To deliver orders to the doors of customers, Amazon leverages a variety of transportation methods and delivery partners to keep up with demand and expediency. Amazon-branded trailer trucks carry more than 2,000 boxes at a time, bringing orders from fulfillment centers to sortation centers, where packages are distributed by location and the required delivery speed. From there, items are distributed to the most efficient transportation mode ranging from Amazon trucks and planes to partnered carriers such as UPS and the U.S. Postal Service. Show
To meet Amazon’s two-day delivery window for Prime members, Amazon employs its airplane fleet, which takes flight from more than 20 airports around the U.S. Each plane has the capacity to carry 30 or more containers, filled with hundreds of boxes. By ground, the company utilizes a fleet of trucks, vans, bikes, and even robots for last mile delivery. For even speedier delivery options, such as Prime Now’s one- to two-hour window and one-day delivery for Prime members, Amazon is exploring the use of drones that can fly packages straight to customers’ doors, and last year launched the Delivery Service Partners program, which aims to incentivize its employees to launch their own delivery businesses. Amazon will fund up to $10,000 in start-up costs and provide three months of pay to any employee that wishes to participate. Beneficial to both Amazon and the employee, the Delivery Service Partners program strategically expands Amazon’s delivery network, with partners operating anywhere from 20 to 40 vans and 40 to 100 employees, while employees receive training and ongoing support as well as a key client for their delivery business — Amazon. The Amazon distribution network is complex and evolving. Its entire footprint is nearly seven miles long, and it serves of third-party sellers through Fulfillment by Amazon (FBA). However, Amazon sellers looking for a more diversified fulfillment strategy that enables them to grow their brand both on Amazon and off may be looking to build their own Amazon distribution network. Ahead, we’ll examine the elements of Amazon’s fulfillment operations that small to mid-sized businesses (SMBs) can apply to their own network for faster delivery without having to rely on Amazon. How It WorksAmazon has virtually created consumer demand for 1- to 2-day shipping, and they’ve learned the most cost effective and efficient way to deliver: inventory distribution. The closer a product is to the person ordering it, the faster it can get there at an affordable price. Next-day air is a hail-Mary kind of move when it comes to fast shipping, as it’s very expensive and carbon-intensive. By distributing inventory strategically, they create a distribution network optimized for 1- to 2-day ground shipping, making their delivery times both fast and affordable. Why It WorksAmazon’s greatest asset is data. With shoppers per month and over 200 million Prime members, it knows all about consumers’ purchasing habits: what they buy, how often they buy, and where they live. Knowing where consumers are located, and therefore where packages need to be delivered, allows them to stock inventory appropriately. If you look at the states where Amazon has the greatest square footage of warehouse space, you’ll start to see a pattern in the Amazon distribution network. The top three are California, Texas, and Illinois – all highly-populated states that contain major US cities. Amazon knows that most orders will be coming from densely populated urban areas. These states are also spread out across the US, covering three major geographic regions Why It Doesn’t Always Work for Third-Party SellersThe Amazon distribution network functions like a well-oiled machine, but it ultimately exists to serve its own product line first and foremost, and many third-party sellers struggle with fulfilling through Amazon’s network. Third-party sellers often struggle with the following issues when working with Amazon fulfillment:
These issues have sent many merchants looking for FBA alternatives. To better understand how merchants can take the elements of Amazon’s network that are working for them while leaving the elements that aren’t, we’re going to compare Amazon’s fulfillment strategy to its largest competitor’s – Walmart. The Amazon Distribution Network vs the Walmart Fulfillment NetworkWalmart has long been fighting Amazon to regain its position as America’s number one retailer. By expanding its third-party marketplace sellers, Walmart became more competitive in their ecommerce offerings, and when stores shut down in 2020, their fulfillment strategy proved to be a major competitive differentiator. Namely, when brick-and-mortar traffic slowed down, they began to leverage their retail stores as micro-fulfillment centers. By the end of 2023, Amazon will have 355 warehouses. By comparison, Walmart has over 5,000 retail stores. Walmart can support same-day home delivery (which it offers for free for Walmart+ subscribers) – or it can allow in-store pickup, which became a wildly popular fulfillment option in 2020. Grocery was one of the fastest growing ecommerce segments in recent years and is projected to make up 20% of ecommerce by 2026. As the country’s biggest grocery retailer, Walmart has the potential draw in grocery shoppers who end up purchasing additional products. To be fair, Amazon does own Whole Foods where they offer in-store pickup from lockers. However, Whole Foods only has around 500 brick-and-mortar locations – nowhere close to Walmart’s footprint Ship from Store vs. BOPISBrick and mortar stores like Walmart can offer two fulfillment options for online orders: ship from store and Buy Online, Pick Up in Store (BOPIS). In the ship from store model the retail store acts as a mini warehouse and fulfillment center for ecommerce orders. This model gives retailers flexibility on where they fulfill their orders from. For example, when shopping shifted heavily to ecommerce in 2020, Urban Outfitters saw that the cost of shipping orders was eating into their margins. They applied an algorithm to their ecommerce orders that identified the best store to fulfill the order from based on two pieces of criteria: which store was closest to the customer and which store had the most in stock. Using this criteria helped them to lower their time in transit (TNT) without risking potential lost sales when a brick and mortar was unable to find an item in store due to ecommerce demand. The other option for brick-and-mortar fulfillment is Buy Online, Pick Up in Store (BOPIS), which skyrocketed in popularity during the 2020 shutdowns. Even after stores reopened for in-person shopping, 33% of still reported that they preferred in-store or curbside pickup over home delivery. Offering BOPIS through a retail partner allows merchants to capture sales shoppers who need their item immediately. BOPIS also benefits retailers because shoppers will often buy additional items when they go into the store for pick up. Returns ManagementAnother benefit of Walmart’s many retail locations is in-store returns. Nearly half of consumers prefer to make returns in-store, and the benefit of additional purchases may be even greater for in-store returns than in-store pick up. Many retailers have started to see the benefits of offering in-store returns, even for products purchased from other retailers with partnerships like Happy Returns. Driving traffic to stores, even if it’s to make a return, can increase customer engagement and ultimately, sales. What SMBs Can Learn from the Amazon Distribution NetworkThe four primary principles upon which Amazon has built its distribution can be applied to distribution networks of third-party sellers. They include:
How SMBs Should Do It DifferentlyWhile the Amazon distribution network may work well for Amazon, it clearly isn’t a one-size-fits-all solution. There are three key areas where SMBs should think differently about building their distribution network:
Build Your Own Amazon Distribution NetworkWare2Go is a UPS-backed warehousing and fulfillment partner that helps merchants of all sizes build their business on Amazon and beyond. With a network or certified warehouses supported by cutting-edge fulfillment technology, Ware2Go can position your inventory closer to your end customers to enable 1- to 2-day ground shipping anywhere in the US to support Amazon Fulfilled by Merchant (FBM) or Seller Fulfilled Prime (SFP). To learn more, schedule a time to speak with one of our Amazon fulfillment experts. What type of distribution network does Amazon use?Amazon's business model follows both a B2C and B2-B distribution strategy. Indeed, on the one hand, its e-commerce platform is consumer-facing, providing millions of products to billions of users around the world.
How many types of distribution networks are there?There are three types of distribution channels: direct, indirect and hybrid.
How many distribution centers are there for Amazon?Amazon operates more than 175 fulfillment centers worldwide, with more than 150 million square feet of space, making it a leader in the warehouse industry. This includes centers in the United States and elsewhere, with the majority being in North America and Europe.
How does Amazon distribute the products to the customers?Another example of a company that uses a direct distribution channel is Amazon. Amazon sells products directly to consumers via its website, and it also has a large network of warehouses and fulfilment centres that allow it to ship products quickly to customers all over the world.
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