Inside Amazon’s Meticulous Same-Day Delivery Strategy | WSJ Shipping Wars — Transcript

Full transcript

1. 0:00- [Narrator] This Amazon fulfillment center
2. 0:01is unlike the ones they've been using for years,
3. 0:04building the industry standard for fast shipping.
4. 0:07It's one-eighth the size.
5. 0:09It needs fewer employees, yet,
6. 0:11it allows them to deliver even faster.
7. 0:14An order here can go from storage to out for delivery
8. 0:18in just 11 minutes.
9. 0:20Because of Amazon,
10. 0:21customers have come to expect fast shipping.
11. 0:24And Walmart and Target have met those demands
12. 0:27by building systems to beat Amazon's
13. 0:29two-day delivery promise.
14. 0:31So Amazon is trying to win the shipping wars
15. 0:33by investing in what made them successful
16. 0:36in the first place.
17. 0:37Speed.
18. 0:38- Over Prime Big Deals Day,
19. 0:39our fastest delivery was 54 minutes.
20. 0:41We don't know yet what the limit is.
21. 0:43- [Narrator] Here's how the king of fast shipping
22. 0:45is overhauling its massive distribution network
23. 0:48to shave more days, hours,
24. 0:49and even minutes off delivery times.
25. 0:52(bright music)
26. 0:58- We're delivering between 25 and 30,000 packages a day
27. 1:02to our customers.
28. 1:03- [Narrator] This facility in Renton, Washington,
29. 1:05is one of 49 same-day delivery centers across the country.
30. 1:09Unlike Amazon's larger warehouses,
31. 1:11these smaller sites prepare products for immediate delivery,
32. 1:14a service that's available
33. 1:16in more than 90 metropolitan areas.
34. 1:18At traditional Amazon warehouses,
35. 1:20an order might first be picked up and packed in one center
36. 1:23before being moved to another to be sorted
37. 1:25and then to a delivery station in the customer's area,
38. 1:28before finally arriving on a doorstep.
39. 1:30Compare that to the same-day centers,
40. 1:33which put picking, packing, and sorting under one roof.
41. 1:36The facility here in Renton only delivers to customers
42. 1:39up to an hour away.
43. 1:41But that's enough to serve households
44. 1:42around parts of Seattle and Tacoma.
45. 1:45Centers like this deliver the 100,000 most popular items
46. 1:49local customers might want in hours, not days.
47. 1:53- Apple products, like AirPods, everyday essentials,
48. 1:56and then household cleaners.
49. 1:57That's what we're driving here in this particular building.
50. 2:01- If you have a right analytics,
51. 2:02you can keep the right items closer to the customers.
52. 2:06And those right items will be different
53. 2:07at different regions.
54. 2:09- [Narrator] The inventory curation here in Renton,
55. 2:11along with AI-driven tech,
56. 2:12gets packages to doorsteps faster.
57. 2:15- We have things that help make sure we don't have
58. 2:17too similar of an item sitting next to each other
59. 2:19to avoid a mis-shipment or things like that.
60. 2:21- [Narrator] In a process called Stowing,
61. 2:23workers store small items in these bookshelf-like containers
62. 2:26on the robotics floor.
63. 2:28Larger items, which the company calls Non-Sortable,
64. 2:31live on these shelves.
65. 2:32There are diapers, dog food, even air fryers.
66. 2:35That meticulous organization is key to getting orders
67. 2:38to customers in record time.
68. 2:40- I was in my building at about four o'clock
69. 2:42on a Friday afternoon and ordered something in my,
70. 2:46and outta my building,
71. 2:47and got home within a couple hours
72. 2:50and that package nearly beat me.
73. 2:52- [Narrator] Say you order this Amazon Echo.
74. 2:54One of the facility's hundreds of robots
75. 2:56is assigned to pick up the pod it's stored in.
76. 2:59The picker pulls the item and places it in a cubby
77. 3:01on this wall to be packed.
78. 3:03A packer will grab the item, scan it, and package it here.
79. 3:08Your order travels on this conveyor belt
80. 3:10just a few hundred feet away to the dispatch area.
81. 3:13- When that sticker is applied to the package,
82. 3:15at that moment, we determine what route that's gonna go to,
83. 3:19how long that route could be,
84. 3:21and that's dynamically happening throughout our day.
85. 3:24- [Narrator] The yellow sticker tells workers
86. 3:26which cart selection and cart the order should be routed to.
87. 3:29By the time your order is waiting
88. 3:31for a driver to pick it up,
89. 3:32only four minutes and 50 seconds have passed
90. 3:35since a worker pulled it from the shelf.
91. 3:37On average,
92. 3:38the company says it takes 11 minutes for an order
93. 3:41to travel through this whole facility.
94. 3:43Once the packages are on the outbound docks,
95. 3:46Amazon's flex drivers are notified to load them up.
96. 3:49They make deliveries using personal vehicles,
97. 3:51allowing the company to utilize more drivers.
98. 3:54The timing is roughly the same,
99. 3:55no matter what you order alongside your Amazon Echo.
100. 3:58- Let's say I ordered three items.
101. 4:00We have the ability with our logic,
102. 4:02to combine those items from the floor
103. 4:05and bring all three of them together.
104. 4:07- [Narrator] Amazon says an eligible order placed by 5:00 PM
105. 4:10will arrive by 10:00 PM.
106. 4:12Otherwise, it will arrive early the next morning.
107. 4:14This same-day facility operates 23 hours every day
108. 4:18to make that possible.
109. 4:19Amazon plans to double the number of same-day centers
110. 4:22in the next few years.
111. 4:23- The biggest difference is that what we're trying to do
112. 4:26is reduce the distance between inventory and the customer
113. 4:30as much as we can.
114. 4:32- [Narrator] Before,
115. 4:33if a shopper in Florida ordered a pair of headphones,
116. 4:35they might have been shipped from Seattle.
117. 4:37- Now we're at a big enough scale
118. 4:38that we've realized it's actually more efficient
119. 4:40to break the US up into eight interconnected regions.
120. 4:42Today, more than 76% of customer demand
121. 4:45is fulfilled from within their region.
122. 4:47- [Narrator] Competitors like Walmart and Target
123. 4:48are also speeding up delivery,
124. 4:50by fulfilling orders closer to customers.
125. 4:53But the key difference?
126. 4:54Amazon doesn't have thousands of stores.
127. 4:56- These same-day sites are directly taking on Walmart stores
128. 5:02because it's a lot of the items
129. 5:03that someone would go to Walmart for
130. 5:06to pick up for their house.
131. 5:08- [Narrator] Customers' expectations on speed
132. 5:10have also risen.
133. 5:11- You have customers that have come to expect
134. 5:14two-day delivery all of a sudden saying,
135. 5:15"Well, can I get this item or that item
136. 5:17without having to go to the store?"
137. 5:19And they've had to really meet customers where they're at.
138. 5:22But the funny thing is,
139. 5:24is customers are where they're at largely because of Amazon.
140. 5:27- We see that the faster our deliveries get,
141. 5:29the more customers engage with our store
142. 5:32and the more they come back.
143. 5:33- [Narrator] And as more and more retailers try to compete
144. 5:35with Amazon and e-commerce,
145. 5:37the company is doubling down on speed.
146. 5:39- The response has been,
147. 5:41"What we already do good, let's do it even better."
148. 5:44And that's sort of is a way to play defense
149. 5:47by playing offense.
150. 5:48- [Narrator] Since 2018,
151. 5:49Amazon has cut its average delivery time by more than half.
152. 5:52- Whenever you reduce your delivery time,
153. 5:55your cost increases exponentially.
154. 5:57- With the same-day centers,
155. 5:58you're paying gig workers to do their job
156. 6:01and they can only put so many packages in the cars
157. 6:03that they're driving around.
158. 6:04- [Narrator] To offset some of the cost
159. 6:06in speeding up delivery, Amazon uses Prime memberships,
160. 6:09which cost $139 a year.
161. 6:12It also has another advantage,
162. 6:14the sheer breadth of its business.
163. 6:16- Amazon has that power right now that they're ready
164. 6:20to incur some losses in the short-run,
165. 6:23because they have that kind of cash,
166. 6:25they have that kind of revenue coming from other things.
167. 6:28- [Narrator] Amazon says fast delivery
168. 6:30doesn't necessarily mean higher expenses.
169. 6:33- Our fastest deliveries are some of our lowest-cost options
170. 6:36because we've really shortened that fulfillment distance.
171. 6:39- [Narrator] The company argues that the shortened distance
172. 6:41also reduces the environmental impact of delivery,
173. 6:44like increased packaging and emissions.
174. 6:46- Our same-day facilities are located very close
175. 6:49to dense metro areas.
176. 6:50We stock them with very high demand items.
177. 6:52That means we have a lot of packages that go out on the road
178. 6:55and they travel much shorter distances.
179. 6:57- [Narrator] Labor researchers and activists
180. 6:58also worry about employee safety
181. 7:00as the company ramps up its speed.
182. 7:02- Amazon has a huge history of high injury rates
183. 7:05at their facilities,
184. 7:06and now that they're trying to go even faster,
185. 7:08what does that mean for employees?
186. 7:10- Employees go through the same exact process of picking,
187. 7:14packing, and packaging an item
188. 7:16and getting it ready to be delivered in a same-day site,
189. 7:19as they do in a regular site.
190. 7:20It's just that the distance traveled is much shorter.
191. 7:22- [Narrator] The company says that
192. 7:23"From 2019 to 2022,
193. 7:25it saw a 23% reduction in its recordable incident rate,
194. 7:29and that it has invested over $1 billion
195. 7:32in safety initiatives since 2019."
196. 7:35Despite those challenges, Amazon aims to be -
197. 7:38- Fast, faster, fastest!
198. 7:40- [Narrator] It's investing in more automation,
199. 7:42electrifying its delivery fleet,
200. 7:44and plans to create more efficiency in rural areas
201. 7:47with its drone delivery program.
202. 7:49And that's forced other retailers to step up their game.
203. 7:52But Target is taking a different approach.
204. 7:55- Our stores can act like fulfillment centers.
205. 7:58- [Narrator] In our next episode,
206. 7:59we'll go behind the scenes
207. 8:01at Target's first Sortation Center.
208. 8:03Can the smallest competitor of the bunch
209. 8:05even compete with Amazon in the shipping wars?
210. 8:08(bright music)