Amazon Revamps Network to Make Deliveries Faster and Less Expensive.

"Amazon.com has upended its vast logistics network to reduce how far packages travel across the U.S. in an effort to get products to customers faster and improve profitability.

The company's overhaul has cut delivery times, transformed inventory management and altered the search results customers see on its flagship e-commerce website, according to executives, analysts and sellers who list their items on Amazon. The move also appears to be improving the company's bottom line.

The changes that were rolled out in recent months represent one of the biggest shifts to Amazon's global system of shipping goods.

That network swelled during the pandemic as Amazon added warehouses, trucks and staff to keep pace with surging demand that threw the company's delivery operation into turbulence. Amazon hired at a breakneck pace and roughly doubled its U.S. warehouse space in two years. It operates more than 1,000 facilities throughout the U.S., according to the logistics consultant MWPVL International.

Now, Amazon is trying to reduce spending by cutting back on some excess. It is reacting, in part, to slowing growth across several of its businesses, including in its North America unit that includes e-commerce sales. Revamping the delivery network became a priority after the pandemic's rapid expansion, executives said.

Amazon sees a connection between delivery speeds and company growth.

"When we offer faster speeds, customers are more likely to buy something," said Udit Madan, Amazon's vice president of transportation. "They come back more often to shop with us."

With the shake-up, Amazon altered how it has done things for years. The company traditionally operated its domestic shipping on a national model, transporting products desired by customers across the country -- even if that cost more. In the past year,Amazon created eight regions that are designed to work self-sufficiently. The arrangement means Amazon doesn't move items outside of each region unless it has to, Mr. Madan said. Items commonly bought are now increasingly placed throughout the country to be closer to customers, he said.

That setup could affect what consumers see when they search for goods on Amazon's website. Items that are already located within a region might appear higher on results because they can get to customers faster, Mr. Madan said.

Amazon said about 76% of products customers order are now from facilities within their region, compared with 62% a year ago.

"This isn't something we could have easily done in 2019 because we had a much more sparse network," Mr. Madan said. "The doubling of footprint really allowed us to have a lot more facilities that were closer placed to customers."

Mr. Madan said the effort is starting to pay dividends. The company said it has seen a 15% reduction in the distance items travel from fulfillment centers to customers, and a more than 12% decrease in "touches," or how often a package is handled. The pace at which Amazon's global shipping costs are rising has started to slow, increasing by about 2% in the first quarter, compared with a 14% jump for the same period a year earlier.

Some merchants that sell products on the company's website say that despite Amazon's focus on speed, they are experiencing delays in some cases when they send their items to the company's warehouses. Aside from the shift to the regionalization model, Amazon has made other changes in the past two years that changed how many products sellers can store at the retailer's facilities and how they report inventory. The changes often pressure the sellers to adapt how they interact with Amazon's logistics operations.

It can be difficult for sellers to pinpoint what causes restocking delays. Jason Boyce, who helps brands sell on Amazon through his agency, Avenue7Media, said delays persist despite Amazon's efforts to curb them. Roughly 20 of his clients had more than 600 orders in April that were delayed, an unusually high number, he said.

Brandon Fuhrmann, an Amazon merchant who sells kitchen products, said he has had to spread inventory over more warehouses as Amazon has expanded its infrastructure. He recently had about 5,000 units of product stuck for two weeks at an Amazon warehouse in Stockton, Calif., though he has been unable to identify the cause."There have been a lot of changes to inventory, so maybe something is broken," Mr. Fuhrmann said.

An Amazon spokeswoman said shipment processing and stocking times can vary based on several factors. She added overall deliveries have become faster.

Amazon also tried to increase speed of delivery by expanding warehouses it calls same-day centers. Amazon has been opening such facilities throughout the country and could expand to at least 150 same-day centers in the next several years, MWPVL International estimated. The facilities primarily store items that are in high demand for quick delivery, such as toiletries and electronics.

Mr. Madan said customer use of same-day delivery increased by 50% year-over-year during the first quarter to nearly 26 million customers." [1]

1. Amazon Revamps Network to Make Deliveries Faster and Less Expensive. Herrera, Sebastian. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 15 May 2023: B.1.