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Can Amazon’s Fulfillment Efforts Eliminate Holiday Delays?
Amazon is preparing for a busy holiday season on multiple fronts to head off potential last-mile holdups and ensure purchases arrive on time as the company ramps up a wider supply chain push. Its efforts include asking third-party merchants using Fulfillment by Amazon to deliver their holiday inventory by Oct. 26 and hiring 250,000 employees for full-time, part-time, and seasonal fulfillment center and transportation roles across the country.
Receiving inventory early will let Amazon focus on fulfillment once the holiday season kicks off in earnest in November, according to a message shared with retailers. The e-commerce company plans to ensure all products are in the right fulfillment centers during the earlier parts of the month to enable faster delivery speeds when it matters during the holidays.
Another change is that Amazon will eliminate its peak pricing for storage fees, which normally spikes during Q4, in tandem with the rollout of Supply Chain by Amazon. This set of end-to-end supply chain services aims to put Amazon in charge of a greater bulk of the overall logistics, with the goal of ultimately improving delivery speeds.
Amazon will likely take some pressure off Black Friday and Cyber Monday with its Prime Big Deal Days event, which will run on Oct. 10 and 11. The e-commerce giant’s second major shopping event of 2023 will help push holiday sales earlier into the year, which could either reduce the Q4 sales loss from a sluggish holiday or help take the pressure off in case the end of the year proves particularly busy.
These efforts will be supported by Amazon’s 250,000 new hires, who will help manage the retailer’s entire fulfillment network, including the more than 50 new fulfillment centers, delivery stations, and same-day delivery sites that opened this year. Amazon is also raising its base pay for these warehouse and delivery workers to $20.50 per hour, with some locations starting as high as $28 per hour. This could help Amazon expand its labor force as Supply Chain by Amazon gives the company a larger role in the overall retail industry supply chain.
However, the short-term emphasis seems to be on ensuring the holiday season goes as smoothly as possible for customers. Nothing can ruin a celebration like a late gift, and Amazon — the pioneer of two-day delivery — seems to be aiming to make holiday delays a thing of the past. Amazon will need to achieve 95%+ on-time rates to compete with last-mile providers like UPS and FedEx, and this is the company’s best chance to prove itself.
Discussion Questions
Is Amazon overpreparing for what could be a slow holiday season? Will these investments help Amazon prepare its supply chain capabilities for bigger things in the near future?
Poll
Loading …BrainTrust
Mohammad Ahsen
Co-Founder, Customer Maps
Ken Morris
Managing Partner Cambridge Retail Advisors
Regardless of whether the retail market grows by 5% or remains flat, this will be a busy holiday for Amazon – kicking off with the Prime Big Deal Days. The company is right to prepare and to focus on getting stock in the right location early on. Of course, with its new strategy of regionalizing fulfillment, Amazon will also be hoping to reduce its own shipping costs over this holiday which will be helpful to the bottom line.
Consumer demand remains strong so Amazon is preparing, not over-preparing. No one can predict what the holiday season will bring and Amazon is right to be preparing for a busy season. The significant investment that they are making in personnel and eliminating the peak price for storage fees will help ensure that they have plenty of product and are able to keep it moving to customers. And the new sales event in October will indeed pull sales forward to smooth out demand during the holiday season. Amazon is the most prolific online retailer in history, and they are at the top of their game.
You can never be too rich, too good looking, or too prepared. Amazon is doing exactly what they need to do to surprise and delight their customers. They are doing everything they can to increase the lifetime value of a customer and that is, of course, the holy grail of retail. In fact, Amazon might be the only organization on earth to put together a fully functional—and fast—end-to-end supply chain.
Now, Amazon might also be one of the few companies that can ramp up by hiring and training a quarter of a million new employees while pressuring their suppliers to deliver to them ASAP. It’s all about resources—in this case people, processes, power, and tech—to build the perfect machine. I won’t be surprised if they pull it off.
Being out in front of the holiday season is a smart long term play. If they offer outstanding service this year by ‘buying up”. the limited labor pool early they will continue to gain a larger share of the consumers wallet. As logistics automation continues to improve and Amazon’s physical foot print expands they will ultimately be able to reduce per unit costs.
Given that Amazon has the warehouse capacity to hold 3rd party goods early (which they do), preparing early for the holiday season, hiring up front (instead of paying overtime) are all good bets. Now the comment “could be a slow holiday season” is an interesting one. So despite all the AI/ML and sophisticated tools available today, and the vast amount of experience on this board, is predicting the holiday season (just a few forecast weeks ahead) really still a case of an educated guess. You have to love Retail.
Amazon has built their brand in part on the convenience of fast free delivery. I would say that it their brand promise, particularly in the mind of Prime Members. If they fall down at the one time of year when their customers are really counting on them to be on time, they have failed. Do it enough times and customers will either only purchase from you when they absolutely can’t find product anywhere else, or they will leave entirely, so it is critical that they are prepared for the busiest time of the year regardless of seasonal forecasts.
Amazon is taking proactive steps like early inventory, hiring staff, and refining logistics to ensure a smooth holiday season. It’s a strategic move to handle the expected surge in demand and provide reliable service. Amazon is not overpreparing but rather wants to avoid delays and ensure smooth operations.
Absolutely! Amazon’s investments in early inventory, hiring, and logistics not only tackle the holiday rush but also strengthen its supply chain for future growth. It sets the stage for handling larger demands efficiently. However, some might argue Amazon’s extensive preparations are unnecessary, considering potential costs.
Seamless fulfillment will reinforce Amazon’s logistics strength. Contrast Amazon’s reliability with TikTok Shops, which could struggle to fulfill orders due to wild swings in demand.
I don’t think “being overprepared” is a risk. The worst thing that could happen is third-party vendors shipped too much inventory too early to Amazon. Amazon actually wins, as they collect more storage fees. Being underprepared is the real risk, as being out of stock or delivering merchandise late can have lasting negative impacts on your brand’s reputation. Amazon continues to lead the way in supply chain excellence and fast delivery and they are protecting their brand and market share.
Retailers have struggled with Christmas for 150 years; will all the problems go away this year?? Yeah, right !
As for Amazon specifically, no they’re not “overpreparing”. Certainly not (!): even if it ends up that “this was only a drill” lessons can be learned and applied to the future. Endless experimentation – annoying as **** as it may be to have to hear about…endlessly – is one of Amazon’s great strengths (credit size and a seemingly bottomless bank account).
A big reason Amazon invested so heavily in controlling this part of their system is to mitigate (and ideally eliminate) delays and other delivery problems. Yes, there will be storms and other issues, but not relying as much on third parties to ship and deliver their customers’ orders is going to help tremendously.
Customers desire a simple and enjoyable shopping experience, however, during the holiday season, logistical and geographic limitations may cause their online orders to be delayed. Additionally, the overwhelming number of orders placed during the holiday season may also make it difficult for retailers to fulfill their promises of rapid delivery.
In my opinion, Amazon is preparing for the holiday season in a sensible manner. By leveraging their extensive supply chain capabilities, Amazon can enhance the delivery of their products to ensure that their customers have a great time shopping during the holidays.
Ultimately, these investments aren’t just about this holiday season; they’re about setting Amazon for even greater success down the line and solidifying its position as a major player in the retail industry.