It wasn’t that many years ago when Amazon shook the ecommerce market with free two-day shipping for its Amazon Prime members, a logistics breakthrough that clearly set a new standard for other retailers.
Now, Amazon says same day and one day delivery is what it’s all about.
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Amazon is also rolling out more “same-day sites,” which are smaller fulfillment nodes located closer to large metro areas where the company picks and ships customer orders in one process
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A few days before it’s Q3 earnings call on August 3rd, Amazon couldn’t wait for that event to tout its continued progress in reducing customer order delivery times.
In a web post this week, Amazon announced that is achieved a Important milestone in efulfillment with the news that thus far in 2023, Amazon said it has delivered 1.8 billion order to US Prime members either the same or the next day, about four times the number it had delivered that quickly at this point in 2019.
For several years, Amazon has been on a mission to further reduce its pace-setting delivery performance, as Amazon has invested billions of dollars to optimize its fulfillment center and delivery stations and related processes to push delivery times from its initial two-day standard to just one day or same day.
On its web post, Amazon says it achieved its “fastest Prime speeds ever” in Q2. Across the top 60 US metro markets, Amazon says more than half of Prime orders arrive the same or next day.
CNBC reported this week that a major effort has been to shift away from a national “hub and spoke” fulfillment network, in which packages can travel through several facilities across the country on route to the customer, Udit Madan, Amazon’s vice president of transportation, said to CNBC in an interview.
Now, Amazon has increasingly executed a model in which its network is divided into eight smaller regions, with many local fulfillment centers that stock commonly ordered SKUs.
And while it is generally assumed the faster the delivery the higher the cost, Amazon claims to have found some logistics magic that goes counter to the prevailing wisdom.
“Our fastest speeds tend to be our most economical,” Madan added in his CNBC interview.
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That’s because the more direct paths results in driving fewer miles and requires fewer handoffs.
In fact, Amazon says it’s reduced the miles items are traveling from its fulfillment centers to customers by 15%, and lowered the number of “touchpoints,” or how many times a package is handled, by 12%.
 Of course, this strategy might be enabled by absorbing higher cost for additional facilities, and for transportation and inventory stocking, but it sounds like the math works for Amazon.
Advanced inventory deployment software is also part of the mix, Amazon says, with use of machine-learning technology that allows it to better determine where and how much inventory is placed in fulfillment centers, meaning an increase in the percent of times an order can be fulfilled from a local center.
But there is a real method to Amazon’s madness. The rapid delivery, it believes, results in some consumers buying from Amazon on-line instead of heading to a local brick and mortar store to purchase an item that those consumers need soon.
“We’ve consistently seen that as we’re offering faster speeds, we’re actually expanding the consideration set that customers think of us for when they’re thinking about their purchases,” Madan told CNBC. “What we’re seeing is greater engagement and more purchases from customers.
But Amazon is hardly done with its quest.
Amazon is also rolling out more “same-day sites,” which are smaller fulfillment nodes located closer to large metro areas where the company picks and ships customer orders in one process, rather than for example sending orders from a fulfillment center to a Delivery Station, where drivers pick up the goods for delivery. This change takes time out of the delivery process.
Amazon plans to double the number of same-day sites in its network over the next two years, Madan added.
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