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Supply Chain News: Amazon Adding New Layer of Facilities to Replenish Fulfillment Centers


As Company nears 1000 US Logistics Facilities, a New Type Enters the Mix

Nov. 23, 2021
SCDigest Editorial Staff

In its quest for ever faster fulfillment, news this week that Amazon is adding a new layer of facilities that feed its fulfillment centers that in turn increasingly support delivery stations for its own parcel delivery network.

Supply Chain Digest Says...

Amazon has not said how long the trials will last or how many of these upstream warehouses it intends to set up if the concept goes forward.

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According to a report this week on web site, Amazon has started tests with users of its Fulfilment by Amazon (FBA) service, which acts as a third party for fulfillment and shipping services for its Marketplace platform. Marketplace sellers can either perform or arrange their own order fulfillment – or use FBA.

These facilities will feed fulfilment centers “from upstream, for more seamless replenishment,” Amazon says.

These new facilities, at least for some percent of SKUs Amazon is handling for its Marketplace clients, appear to replace vendor shipments direct to FCs, sending goods instead to these new sites, which presumably are close by FCs, likely less than an eight hour drive.

“These new facilities are essentially for inventory staging,” said Rick Watson, founder and CEO of RMW Commerce Consulting, told The Loadstar, adding that “Amazon wants to optimize them for holding inventory.”

Amazon itself has told FBA customers that “Our system will automatically replenish inventory from upstream storage into Prime-ready fulfilment centers.”

Apparently, it will require additional fees from its target clients. Amazon added that it comes with “simple, pay-as-you-go pricing, plus low storage costs.”

Amazon provided some details, saying that storage costs in the new facilities would be, on average, between 47% and 63% lower than it charges currently for FC storage. But clients may need to pay both the new and existing FC storage costs, though customers it would seem may be able to move some storage from more expensive FC storage to these new lower cost inventory staging facilities.

One expert interviewed by The Loadstar guessed these new buildings will have little automation and be well outside major urban areas and thus have low costs to acquire land, keeping overall costs to add the new sites down.

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Other reports indicate that the trials are centered on imports from Hong Kong and China shipped by ocean carriers through Amazon Global Logistics. As the new facilities offer significantly more storage space than FCs, this should allow FBA users to keep larger inventories in the US at lower cost.

The Loadstar says one such new facility near Minneapolis contains 517,000 square feet of space.

Notable, despite throwing up dozens of new FCs every year, lack of warehouse space is cited as a constraint on Amazon growth.

Amazon has not said how long the trials will last or how many of these upstream warehouses it intends to set up if the concept goes forward.

According to consulting firm MWPVL, which has tracked Amazon facility growth by type for many years, the company currently has 938 current US facilities, including 264 fulfillment centers, 361 delivery stations for normal goods, and 93 more for heavy/bulky items.

What do you think of this new Amazon network model? Let us know your thoughts at the Feedback button section below.




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