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Supply Chain News: Amazon Putting Many New FC Openings on Hold, while Still Opening Dozens more

 

 

On-Line Sales have Declined Now for Three Straight Months

 
Sept. 5, 2022

 

SCDigest Editorial Staff

In June, we reported on news that Amazon was cancelling or putting a number of fulfillment center openings on hold.

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Amazon about doubled the size of its logistics network over a two-year period.


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That news came after reports earlier in the year that Amazon was going to sub-lease excess FC space in some markets.

Around that time, Amazon CEO Andy Jassy said that that the company is "no longer chasing physical or staffing capacity."

What’s going on? A significant slowdown in ecommerce sales, in part. Last week, for example, Amazon’s Q2 on-line store sales fell 4% versus 2021, marking the third straight quarter of a decline in that metric.

After the more anecdotal reports in June of the cancellation or delay in new FC projects, now some more specific numbers. They come from Marc Wulfraat, who runs consulting firm, MWPVL International, which has tracked changes in Amazon's logistics network for years.

As first reported by Bloomberg, MWPVL data shows Amazon has either cancelled plans to open 42 facilities totaling almost 25 million square feet of space. The company has suspended opening an additional 21 locations, totaling nearly 28 million square feet.

Amazon also has cancelled several European projects, mostly in Spain, MWPVL said.

In addition to changing plans for FC that had been scheduled to open, Amazon is even shuttering some existing buildings. For example, Amazon recently informed officials in Maryland of its intention to close two delivery stations next month in Hanover and Essex, near Baltimore, that employ more than 300 people.

Delivery stations are facilities where Amazon drivers, such as part of its Delivery Partners program, pick up the items for their routes each day.

Amazon says the two delivery stations have dated designs.

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This change of direction comes after Amazon furiously added space during the pandemic, apparently a little “too fast and too furious” in retrospect.

Amazon about doubled the size of its logistics network over a two-year period. MWPVL estimates that Amazon now operates more than 1,200 logistics facilities, including FCs, delivery stations and sortation center, around the US.

But that’s not too say Amazon is not adding facilities in some markets.

“There remains some serious cutting to do before year-end -- in North America and the rest of the world,” Wulfraat says, adding that “Having said this, they continue to go live with new facilities this year at an astonishing pace.

An Amazon spokesperson told Bloomberg that the company still has dozens of fulfillment centers, sortation centers and delivery stations under construction.


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