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Amazon is the world’s largest eCommerce company. And one of the biggest reasons behind the success of this 800-pound gorilla is the almost flawless Amazon supply chain.
So, as an eCommerce or delivery business owner, knowing about how the amazon supply chain works is important. It can help you understand how this eCommerce giant became what it is today which will help you implement its strategies for your own business growth.
Without further ado, let us get on with understanding how the Amazon supply chain works. Then, you can try to emulate them in delivering great customer service yourself.
What Is the Amazon Supply Chain?
The Amazon supply chain refers to the entire process of inventory management, warehousing, and delivery of products. Simply put, the supply chain followed by most eCommerce companies is also followed by this e-retail leader, albeit on a much larger scale.
So, what makes Amazon’s supply chain so sturdy?
Continuous Amazon supply chain optimization of every link and process within the system. Amazon also never shied away from embracing technology.
The combination of these two has resulted in a smooth and efficient Amazon supply chain management system which has consistently ensured the highest customer satisfaction.
Amazon FBA and FBM
According to Statista, 55% of all sales made on Amazon are by third-party sellers. And, Amazon offers two different kinds of fulfillment strategies for such sellers.
The first is Fulfillment by Amazon (FBA) and the second is Fulfillment by Merchant (FBM). We look at what these are and how they work.
Fulfillment by Amazon (FBA)
As the name suggests, orders received by third-party sellers who choose this method will be fulfilled by Amazon. In other words, Amazon takes care of inventory, warehousing, delivery, and everything in between.
This is a great option for small-scale sellers who do not have their own logistics in place.
Amazon has gone further to make things even easier for such sellers by offering another program called FBA Onsite.
This program has Amazon using its own warehouse management tool to manage the warehouse of the sellers.
In this way, the sellers are only responsible for maintaining their inventory. Amazon takes care of the rest, including order fulfillment.
Fulfillment by Merchant (FBM)
Again, as the name suggests, third-party sellers who choose this method need to fulfill the orders they receive by themselves.
Most Amazon sellers worldwide prefer FBA over FBM since it is easier and they are not responsible for the fulfillment.
Main Elements of the Amazon Supply Chain
Amazon offers order delivery within two days at no additional cost to its Prime members.
But, as per Statista, there are 112 million Amazon Prime members?
So, how does Amazon manage to fulfill its promise of two-day shipping to them all?
The two main elements of the Amazon supply chain that make Amazon Prime’s promise a reality are Amazon fulfillment centers and their delivery fleet.
Let’s take a look at each below.
Amazon Fulfillment Centers
The first pillar that holds up Amazon’s order fulfillment promise is its fulfillment centers. According to Amazon’s official website, the eCommerce giant has more than 175 fulfillment centers, occupying approximately 150 million sq feet of space, spread across the world.
Now, the Covid-19 pandemic has led to an eCommerce boom worldwide. Amazon saw an unprecedented growth last year with third-party sellers on the platform reporting a 60% annual increase in sales.
The eCommerce growth has been so great that, according to reports, Amazon needed to hire 427,300 additional employees in just 10 months last year.
Moreover, according to a survey, online shopping is here to stay and Amazon is preparing itself well to manage the demand full-on.
The e-retail market leader is all set to open 50 more fulfillment centers across the US as well as globally.
Amazon Delivery Fleets
Amazon’s delivery fleet is the other pillar on which the whole Amazon supply chain stands.
In fact, Amazon’s last-mile delivery is one of the best in the world as it employs the services of external delivery partners and uses its own fleet of vehicles to get orders delivered to the customers quickly and efficiently.
For example, Amazon has its own fleet of airplanes to fly items from its different warehouses spread across the US. They also have trucks to move the orders from fulfillment centers to the sorting locations.
The company then chooses the best delivery transportation option for the packages, which includes vans, cars, and motorcycles, depending on the locations and the timelines of the deliveries.
Along with human labor, robots form an integral part of the Amazon logistics and supply chain. The company uses robots in its warehouses in the US.
Amazon is also considering using drones for deliveries and has already received a patent for their innovative floating warehouse.
The concept is that there will be a flying warehouse vessel from where drones will be deployed to deliver orders as soon as an order is received. The idea is to get orders delivered in 30 mins or less to the end customers.
How the Amazon Supply Chain Works
The supply chain structure of Amazon is an amazing network that depends on the two main elements mentioned above.
Warehousing
It is the first step whereby the packages from third-party sellers arrive at the fulfillment centers. The items are thoroughly inspected, scanned, and sent off to be stored in their assigned location.
This efficient sorting and storing process along with pick and pack optimization allow Amazon to deliver products quickly. The process of packing the product for delivery starts as soon as an end customer clicks buy.
You can also optimize your pick and pack process by using a route planner like Route4Me. The route optimization software comes with dynamic route optimization technology that easily optimizes pick and pack routes inside warehouses and yards for robotic and human operators.
Route4Me even creates a map of your warehouse or yard and a road network inside your warehouse. The route optimization algorithm then uses that mapping data to build highly efficient routes.
All you need to do is describe the item types and the number of items that are located in each part of your warehouse/cabinet/bin and the route planner app’s dynamic routing algorithm will route your robotic loader or human operator to the nearest inventory pick location.
The map route planner also ensures that your robots/loading equipment are not overloaded by weight or overwhelmed in any other capacity.
Learn more about Route4Me’s pick and pack optimization feature.
Want To See For Yourself How Route4Me Can Boost Your Profits?
Delivery
The second step is the delivery process.
The warehouses are strategically located near metropolitan areas from where most orders are received.
Amazon also developed advanced technology solutions to ensure that deliveries do not become a headache for the drivers.
For example, the company has made an app named Rabbit exclusively for its delivery drivers to help them make seamless deliveries.
So, what does this app do, and how does it work?
Well, during their shift, each driver receives a manifest that contains barcodes to the delivery zones where they need to deliver packages. The drivers have to deliver all the packages within their delivery zones during their shift.
However, everything is already organized and structured for the drivers on the Rabbit app. Once the drivers receive their manifests, they scan their barcodes on the Rabbit app and they are off.
The app not only provides driving directions from one place to another but also the fastest and shortest route.
ALSO READ: Shortest vs. Fastest Route: When You May Need Different Types
The app handles everything from inventory and scanning to route optimization and providing turn-by-turn directions along the way. The drivers just need to log in and follow the instructions on the app.
Apart from optimizing the routes, the Rabbit app also allows the drivers to mark off their deliveries once done, thus helping them stay on track and providing real-time delivery status to users.
This easy-to-use technology and streamlined Amazon supply chain structure allow third-party last-mile delivery companies and individual contractors to sign up with Amazon and become their delivery partners.
This is also why Amazon’s last-mile delivery is so flawless and world-renowned for being one of the best.
In addition, Amazon introduced the Amazon Map Tracker to the market just a couple of years ago to ensure that the company stays on top in providing the best customer service. This technology allows the end customers to follow the progress of the driver delivering their orders.
The Amazon Map Tracker uses the same concept as Uber.
As an end customer, you can see exactly where your delivery driver is, how many stops they need to make before reaching your location, and their expected arrival time.
This amazing technology increases the customers’ satisfaction with Amazon, simply because they now do not have to sit around waiting for their orders to arrive. They can pop out for quick work because they know exactly when to expect their packages.
If you want to up your game like Amazon, you will need a route optimizer like the Rabbit app. This is where the Route4Me route planner app can be immensely helpful.
The delivery scheduling software helps your drivers get a large volume of deliveries done quickly and efficiently. You just need to upload the list of addresses that need to be visited into the system, set some parameters, and you are done!
You will have accurate routes with the best directions to work for your delivery drivers within a minute.
Route4Me goes above and beyond Google Maps and Apple Maps because the AI-powered dynamic route optimization technology takes into account variables, such as construction updates, traffic congestion status, weather reports, and road conditions.
ALSO READ: Why Route Optimization Software Is Way Better Than Google Maps
The route planner even comes with a geocoding feature that autocorrects any wrong addresses entered into the system. And, it offers geofencing technology that automatically checks in and out your drivers.
Also, much like the Amazon Map Tracker, Route4Me comes with built-in GPS tracking that helps you or your dispatchers monitor drivers and vehicles in real-time.
You can even let your customers track their package delivery statuses or progress on their own through Route4Me’s customer portal feature.
What Lies Ahead for the Amazon Supply Chain?
As mentioned above, what lies ahead in the immediate future of the Amazon supply chain is drones.
Amazon has already received the patent for floating warehouses; hence it is only a matter of time when the e-retail giant starts operating a fleet of delivery drones.
Another area where Amazon is currently focusing on is the manufacturing industry. Along with selling third-party items, Amazon is manufacturing and selling its own products as well.
Amazon is manufacturing a number of products from Fire TV devices and backpacks to AI virtual assistants.
Frequently Asked Questions about Amazon Supply Chain
How Does Amazon’s Same-Day Delivery Work?
In addition to the sturdy supply chain network, Amazon also uses advanced technology solutions, such as route optimization software, to smooth out its last-mile delivery. With so many orders to be delivered in a single day, it would be tough for Amazon’s delivery drivers to complete all their deliveries without routing software.
You can use Route4Me’s delivery route planner to plan well-optimized routes with the best directions to work for your delivery drivers. The routes will also be free from any hindrances that could affect deliveries and your drivers’ performance and productivity. It thus factors in weather, traffic congestion, sunrise and sunset times, one-ways, avoidance zones, left turns and U-turns, and more.
Learn how Route4Me’s trip planner can help you automate same-day delivery.
How Does Amazon Prime Ship so Quickly?
Simply put, as soon as you place an order as an Amazon Prime customer, the fulfillment center stirs into action. Robots get the items from their stored location directly into the hands of the delivery driver. The driver then puts his or her foot down on the gas pedal and zooms to deliver your item the first thing.
However, not every Amazon fulfillment center uses robots. For those who do not have robots, the human workforce does the job. It is made easier through the excellent sorting, scanning, and storing method used by Amazon.
What Happens at Amazon Once I Place an Order?
- The items arrive at the fulfillment facilities: The packages are either forklifted from the trailers or manually made into pallets. The freights are separated based on whether the products are arriving from the Amazon facility or from third-party sellers who are using FBA.
- The products are stored: Tracked by computers, Amazon stores items randomly in yellow-tiered bins and not according to size. The bins then ferry the products according to their sizes to the Amazon associates.
- The items are picked when an order comes in: Once an order is placed, the Amazon warehouse robots deliver a pod full of items to the pick stations where Amazon associates organize the orders. These associates will then look at the orders on the screen, pick the items accordingly, and place them in the tote, which is a yellow plastic box.
- The orders are packed: The items are scanned and organized as per their shipments to be sent to the packing station. At the packing station, the system measures each item to recommend a box size and the amount of tape that will be required. The associates then pack the orders accordingly before sending them out for shipping.
It is important to note that the products’ location saved on the system should match its physical location for the robots to find them efficiently and quickly. Robots working alongside humans require a lot of technological fine-tuning, which is one of the biggest Amazon supply chain challenges, but one which this market leader has been successfully navigating till now.
How Is Amazon Managing Next-Day Delivery?
What Is Amazon’s Shipping Process for Same-Day and One-Day Delivery Prime Orders?
There are prime fulfillment centers with items stored in a location that is scanned and saved on the management system. Once an order is received, the items are retrieved, packed, and handed over to the last-mile delivery partners.
The strategic locations of the prime fulfillment centers, along with efficient use of technology, ensure that Amazon prime deliveries are always on time.
How Does Amazon Deliver Products to You on Time?
Also, Amazon offers their very own Rabbit app, a route optimization software that helps plan well-optimized routes and ensures the drivers always show up on time.
How Does Amazon Deliver Products to You on Time?
Also, Amazon offers their very own Rabbit app, a route optimization software that helps plan well-optimized routes and ensures the drivers always show up on time.
Conclusion about Amazon Supply Chain
Amazon has consistently kept up with the changing marketing trends and adapted to technology to outwit as well as outgrow its competitors.
The Amazon supply chain is a robust network that has revolutionized the retail industry. No wonder this eCommerce giant has stayed way ahead of other e-retail businesses.
Do you any questions about Amazon’s supply chain? Please feel free to leave your comments below.
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