TRANSPORT PROCESS AND MANAGEMENT

Contents
Introduction.......................................................................................................................... 2
Ecommerce........................................................................................................................... 2
“The Move”........................................................................................................................... 3
Multiple distribution and sorting centre................................................................................3
Delivery Stations.................................................................................................................3
Prime Now Hubs................................................................................................................. 3
Prime Air Hub..................................................................................................................... 4
The Last Mile...................................................................................................................... 4
Conclusion............................................................................................................................ 5
Appendix............................................................................................................................... 6

1
Introduction

Amazon, a brand so synonym in the Ecommerce world. To be able to sustain

revenue growth, making the supply chain more effective and efficient in delivering business
objectives, the company took a brave leap to change their Supply Chain Design Network
and make it one of the finest in the world.
This report will highlight the important decision-making steps that Amazon took and
be as successful as it is today.

Ecommerce

With consumers all around the world focusing on purchasing daily needs and items
at a cheap shipping rates and unbelievable delivery turn over timings, Amazon Prime’s were
introduced.
It was a huge game changing model as Service are contradicting with the Supply
Chain costs.
If we look at it broadly, there are two broad factors which drive various supply chain
network design decisions: Customer Service and Supply Chain Cost.
According to the nature of the business, customer service has many dimensions and
components of customer service. Some dimensions of customer service are listed:

 Service Time
 Service Level
 Product Variety
 Returnability
 Order Visibility
Supply Chain Network Design is all about meeting or exceeding customer service at
minimum possible cost. As such:

 Transportation Cost
 Facility Costs
 Inventory Costs
Therefore, when you go into focusing on customer service, your supply chain costs
will increase. In order to reduce response time, company need to increase number of
facilities, in return increasing the cost of supply chain.
Hence, Amazon make decisions to maintain a high service level while keeping supply
chain costs low by investing on their own supply chain network by having multiple
distributions and sorting centres, own fleet of cargo planes, delivery trucks, food hubs, and
also 3rd party’s delivery partners.

2
“The Move”

Amazon has shipped more than 5 billion Prime packages and the retail giant's e-
commerce market share in the United States is poised to exceed 50%.
Moving this amount requires a lot of technology, manpower and distribution
infrastructure. Although Amazon relies on third parties for delivery and warehousing, the
company is also building an ever-expanding distribution network to try and manage the
entire process.

Multiple distribution and sorting centre

Multiple deposits also involve higher management costs. Amazon prefers multiple
warehouses because the cost of a distribution centre is lower compared to other industries
because of the large sales to many customers. Running more frequently can also save
storage space, but it will reduce the utilization of production capacity.
Compared to a single distribution centre, greater storage cost efficiency can be
achieved, but the distribution cost is higher due to the wider distribution of customers to be
served. Multiple warehouses mean closer product availability to customers and therefore
faster response to deliveries thanks to the flexibility of smaller delivery batches.
The sorting facility is responsible for sorting the packages by postal code, and then
usually deliver the packages to the USPS site. Since its launch in 2014, the sorting centre
has enabled Amazon to speed up the delivery process and help control the delivery process
to the "last mile."

Delivery Stations
In urban areas, the distribution station is usually the last step before the package
reaches the customer. Couriers, and more and more Amazon Flex drivers, often handle
these short-term deliveries. These stations are usually located near the airport.

Prime Now Hubs

These smaller positions are designed to increase speed. The Prime Now Centre
offers a more limited selection of goods, including Whole Foods inventory, which can be
delivered within two hours after clicking "Buy". There are currently about 50 such facilities in
urban areas in the world, but this number is expected to increase dramatically in the near
future.
Therefore, delivering smaller orders more frequently can not only solve inventory,
obsolescence, and warehousing issues, but also improve service to end users by avoiding
the possibility of out-of-stocks, as supplier delivery times may be shorter.

3
Prime Air Hub
Amazon doesn't have its own airport yet, but the recently announced $ 1.5 billion
international Prime Air Hub is a step in this direction. 4,444 210 acres of land will help
Amazon expand its Prime Air fleet while reducing its dependence on companies like UPS
and FedEx. Kentucky is the natural choice for this centre because the state already has 11
distribution centres.

The Last Mile

Over the years, Amazon has streamlined all aspects of its distribution system, but the
last obstacle still exists.
Conquering the last mile, the last section of the road before the package reaches its
destination, has been difficult, partly because the USPS has developed a comprehensive
strategy for delivery to all residents of the country.
The company's serious recruitment campaign for Amazon Flex is the latest in a long-
term attempt to reduce reliance on third-party package delivery. In addition, by using on-
demand labour, Amazon hopes to reduce costs and have greater flexibility during periods of
sales growth like Black Friday.
This desire to own the entire process is reflected in the company's list of distribution
facilities. Large-scale distribution centres have nowhere to go, but we may see more smaller
distribution centres in cities and towns across the world.

4
Conclusion
Trade-offs are part and parcel of every logistics and supply chain strategy and are
part of the realm of top management decision-making. Shippers need to balance the effect
of their strategies over the unique functions of their operations as one benefit in one area
may mean higher costs in another. How the company positions itself determines what
supply-chain strategy is more appropriate.
As for Amazon’s ambitious move, investing money on infrastructures and
transportations have proved to be cost cutting for long term setup.

5
Appendix

https://www.toolbox.com/supplychain/supply-chain-management/blogs/choose-and-choose-
wisely-trade-offs-in-supply-chains-031710/
http://www.bmishipping.com/trade-offs-in-logistical-activities-and-how-they-benefit-the-client/
https://www.supplychain247.com/article/taking_a_look_at_why_amazon_is_bringing_logistic
s_in_house
https://www.forbes.com/sites/paulmartyn/2015/06/05/amazons-free-shipping-an-
inexpensive-trade-off/?sh=5226ba478cf2
https://sloanreview.mit.edu/article/beyond-the-speed-price-trade-off/
https://www.cnbc.com/2019/12/13/amazon-will-be-the-most-important-company-of-the-
2020s.html