Dive Brief:
- Amazon is overhauling its inbound fulfillment processes for inventory entering its logistics network, CEO Andy Jassy said on a Q3 earnings call Thursday.
- The e-commerce giant has "made hundreds of changes to" its U.S. inbound logistics network and opened more than 15 buildings focused on the inbound process, according to Jassy.
- "While still relatively early in this re-architecture, we've already improved our ability to spread inventory across our fulfillment centers by 25% year over year, allowing us to have more of the requisite items in fulfillment centers closest to the customer, so we can compile shipments and ship to customers even more quickly," Jassy said.
Dive Insight:
In February, Amazon's CEO highlighted more effective inbound fulfillment processes as an area of focus for 2024. The changes now underway build upon the company's shift to a regional network model and aim to further improve inventory placement, speed up deliveries and reduce transportation costs.
While Amazon executives are bullish about the overhaul's upside, third-party sellers are facing challenges during the transformation. Inbound capacity constraints at West Coast locations are leading to longer processing times for seller inventory. In response, Amazon is rerouting shipments and offering lower placement fees for products destined for the Eastern U.S.
The company appears committed to the changes, with CFO Brian Olsavsky saying on Thursday’s call that Amazon is continuing to invest in its inbound network.
Amazon is also investing in other facets of its supply chain to further strengthen fulfillment operations. For example, the company is increasing its use of robotics to improve delivery speeds and employee safety. It recently opened a fulfillment center in Shreveport, Louisiana, that uses robots to simplify stowing, picking, packing and shipping processes, according to Jassy.
"Though we believe we have more expansive automation and robotics than other retail peers, it's still early days in how much automation we expect in our fulfillment network," Jassy said.
