Amazon Supply Chain Innovation Continues (2024)

Three years ago, I wrote an article about theAmazon supply chain where I asked if Amazon AMZN had the most innovative supply chain in the world. It is time to revisit Amazon’s supply chain and see how it has changed and how prepared it is for the future.

Amazon continues to grow. In 2019 the company delivered 2.5 billion packages, an estimated 20 packages per household. And the company’s operations and technology have evolved over the last three years to help them deal with this growth. In particular, the company has expanded their trucking, warehousing, and air capabilities. How do each of these drive the Amazon supply chain?

Amazon Trucking

Over the last few years, Amazon has continued to expand its private fleet of long haul and last mile delivery trucks. The end goal is to reduce or eliminate its reliance on UPS, FedEx FDX , and the USPS to make deliveries, thus becoming more profitable while controlling the customer experience.

While Amazon has rolled out its owndigital freight matchingmarketplace named Amazon Freight, the company is always looking at new opportunities in this area. One way is to build its own pool of drivers, and to do this, the company is reportedly building an incubator for startup trucking companies. Essentially Amazon is recruiting hundreds of people to start trucking companies and only drive for Amazon. The incubator will provide business training and loans for entrepreneurs to start their own trucking companies.

According to sources, the incubator is not about tackling the challenges of today’s capacity crunch. Instead, the program is about looking at the future and where that demand will be, and how Amazon can take control of it with an in-house solution.


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Amazon is also investing in the future of its trucks by exploring more sustainable fuels. The coronavirus pandemic helped push e-commerce to new levels; but as e-commerce sales soared, so too did heavy duty trucking on the roads to get goods to their final destination. And that increased congestion and pollution. Amazon is looking ahead at reducing carbon emissions in its fleet by upgrading to natural gas class 8 trucks. The company has ordered more than 700 compressed natural gas class 6 and class 8 trucks so far, as it looks to introduce new sustainable solutions for freight transportation. Amazon is working on testing a number of new vehicle types including electric, CNG, and others. The engines, supplied by a joint venture between Cummins Inc CMI and Vancouver-based Westport Fuel Systems Inc, are to be used for Amazon’s heavy-duty trucks that run from warehouses to distribution centers.

Amazon has never shied away from making controversial decisions, and the latest technology the company is developing for its trucks fits squarely in this category. Last month, Amazon announced that it plans to equip its branded delivery vans with cameras powered by artificial intelligence. The cameras, which will always be on, are being promoted as an effort to improve driver safety. However, many workers and privacy advocates are concerned about drivers being continuously subjected to surveillance and data gathering.

The cameras, which run on Netradyne’s Driveri platform, are intended to improve safety for drivers and the community they are making deliveries in. Each camera system has four HD lenses to sense road conditions, driver speed, and collision detection technology. And while the cameras will be rolling at all times, Amazon has said that footage will only be uploaded if the driver triggers one of 16 actions, such as running a stop sign or speeding.

Amazon Warehousing

Amazon has spent years cultivating its logistics network to move items around the world as fast and as cost efficiently as possible. When I wrote about Amazon three years ago, the focus was on their large regional ecommerce distribution centers and the Whole Foods distribution centers. But in an effort to improve service, we are hearing about other types of warehouses they manage. These include: sortation centers - used to sort packages for a geographical region; pantry and fresh warehouses - facilities which service dry grocery merchandise or perishables or frozen merchandise; Prime Now - facilities that stock a limited line of products that are in high demand and can be delivered within 1-2 hours of order placement; and delivery stations - last mile facilities where packages are sorted and then dispatched directly to the customer.

Part of speeding up delivery is to make sure that not just large cities have fulfillment centers in place. Amazon’s delivery stations represent an effort to “blanket the suburbs.” The delivery stations are the final link in Amazon’s supply chain that begins with its large regional fulfillment centers. The delivery stations are smaller terminals that will receive Amazon goods and ship them out to end consumers. The company plans to open 1,000 parcel delivery stations in the near future.

This model is not just about speeding up deliveries in the US, however. At the beginning of the year, Amazon announced plans to open five new facilities in Quebec to speed up its delivery process. The company will add two sorting centers and its first three delivery stations in the province. Overall, the new facilities will create about 1,000 new jobs. The sorting centers will be located in Coteau-du-Lac and Longueuil, while the delivery stations will be located in Laval and Lachine.

The Covid pandemic has certainly been a boon to Amazon’s business. However, not all warehouse employees have been happy with the working conditions. This was especially true at the beginning of the pandemic when social distancing guidelines were first put into place. As a result, Amazon launched cameras and software within its warehouses to detect if and when an employee was violating social distancing rules. This type of software is still a work in progress as more people are vaccinated and guidelines are ever changing.

One of the biggest fears of warehouse workers is that full-scale automation will put them out of work. However, as most companies will say, and Amazon is no exception, robots and cobots are there to make things easier for employees. Amazon continues to invest in robots for its facilities, helping to remove menial and time-consuming tasks from workers so they can focus on other tasks. As things stand, Amazon sees fully automated shipping warehouses as a decade or so away. While Amazon will continue to invest in robots, they are also investing in their human counterparts.

Amazon Prime Air

For the last four years, Amazon has been aggressively investing in its air capabilities. What was formerly known as Amazon Prime Air, Amazon Air is a cargo airline operating exclusively to transport Amazon packages. The company has been acquiring jets to build out its fleet as it also awaits the completion of its air hub at Cincinnati/Northern Kentucky International Airport. As of this writing, Amazon’s fleet consisted of 22 Boeing 737-800’s and 55 Boeing 767-300ER’s, with another 9 aircraft on order. Amazon has also spent $131 million to acquire about 13.5 million shares of Air Transport Services Group (ATSG ATSG ).

Cargo planes are not the only piece of Amazon’s aerial plans for the future. Drones are a big part of the future of Amazon, something Jeff Bezos has been touting for the last seven-plus years. In September of last year, Amazon took a big leap forward in its quest to use the autonomous flying vehicles as part of its home delivery strategy. The Federal Aviation Administration (FAA) designated Amazon Prime Air an “air carrier,” which allowed Amazon to begin its first commercial deliveries in the US under a trial program. There are still a number of regulatory hurdles that Amazon must clear before it begins making home deliveries, but this is clearly a step in the right direction for drone usage. Amazon joined Wing, the Alphabet Inc. GOOGL subsidiary, and UPS as companies that have gotten FAA approval to operate under the federal regulations governing charter operators and small airlines.

And Amazon clearly sees drones as a big part of its future, based the amount of research and development it is putting into its drone program, especially in Europe. According to a story published last week, Amazon has doubled the number of staff employed by its Cambridge-based Prime Air team, where the company is developing its drone delivery service. This brings the total number of staff to nearly sixty in Cambridge; Amazon also has research tech hubs in London and Edinburgh. Amazon said last summer it was aiming to begin launching the drone service ‘within months’, announcing that the aircraft could travel up to fifteen miles and deliver packages under five pounds to customers in less than thirty minutes.

Final Thought

The Amazon supply chain continues to be one of, if not the most, innovative in the world. The company is investing in its trucking capabilities to reduce its reliance on other carriers. Amazon is also continuing to expand its warehouse technology and capabilities to make picking, packing, and shipping orders more efficient. And it is heavily investing in taking to the skies, with an emphasis on cargo planes and drones. It will be interesting to see where the Amazon supply chain goes from here.

The primary author of this article was Chris Cunnane.

Amazon Supply Chain Innovation Continues (2024)


How did Amazon improve their supply chain? ›

Technology. Amazon's supply chain management relies heavily on technology and is often among the first to integrate new technologies. The company uses robots, automated conveyor belts, and other technology in its fulfillment centers to streamline the process of sorting, storing, and shipping orders.

What innovations is Amazon working on? ›

From new robotic systems and Prime Air drones to vehicle safety technology for drivers, learn how Amazon is improving operations for employees and customers. Amazon's robotics and delivery teams are at the forefront of innovating to deliver a great workplace and customer experience.

How good is Amazon's supply chain? ›

Final Word. Amazon's supply chain is one of the most innovative in the world. The main secrets of the company's success are economies of scale, customer focus, automatization, and process optimization. As a seller, you can use Amazon's supply chain through FBA or try building something similar.

How does Amazon's supply chain work How has Amazon's supply chain given it a competitive advantage? ›

Amazon's supply chain has given it a competitive advantage by allowing the company to quickly and efficiently deliver products to customers. The company is able to store, manage, and ship orders quickly because of its strategic warehouse placement and its logistics network.

Does Amazon have an efficient or responsive supply chain? ›

Amazon has one of the biggest and most efficient supply chain operations globally. While the basic model has remained the same since its inception, it has adopted newer technologies over the years to streamline its operations and improve its efficiency.

Does Amazon have a supply chain problem? ›

Share of Amazon businesses affected by supply chain issues 2021. The vast majority of businesses selling on Amazon were challenged by supply chain issues occurring in 2021.

How has innovation helped Amazon become successful? ›'s success is due in part to its innovative business model, which allows customers to buy anything from books to furniture to electronics online. The company has also been successful in its efforts to expand beyond its core retail business into other areas, such as cloud computing and streaming media.

Is Amazon still innovative? ›

This increased competition has forced Amazon to continually innovate and improve its offerings to stay ahead of the competition. Amazon Prime is an integral part of the company's business model and continues to be a significant driver of growth.

What new technology is key to Amazon's future? ›

Amazon is well positioned to rapidly expand this transformative innovation through its cloud business. Generative artificial intelligence is getting all of the hype but cloud computing is the technology that has truly transformed businesses and the broader economy over the past decade.

Why is Amazon's logistics so good? ›

Amazon's last-mile delivery system is another crucial advantage that the company has over its competitors. The system enables the eCommerce retailer to deliver packages directly to customers' homes, businesses, or other preferred locations. Thanks to the last-mile delivery system, the distribution may take a few hours.

What are the roles of supply chain in Amazon? ›

It includes forecasting demand, procuring materials and products from suppliers, managing inventory, and shipping products to customers. The operations function works closely with other functions within SCM, such as the planning and control functions, to ensure that the Supply Chain runs smoothly.

How many supply chains does Amazon have? ›

Even before that, Amazon is known for fast delivery due to its vast warehouse and distribution network. Amazon has 175 fulfillment centers all over the world, 75 fulfillment centers, and 25 sortation centers in North America.

What are 3 of Amazon's competitive advantages? ›

The main element of competitive advantage of Amazon is that it provides a great customer service experience, such as easy to operate, fast online order, smooth checkout, and stress-free returns. These factors made Amazon unique and have a competitive difference among all other competitors.

How has Amazon changed the product distribution world? ›

The Amazon Effect

In the world of fulfillment and distribution, the “Amazon Effect” has been massive. two-day shipping, pricing flexibility, free returns, frictionless shopping, products like Amazon Dash, Amazon Go, and Amazon Fresh – the list goes on and on.

How does Amazon use big data in supply chain? ›

Amazon's data-driven approach to demand forecasting and inventory management has helped it optimize its supply chain operations and reduce costs. By analyzing historical sales data, customer behavior, and external factors such as seasonality and market trends, Amazon can accurately forecast demand for products.

How has Amazon increased efficiency? ›

Robots are plentiful in Amazon warehouses, helping move products, assist workers and improve overall safety. At Amazon, warehouse automation technology and artificial intelligence aren't designed to replace workers but to complement their efforts. And it has resulted in a more efficient warehouse overall.

How has Amazon improved the economy? ›

Amazon has created more U.S. jobs in the last decade than any other company. These are jobs that pay an average starting wage of $19 an hour, more than double the federal minimum wage, and come with comprehensive, industry-leading benefits.

How has Amazon built their competitive advantage? ›

It has been perceived that Amazon uses the lower price differentiation in every product and services they offer. This is what makes it very difficult to compete and hence give Amazon competitive.


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