Amazon’s supply chain innovation continues

Three years ago I wrote an article on Amazon supply chain where I asked if Amazon

AMZN
had the most innovative supply chain in the world. It’s time to take a look back at Amazon’s supply chain and see how it has changed and how it’s prepared for the future.

Amazon continues to grow. In 2019, the company delivered 2.5 billion packages, or around 20 packages per household. And the company’s operations and technology have evolved over the past three years to help them cope with this growth. In particular, the company has expanded its trucking, warehousing and air transportation capabilities. How do each of these elements drive Amazon’s supply chain?

Amazon Trucking

Over the past few years, Amazon has continued to expand its private fleet of long-haul and last-mile delivery trucks. The end goal is to reduce or eliminate its dependence on UPS, FedEx

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, and the USPS to make deliveries, thus becoming more profitable while controlling the customer experience.

While Amazon has deployed its digital freight matching market named Amazon Freight, the company is always looking for new opportunities in this area. One way is to create its own pool of drivers and to do this the company is reportedly building an incubator for start-up trucking companies. Essentially, Amazon is hiring hundreds of people to set up trucking companies and only drive for Amazon. The incubator will provide business training and loans to entrepreneurs to start their own trucking business.

Sources say the incubator does not aim to address the challenges of the current capacity shortage. Instead, the program is to look to the future and figure out where that demand will be, and how Amazon can take control of it with an internal solution.

Amazon is also investing in the future of its trucks by exploring more sustainable fuels. The coronavirus pandemic has helped push e-commerce to new levels; but as e-commerce sales have skyrocketed, heavy trucking has also increased on the roads to get goods to their final destination. And that has increased congestion and pollution. Amazon plans to reduce carbon emissions from its fleet by switching to Class 8 natural gas trucks. To date, the company has ordered more than 700 Class 6 and Class 8 compressed natural gas trucks, with the goal of ” introduce new sustainable solutions for the transport of goods. Amazon is working on testing a number of new types of vehicles including electric, CNG and others. The engines, supplied by a joint venture between Cummins Inc

CMI
and Westport Fuel Systems Inc, of Vancouver, are to be used for Amazon’s heavy-duty trucks that run from warehouses to distribution centers.

Amazon has never shied away from making controversial decisions, and the latest technology the company is developing for its trucks fits perfectly into this category. Last month, Amazon announced plans to outfit its branded delivery vans with cameras powered by artificial intelligence. The cameras, which will always be on, are touted as an effort to improve driver safety. However, many workers and privacy advocates fear that drivers will be continually subjected to surveillance and data collection.

The cameras, which run on Netradyne’s Driveri platform, aim to improve the safety of drivers and the community in which they make deliveries. Each camera system has four HD lenses for detecting road conditions, driver speed and collision detection technology. And although the cameras are rolling at all times, Amazon said the footage will only be uploaded if the driver triggers any of the 16 actions, such as running a stop sign or speeding.

Amazon warehousing

Amazon has spent years expanding its logistics network to move items around the world as quickly and cost effectively as possible. When I wrote on Amazon three years ago, the focus was on their large regional e-commerce distribution centers and Whole Foods distribution centers. But in an effort to improve service, we hear about other types of warehouses that they run. These include: sorting centers – used to sort packages for a geographic region; Pantry and Fresh Food Warehouses – facilities that serve dry groceries, perishables or frozen foods; Prime Now – facilities that stock a limited range of high demand products that can be delivered within 1-2 hours of ordering; and delivery stations – last mile facilities where packages are sorted and then shipped directly to the customer.

Part of speeding up delivery is making sure that not only major cities have distribution centers in place. Amazon’s delivery stations represent an effort to “cover the suburbs”. Delivery stations are the last link in Amazon’s supply chain that begins with its large regional distribution centers. Delivery stations are smaller terminals that will receive Amazon products and ship them to end consumers. The company plans to open 1,000 parcel delivery stations in the near future.

This model is not just about speeding up deliveries to the United States, however. Earlier this year, Amazon announced its intention to open five new facilities in Quebec to speed up its delivery process. The company will add two sorting centers and its first three delivery stations in the province. Overall, the new facilities will create approximately 1,000 new jobs. The sorting centers will be located in Coteau-du-Lac and Longueuil, while the delivery stations will be located in Laval and Lachine.

The Covid pandemic has certainly been a boon to Amazon’s business. However, not all warehouse workers are satisfied with the working conditions. This was especially true at the start of the pandemic, when social distancing guidelines were first put in place. As a result, Amazon launched cameras and software in its warehouses to detect if and when an employee violated social distancing rules. This type of software is still a work in progress as more and more people are vaccinated and the guidelines are constantly changing.

One of the biggest fears of warehouse workers is that large-scale automation will put them out of work. However, as most businesses will say, and Amazon is no exception, bots and cobots are there to make things easier for employees. Amazon continues to invest in robots for its facilities, helping to remove menial and time-consuming tasks from workers so they can focus on other tasks. As it stands, Amazon envisions fully automated shipping warehouses in a decade or so. While Amazon will continue to invest in robots, they are also investing in their human counterparts.

Amazon Prime Air

Over the past four years, Amazon has invested heavily in its airline capabilities. What was formerly known as Amazon Prime Air, Amazon Air is a freight airline operating exclusively to transport Amazon packages. The company has acquired jets to expand its fleet as it is also awaiting completion of its air hub at Cincinnati / Northern Kentucky International Airport. At the time of this writing, Amazon’s fleet consisted of 22 Boeing 737-800s and 55 Boeing 767-300ERs, with 9 other planes on order. Amazon also spent $ 131 million to acquire approximately 13.5 million shares of Air Transport Services Group (ATSG

ATSG
).

Cargo planes aren’t the only part of Amazon’s air plans for the future. Drones are a big part of Amazon’s future, something Jeff Bezos has been touting for over seven years. In September of last year, Amazon took a big step forward in its quest to use autonomous flying vehicles as part of its home delivery strategy. The Federal Aviation Administration (FAA) designated Amazon Prime Air as an “air carrier,” which allowed Amazon to begin its first commercial deliveries to the United States as part of a test program. There are still a number of regulatory hurdles Amazon must overcome before it starts making door-to-door deliveries, but this is clearly a step in the right direction for drone use. Amazon has joined Wing, the Alphabet Inc.

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subsidiary, and UPS as companies that have obtained FAA approval to operate under federal regulations governing charter operators and small airlines.

And Amazon clearly sees drones as a big part of its future, based on the amount of research and development it puts into its drone program, especially in Europe. According to an article published last week, Amazon has doubled the number of employees employed by its Cambridge-based Prime Air team, where the company is expanding its drone delivery service. This brings the total to nearly sixty at Cambridge; Amazon also has research technology hubs in London and Edinburgh. Amazon said last summer it intended to start launching the drone service ‘within a few months’, announcing the plane could fly up to fifteen miles and deliver packages under five pounds to customers in less than thirty minutes.

Final thought

Amazon’s supply chain continues to be one of the most innovative, if not the most innovative in the world. The company is investing in its trucking capabilities to reduce its dependence on other carriers. Amazon also continues to expand its technology and warehouse capabilities to make pick, pack, and ship orders more efficient. And it is investing heavily to take off, with an emphasis on cargo planes and drones. It will be interesting to see where Amazon’s supply chain goes from here.

The main author of this article was Chris Cunnane.

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