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From SCDigest's On-Target E-Magazine

- Jan. 21, 2014 -

Supply Chain News: Amazon Gets Patent for Speculative Shipping Process

Not Quite as Wild as Drone Concept, but Impressive Thinking Nonetheless

SCDigest Editorial Staff

The innovation machine that is Amazon.com keeps chugging along, now with word it recently received a US patent for a method of "speculative shipping"Â to potentially speed up orders to customers and/or reduce inventories network wide.

This one may not be quite as far out there as drone-based deliveries, but it is out of the box thinking for sure.

Here is the basic idea: Amazon would forecast demand for a given geographic region, whether that is a state, a metro area - or maybe even an apartment building, on something like a daily basis.

SCDigest Says:

Will this Amazon idea ever get implemented? Who knows, but one has to be impressed by the level of thinking and supply chain innovation nonetheless.

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It would then pre-ship items towards that geographic area at the same level of granularity (meaning possibly, for example, based on a 5-digit zip code, maybe a 3-digit code, or maybe a street address with no name/unit), using common carriers. Each package would be uniquely identified.

If an order is received for that item, then the delivery address would be communicated to the carrier, which would somehow update the shipping information for that parcel. This of course would be comparatively easy to do electronically, in the delivery database, but how the physical label would be changed is not clear.

The patent seems to imply the delivery addresses would be changed at a carrier's hub. The logical solution would be that as a parcel is received at the hub, the unique identifier would be read, and a new shipping label applied if needed using some form of automated print and apply system. However, this would create extra processing and labeling costs for the carrier, especially as just a small percent of parcels would likely need to be handled in this way, maybe slowing down all the others.

RFID of course might someday be used, but even then most want a traditional label to go along with it in case of tag failure.

The Amazon patent is quite lengthy and a bit difficult to get through, as are almost all patents, but is interesting nonetheless. It can be found here: Amazon.com Speculative Shipping Patent

The patent notes that a given parcel may pass through several hubs on its way to a geographic area. Each of these stops would present an opportunity to redirect a package based on an order or forecast information.

A flow chart of how this process would work in one form is provider below (an SCDigest recreation of difficult to read graphic in the patent itself).

Amazon's Speculative Shipping Concept

The patent also uses a number of different terms to describe this vision, as noted in the paragraph below from the document (SCDigest added the bold in the next paragraph to highlight those terms): "In conventional order fulfillment systems, an item is not shipped (or in many cases even packaged for shipment) until a customer places an order for that item to be delivered to a specific delivery address. However, in one embodiment a package including one or more items may be shipped to a destination geographical area without completely specifying a delivery address at the time of shipment. Instead, a delivery address may be completely specified while the package is in transit."

Continuing on: "Such shipment of packages without completely specifying delivery addresses at the time of shipping may also be generically referred to as speculative shipping, and completely or partially specifying a delivery address for a package after that package has shipped (irrespective of whether the package originally was shipped with a delivery address) may be generically referred to as late-select addressing, or simply late addressing. In some embodiments, speculative shipping of a package may occur in anticipation of a customer ordering items in that package, but before such an order has actually occurred. In such embodiments, speculative shipping may also be referred to as anticipatory shipping."

(Distribution/Materials Handling Story Continues Below )

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This approach would allow Amazon to be able to get orders customers quickly without the need to keep as many items stocked at each fulfillment center from which orders would normally be shipped for customers in that region.

Here is a bit more detail from the patent on how Amazon is thinking: "A fulfillment computer system may determine that one or more speculatively shipped packages in transit satisfy the received order, and may then determine the current locations and destination geographical areas of the package or packages, for example by referencing tracking data stored in a data warehouse or by performing a real-time tracking inquiry to the common carrier(s) conveying the packages."

Continuing on: "If more than one package satisfies the received order, the fulfillment computer system may be configured to select one for late addressing on any suitable basis. For example, a package closest to the delivery address of the order (e.g., at or en route to a hub closest to the geographical area including the delivery address) may be selected. However, it is contemplated that more sophisticated selection algorithms may also be employed that may take into account various order parameters and the possibility of multiple outstanding orders satisfiable by in-transit packages. For example, if one package is closest to a geographical area from which two orders satisfiable by the package have been placed, an order specifying expedited shipping may take precedence over an order specifying a non-expedited class of shipping in the selection algorithm."

Wow.

SCDigest editor Dan Gilmore says this idea is not entirely new, saying that in the mid-1990s, a company called Non-Stop Logistics, founded by Stanford professor Hau Lee, had a somewhat similar idea for the consumer packaged goods market.

In that case, Non-Stop's concept was to forecast say a weekend's inventory needs for a series of SKUs in a given metro market. Manufacturers would then ship to that forecast, and a Non-Stop crossdock center would fulfill to individual stores based on later stage insight into inventory levels and demand. The idea was that aggregate forecasts for a market would always be more accurate than the specific forecasts for store chains or individual outlets.

The program never really got off the ground, however, and Non-Stop eventually morphed into supply chain planning software vendor Evant, which was later acquired by Manhattan Associates.

Will this Amazon idea ever get implemented? Who knows, but one has to be impressed by the level of thinking and supply chain innovation nonetheless. And now a patent may prevent others from taking the same path one day.

What do you think of this Amazon patent? Will the concept ever see the light of day? Let us know your thoughts at the Feedback button below.

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