Monday, November 17, 2014

Amazon’s new distribution network

To increase the speed of the delivery, Amazon has been building its new distribution center network of all sortation centers. The experts and scholars in Amazon have predicted that a rollout of 40-plus food distribution facilities nationwide by the end of 2015. Let’s first look at the supply chain weaknesses in Amazon’s current supply chain network.

Amazon’s supply chain weaknesses: 

Amazon is primarily an online B2C retailer and so it has a large need to possess human resources for the final time of the year. In the US alone, it is estimated that Amazon temporarily hire more than 100,000 employers or contractors. The increasing pressure on human resources is adding the fragility of Amazon’s supply chain network.

What’s more, there are significant drawbacks in its outbound transportation network. Most traditional retailers control their outbound transportation to the stores, with others ship primarily using UPS to replenish their retail stores. Amazon has never had this level of control over their outbound transportation function. The challenge is that carries like UPS and FedEx are not exclusive to Amazon and have to serve all their customers, which generates big problems of not delivering on time. Amazon is the one that has to suffer the consequences of transportation failures.

Amazon’s Sortation Network

With the above being said, the Amazon sortation network comes to the rescue. First, it is about taking control over its primary weakness, the outbound transportation. Second, it is about enabling new competitive advantages which pertain to the speed of delivery. 

The sortation network is first introduced by the company in mid 2013 in United Kingdom and then introduced to US. in US, a typical sortation center requires a footprint of 200,000 square feet and only 100-200 associates to operate. These numbers are far less than that of a typical fulfillment center.

The primary role of the sortation center is aggregating shipments from one or more fulfillment centers for delivery into a pre-defined regional grouping of zip codes. They are designed to bring in many shipments from one place destined to a grouping of zip codes for a pre-defined market region.  While USPS is responsible for delivering sealed shipments that are sorted pallets, Amazon will be in a position to take over more of the last mile delivery function.

What are the benefits of Amazon Sortation Network?

Amazon could have the ability to deliver on Sundays, thanks to a joint service by Amazon and USPS. And the sortation center can increase the speed of such deliveries to market for shipments and shave a day off the original cycle time.

Questions: Where would you think is the ideal place to locate the sortation center?

Reference: Supply Chain Digest url=

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