How Amazon Optimizes Its Delivery Network for Fast, Low Cost

Amazon speeds up delivery, reduces costs, carbon emissions, and reshapes inventory management.

Amazon.com Inc. said on May 13 that it has implemented several changes to optimize its distribution network in the wake of the pandemic. The new solutions will allow it to speed up deliveries, reduce costs and reduce its own carbon emissions.

Amazon has traditionally operated a national delivery network, delivering successful orders from warehouses spread across the country. If a local warehouse doesn’t have the product a customer has ordered, the platform will ship it from another region.

But long-distance shipping is much more expensive. Delivery times are also longer. Amazon CEO Andy Jassy said cutting both time and costs is a “significant challenge” for the company right now.

An Amazon package is packed and ready for delivery in Manhattan, New York (USA), January 29, 2016. Photo: Mike Segar — An Amazon package is packed and ready for delivery in Manhattan, New York (USA), January 29, 2016. Photo: *Mike Segar*

In pursuit of increased profitability, the company has created eight new warehouse locations in several remote areas, optimizing service coverage and reducing shipping distances. According to Jassy, each of these locations will have a wide variety of suitable options and will operate primarily on a self-sufficient basis. The new warehouses can also be shipped nationwide if necessary.

This new direction helps the e-commerce giant reshape its inventory management system and search capabilities. This is a way to help partners' goods and products display more effectively and target the right customer base.

Consumers can easily find the items they want to buy from the right shops closest to them for faster shipping. In turn, the delivery process is streamlined, with an estimated 12% reduction in the number of checkpoints and storage points that parcels previously had to pass through.

Many experts and platforms comment that this is a time when consumer demand is decreasing due to signs of economic recession and high inflation. Amazon and other online retailers are mostly in the process of trying to cut down on home delivery and return costs.

Amazon this week rolled out a $10 shipping discount for shoppers who choose to pick up their items at a pickup location or pick up point, rather than having them delivered to their homes. The move shows that despite commanding a large market share, large online shopping platforms are still having to cut costs to keep up with the times.

In recent months, the e-commerce giant has cut about 27,000 jobs to optimize costs. Amazon also started charging customers an additional $1 fee to return items if there is a Whole Foods, Amazon Fresh, or Kohl's grocery store near their delivery address.

Thy An (According to Reuters, CNN )

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