put in the bins where it will be loaded into semi trucks heading towards the closest prime air hub. The airplane will fly to one of the 21 airports that Amazon prime air operates. .

Видео The Logistics of E-Commerce канала Informed Society