Final Communication Plan Team Report

BCOM 314
Michael Mandel
Amazon Inc.
Section 007

Lacy Cain
Matthew Cheng
Jiachen Dong
Camryn James
Nick Johnson
Cayenne Maxwell-Moyle
 TABLE OF CONTENTS

Introduction 3

Conflicting Narratives 3

Background & Analysis 3

Late Delivery 3

Numerous Shipping Providers 4

Careless Delivery Personnel 4

Labeling Issue 4

Current Customer Accommodations 5

Recommendation 5

Stakeholder Analysis 6

Suppliers 6

Stockholders 6

Customers 6

ROI 7

Timeline 10

Conclusion 10

Executive Summary 10

References 12

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Introduction
At the beginning of August, our intern team, The Guardians of the Amazon, were assigned with
the task of determining and analyzing Amazons narratives and the impact that they may have on
the company. The discrepancy between Amazons internal and external narratives has led to
various issues. Our poor shipping processes and their effect on our customers are the major
issues discussed in this report. With our customer-centric focus in mind, we will provide insight
on how to help ensure that we uphold our mission as a company.

This report will be broken down into four sections. First, we will present our company narratives
that are being directly affected by the issues with our shipping processes. Next, we will present
the research we found to support these issues and explain their relevance. Further, we will
provide recommendations on how to communicate this issue to key stakeholders. Finally, we
will provide the next steps to implement a solution which includes: a projected budget, the
predicted return on investment, and a timeline.

Conflicting Narratives
Our mission statement states Our vision is to be earth's most customer-centric company
(Farfan, 2017). Much of our current success stems from our commitment to this vision. This
success is driven by customer satisfaction. In the 2017 letter to stakeholders, we assert that a
customer obsessed culture is vital to our success (Bezos, 2017). Our mission statement and
letter to stakeholders clearly identify our goal of being completely consumer-centric.

Unfortunately, Amazon customers are not experiencing the quality service that they expect and
deserve. Many customers continue to receive broken packages, due to poor packaging and
careless delivery methods. Furthermore, a significant number of customers do not receive their
packages within the guaranteed time frame, while others do not receive their package at all. Each
of these issues conflicts with our goal of being a consumer-centric company.

We are currently failing to meet the standards that have been set in our mission statement. This
issue diminishes our credibility, and damages our reputation and desired image of a customer-
focused company. If we realign with our internal narrative and regain our customer focused
mindset, customer satisfaction and customer loyalty will increase. This will then lead to higher
profits for Amazon. In other words, the magnitude of our financial success is largely determined
by our ability to remain a customer-centric company.

Background & Analysis: Late Delivery

Amazon set the new standard of shipping when we launched Amazon Prime and presented free
two-day shipping, that is included in the membership. Prime members can select from three
shipping options: two-day, same-day, and one hour shipping. Our company currently spends
more than 12% of the revenue on shipping services. In the fourth quarter of 2015, we spent an
estimated $4 billion on those services (Kim, 2016). From November 1st to December 31st of
2015, ten percent of packages arrived late (Taylor, 2015).

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Considering the vast amount of money invested in our shipping services, a 10% margin of error
is too large (Taylor, 2015). The customers need to trust that Amazon will not only provide the
lowest prices but also the fast shipping that was promised with their paid Prime membership. Our
company must be able to uphold its commitments to its Prime members and improve on our
margin of error.

Numerous Shipping Providers

Amazon uses 23 separate shipping companies to deliver over 500 million packages a year
(Taylor, 2015). From large companies like United States Postal Services and FedEx to local
postal services like CEVA Logistics, each of these companies has its own shipping process and
priorities. Our largest carrier, USPS, accounts for 40% of our package deliveries (Taylor, 2015).
However, USPS grants priority to its customers who purchase first-class packages over its
commitment to Amazons Prime members. This conflict leads to many of our Amazon customers
receiving late shipments.

Amazon quality shipping from its shipping providers. Our company provides a significant
amount of business to delivery companies, but our prime packages are second priority to them.
Since we switched to USPS as our primary delivery carrier, we have flooded them with
shipments and it has led to an increase in late deliveries (Leonard 2017). When customers
continually receive late packages, they are more likely to turn to our competitors because they
are unhappy with their current shopping experience at Amazon.

Careless Delivery Personnel

The mishandling of packages is a common occurrence and there have been various cases of
deliveries being mishandled and damaged. This is trend within every one of our shipping
companies that we are partnered with. Amazon depends on its partners to deliver millions of
packages a year and they are not meeting the standards that we have set as a company. When
products are damaged in commute, we are responsible for accommodating the customers
financially.

Even though Amazon is only an average of 5% of business for USPS, UPS, and FedEx (Leonard
2017), they deliver millions of packages for us. Delivery drivers are over extended and cannot
complete all deliveries on time. Customers are becoming extremely dissatisfied with our current
shipping methods.

Labeling Issues
The common reasons for undelivered packages are damaged or misprinted labels. Using multiple
carrier companies is difficult because we do not have the ability to manage every single one of
our delivery partners employees. This makes it difficult for us to monitor and fix issues related
employee error and carelessness because they are not under our supervision.

Although undelivered packages are not extremely common, they do occur, and they do damage
our customer satisfaction. When a package is characterized as undelivered, customers must
repurchase the product to receive it. By this time, the product may be out of stock. Although
customers are refunded when a package becomes undeliverable, this inconvenience decreases
their likelihood of being a lifetime Amazon customer.

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Current Customer Accommodations
When customers receive their packages late, damaged, or not at all, customer service attempts to
satisfy them using various strategies. Our own Julie Law asserts that customers can call or e-
mail and we can extend them an extra month of Prime membership if packages do not arrive as
expected (Taylor, 2015). Some customers are also offered minor credits to their account to
express condolences. In terms of retention rates, these efforts to accommodate unhappy
customers may be sufficient for a selection of customers, but the majority prefer to avoid the
problem completely.

A direct example was found on the blog RefundRetriever.com where an Amazon customer
discussed her interactions with the Amazon customer service team after she received an email
notifying her that her package would delivered later than the promised two-day shipping. Not
only did the customer service agent contact USPS and arrange for the package to be delivered the
next day, she offered an extra month of prime membership free. She also added a five-dollar gift
card for use in the e-commerce store (Amazon Prime - Late Package Delivery, 2017).

Recommendation
With the implementation of our own transportation and logistics network, we can eventually save
$3 per package, which is about $1.1 billion in annual revenue. (Loeb, 2016) Furthermore, we can
provide services to third parties and worldwide logistics markets. According to Baird analyst
Colin Sebastian, the services can possibly generate about $400 billion annually. (Borison, 2016)

Customer Stakeholder Analysis

Looking at the mission statement from Jeff Bezos, Amazon seeks to always be at the forefront of
its vision to be Earths most customer-centric company (Gregory, 2017) in every way (p. 1). In
being the most customer-centric company, Amazons main priority needs to be in guaranteeing
the customers satisfactions in all their interactions which mainly consist of the ordering and
delivering process. By establishing that Amazon needs to remain customer obsessed in order for
the 43% of annual cash flow growth to continue to finance its reinvestment plans, customers and
stockholders need to continue choosing Amazon (Del Rey, 2017).

Whenever the customers expectations fall short, not only does it hurt their chances of returning
to Amazon for future deliveries, it also infringes on the small profit margin Amazon is running
currently. Amazons customer service team, often mitigating miscommunication between the
customer and their delivery agent, will frequently offer incentives for customers to return to
Amazon for their shopping needs with the gift cards.

Communication to Stakeholders
With the understanding that Amazon will continue to expand dramatically over the next few
years and that Amazon is struggling already to fulfill the number of orders outstanding, this issue
needs to be addressed within the company and to its three key stakeholders. These stakeholders
are: the stockholders, the delivery suppliers, and the customers. This next section will
communicate what Amazon will relay to the stakeholders and what channels they will use to
reach them.

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The most influential stakeholder to actually changing the way Amazon will operate its
fulfillment centers and delivery processes are the stockholders who are financially invested in the
consistent growth of Amazon. Included in the stockholders is CEO and President of the Board of
Directors, Jeff Bezos, who is the most influential person in Amazon. His plans for Amazons
future rely on the 43% increase due to customers being obsessed with the credibility of
Amazons speedy delivery (Del Rey, 2017).

Bezos, in an interview with Bloomberg analyst Devin Leonard, acknowledged that the only
reason customers would continue to buy products from Amazon because it came so quick they
didnt need to go to a store to purchase it. The convenience that Amazon provides is
unprecedented to the everyday busy American (Leonard, 2016).

Not limited to Bezos, the rest of the stockholders that are invested in Amazons approximately
480 million shares need to understand how critical this issue and how important it is to invest
money into fixing it (Amazon.com Shares Outstanding, 2017). By communicating with Bezos
and other high-ranking officials, a letter to the stockholders should be written explaining the
many details involved in dramatically increasing the success rates of the logistics of Amazon
delivery services.

In the Letter to the Stockholders, the information about the cost of $1.5 billion will be included
which covers the development of an aircraft carrier that will be called the PrimeAir Cargo Hub
(Business Journal - PrimeAir Hub, 2017). This, along with the creation of the drone center,
would potentially revolutionize the speed in which customers could receive their packages
setting Amazons success over their competitors on an even greater level. This will in turn create
a greater profit on the stockholders stock price and thus is important for stockholders to
understand.

Already in this document, we have concluded that the combined efforts of USPS, UPS, and
FedEX are not able to fully handle the enormity that is Amazon Prime delivery standards.
Although Amazon only accounts for under 5% of all USPS, UPS, and FedEX revenues, the
demands that Amazon requires causes the suppliers to sacrifice the other 95% of customers
priority mail in order to fulfill Amazon. Jeff Bezos, in another interview with Bloomberg,
declared that Amazon will take the capacity that UPS will give us and then we will supplement
that (Leonard, 2016, p.12).

In order to reach out to the delivery outlets, who are a major stakeholder in Amazon, we need to
schedule a meeting with the executive board from each sector and discuss the future plans.
Amazon is growing their business with UPS, according to Bezos, and will continue to utilize
the outside vendors for delivery purposes until a better solution surfaces (Leonard, 2016, p.5).
The discussion with the executive boards need to cover how Amazon could be better served with
upgraded computer software developed by Amazon and may be able to increase the delivery
centers effectiveness (Leonard, 2016).

UPS, USPS, and FedEX will have an interest in continuing the partnering with Amazon by
utilizing their innovative sorting systems to make sure Amazon customers are receiving their

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products on time. By organizing this meeting, the arrangement that will be worked out will fix
this problem temporarily while Jeff Bezos fights to win the patent on drones and works to raise
enough funding for the PrimeAir Hub. When the drones and PrimeAir Hub are released, the need
for a partnership with outside delivery services may not be needed anymore.

Customers need to hear about the actions Amazon are taking to increase their effectiveness in
their deliveries. The customers have a financial investment in their annual deliveries with their
$99 annual fee for Amazon Prime Shipping. They want to hear how Amazon will continue to
provide them what they pay for with their membership. In order for them to stay active
members, they demand a guarantee with their packages.

Amazons customers primarily use the website amazon.com and the application on their phones
to order products. Therefore, by creating a push notification in video form for computers and
phones, the customers can visualize where Amazon is going in the future and how dedicated
Amazon is to their customers happiness. By watching information featuring history-breaking
news, customers will be invested in being a part of this new technology release by ordering from
Amazon (Glaser, 2017).

In this ground-breaking release of information, Amazon will include all of the latest and greatest
technology that will enhance and speed up the customers experience. In the push notification
video, they will watch media that includes: their leasing of 20 extra Boeing 767 jets, which are
being utilized to transport mass amounts of Amazon products, patents being filed on the
possibilities of a drone center, which would cut out fulfillment centers entirely, and the further
testing and implementations of Amazons personal shipping services (Leonard, 2016).

ROI
Having established how we will communicate to our stakeholders and with what specific
messages, this next section will detail our plan for implementation, when we realistically expect
changes to occur, the approximate budget, and our next steps. This will help the high-level
executive board to have an idea of the risk and reward of going forward with our plan to increase
customer satisfaction.

In regard to our plan for the stockholders, we will be explaining our thoughts on how the
PrimeAir Hub and Drone Center will come into action and be beneficial. Both of these plans are
far in the future at approximately two to three years for the PrimeAir Hub and five to ten years
for the Drone Center. We calculated the PrimeAir Hub creation because the idea is already solid
and approved by the Board of Directors. Amazon is just waiting on funding for the $1.5 billion
(Business Journal - PrimeAir Hub, 2017). The Drone Center is still awaiting patent approval and
thus has a long way to go.

In terms of budget, the PrimeAir Hub is predetermined at $1.5 billion (Business Journal -
PrimeAir Hub, 2017). If Amazon was able to control more of the fixed costs by controlling more
of the shipping costs, the 12% of current cost in revenue for shipping expenses could be reduced
significantly for the return of investment of the $1.5 billion (Kim, 2016). This would also allow
Amazon to further create logistics software that could increase efficiency within the fulfillment
centers because they control a larger portion of the shipping process.

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Budgeting out the Drone Center, Amazon executives should expect to spend at least double the
budget for the PrimeAir Hub because it is all new technology and the test period will be
significant. At a minimum of $3 billion in trial and error testing with the investment in the
countless lawyers, engineers, and PR specialists, Amazon is looking at spending a pretty penny
on the Drone Center. (See table below for drone center budget costs)

Costs for Implementation of Drone Center

Drone Purchase 80,000,000

Drone Maintenance 15,000,000

Drone Electricity and Fuel 4,000,000

Direct Labor 300,000,000

Drone Center 1,600,000,000

Drone Storage Expense 20,000

Drone Insurance Expense 400,000

Drone Depreciation 500,000

Drone Center Depreciation 1,100,000

Utilities 4,000,000

License Fees and Taxes 100,000

Advertising 8,000,000

Depreciation Computers 125,000

Equipment Depreciation 1,000,000

Total Costs 2,014,245,000

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If the Drone Center was successful, the return on investment would be significant. Currently,
Amazon spends anywhere between $3-$5 per shipping package which adds up quickly. If you
refer to the appendix image one, you will see that Forbes predicts that drone shipping costs could
be around $1 per package with shipping times at 30 minutes (Loeb, 2016). This would
revolutionize the shipping market forever and Amazon would be at the forefront of it.

Our team recommends that we license our top-of-the-line logistics software to the shipping
carriers that we do business with. Its success in our fulfillment centers would surly translate to
their logistics increasing the rate that USPS, UPS, and FedEX could deliver their packages at.
Overall an increase in successful deliveries leads to increased Amazon customers happiness.
(See table below for software upgrade budget)

Software Upgrade Costs

System Installation 16,000,000
Customization 50,000
Maintenance & support 3,200,000
Training Cost 750,000
Total Cost 20,000,000

Together, USPS, UPS, and FedEX have a total of 39,000 shipping centers across America
according to all of their respective websites. Amazon would need to budget for as many hours it
would take for their software installers to train and program all of the centers. This could cost
Amazon approximately $20 million at least if you multiply the number of centers times the labor
hours times the cost for parts and travel. The return on investment would come with customers
continuing to choose Amazon for their shipping needs when they receive their packages on time.

Finally, in the communication plan for the customers to help them see how serious Amazon takes
their business and desire to improve, the push notification video needs to be created. In
consulting a software engineer from Raytheon, he figured that it would take about three to four
weeks for a basic video to be created. The engineer team that would do this probably has a salary
in the $200,000 to $300,000 range. This means that it would take approximately $25,000 per
engineer for this four-week timespan to create the product. Amazon should budget $200,000 in
case more help is needed than we can anticipate. (See table below for video budget costs).

Engineer Wages $200,000

Trial Costs $60,000

Maintenance Costs $25,000

Total Costs $285,000

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Once the video is created, it is only a matter of releasing the push notification from the
amazon.com app and the website to the customers. This would not cost anything as the
application and website are both already functioning. The return on investment could be
significant if the plans about where Amazon is going in the future with the PrimeAir Hub and
Drone Center go viral causing current members to continue shopping with Amazon and new
members to join due to the excitement.

Looking at the appendix image B, we show the timeline in picture form to project when we will
hopefully have these plans in action. The push notification video and software implementation
would happen within the next two to three months. More long-term plan oriented, the PrimeAir
Hub should be finished within two to three years with the Drone Center more projected at five
plus years.

Conclusion
In conclusion, customer centric is what we emphasize so much at Amazon. Customer
following and support drives our success. Therefore, we must accommodate customers demand
for better shipping processes. Customers want their order delivered on time and undamaged. In
order to solve this issue, we are going to implement new measures and build supplementary
facilities, which include the Drone Center, push notification, sorting software licensing, and the
Prime Air Center. These implementations will enhance and smoothen the shipping processes and
customer satisfaction will improve as a result. With a higher satisfaction rate, our customers will
continue using our services in the future and more potential customers will purchase Amazon
Prime. Overall, adopting these recommendations will increase revenue on a short and long term
basis.

Executive Summary
With growing competition from companies such as Walmart and target, it is crucial for Amazon
to continue to innovate in order to correct current issues that customers are experiencing. These
innovations will allow Amazon to remain the driving force in the e-commerce and retail

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industry. To correct current shipping issues, the Amazon intern team has developed an exciting
shipping strategy that will guarantee that shipping standards are met. This new shipping method
will prove to be extremely beneficial as it will provide significant returns on investment. At a
lower cost, Amazon will now be able to fulfill all of its customers delivery expectations. This
will lead to an increase in customer satisfaction, which will then lead into an increase in profit
and revenue.

After conducting extensive research and analysis, the following steps have been created to
complete our transition into a new and improved delivery system:
Communicate to stockholders through a letter to stockholders
Schedule a meeting with board of directors from each shipping sector
Consult with engineers to create push notification video
Staffing and training of delivery workers for drone, plane and ground deliveries
Obtain licensing and insurance coverage
Purchase drones, planes, and delivery trucks

In terms of projected profitability from this update in delivery method, ROI has been estimated
to become positive by year 5, once all delivery services are fully developed and operational. The
losses in the first four years can be attributed to marketing costs, research and development,
construction, legal fees and insurance fees.

Additionally, the above recommendations have been placed into four phases:
Phase 1: Receive patent for drone center
Phase 2: Create push-notification video
Phase 3: Provide improved software for delivery partners
Phase 4: Construct PrimeAir center

The sum of these phases is approximately 5 years, due to the amount of research and
development associated with technology such as drones.

Based on the teams findings the development and implementation of a new shipping method via
drone, airplane and truck freight shipping, Amazon will strongly boost Amazons customer
satisfaction and will reduce costs associated to shipping error. This will then lead to a drastic
increase in Amazons profit and sustainability.

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 References

About Undeliverable Packages. (2017). Retrieved October 16, 2017, from

https://www.amazon.com/gp/help/customer/display.html?nodeId=3608471

Amazon.com Shares Outstanding: (n.d.). Retrieved October 14, 2017, from

https://ycharts.com/companies/AMZN/shares_outstanding

Amazon Prime - Late Package Delivery. (2017, March 28). Retrieved October 10, 2017, from
https://www.refundretriever.com/blog/AmazonPrime

Borison, R. (2016, January 30). Here's How Amazon Could Offer Its Own Delivery
Service and Crush UPS and FedEx. Retrieved October 10, 2017, from
https://www.thestreet.com/story/13432128/1/here-rsquo-s-how-amazon-could-offer-its-
own-delivery-service-and-crush-ups-and-fedex.html

Business Journal - PrimeAir Hub. (n.d.). Retrieved October 11, 2017, from
https://www.bizjournals.com/seattle/news/2017/07/31/amazon-prime-air-boeing-767-
cargo-fleet.html

Del Rey, J., & Molla, R. (2017, April 27). Amazon just turned a profit for the eighth straight
quarter. Retrieved October 10, 2017, from
https://www.recode.net/2017/4/27/15451726/amazon-q1-2017-earnings-profits-net-
income-cash-flow-chart

Farfan, B. (2017, March 20). What is Amazon.com's Mission Statement? Retrieved

October 16, 2017, from
https://www.thebalance.com/amazon-mission-statement-4068548

Glaser, A. (2017, June 23). Amazon's idea for a massive drone dock looks like a cross
between a beehive and a spaceship. Retrieved October 10, 2017, from
https://www.recode.net/2017/6/23/15864254/amazon-patent-fulfillment-centers-drone-
delivery-beehive-tower-city

Gregory, L. (2017, February 11). Amazon.com Inc.'s Vision Statement & Mission
Statement (An Analysis). Retrieved October 10, 2017, from
http://panmore.com/amazon-com-inc-vision-statement-mission-statement

Kim, E. (2016, January 28). Amazon to delivery companies: Yes, we're building our own
service but don't worry. Retrieved October 10, 2017, from
http://www.businessinsider.com/amazon-says-its-not-trying-to-replace-existing-delivery-
partners-2016

Leonard, D. Its Amazons World. The USPS Just Delivers in it. Bloomberg.com. Retrieved
https://www.bloomberg.com/news/articles/2015-07-30/it-s-amazon-s-world-the-usps-
just-delivers-in-it

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Leonard, D. (2016, August 31). Will Amazon Kill FedEx? Retrieved October 10, 2017, from
https://www.bloomberg.com/features/2016-amazon-delivery/

Loeb, W. (2016, September 29). Amazon Will Deliver Their Own Packages - Revolution
At the Delivery Door. Retrieved October 10, 2017, from
https://www.forbes.com/sites/walterloeb/2016/09/29/amazon-will-deliver-their-ow
n-packages-revolution-at-the-delivery-door/#703b2764a054

Taylor, C. (2015). What You Can Get for Free If Your Amazon Prime Delivery Arrives Late.
Money.Com. Retrieved from http://time.com/money/3955429/amazon-prime-late-
deliveries

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