Before 2005, the year Amazon Prime launched, one-day shipping was a luxury. Today it's standard for 161 million Prime Members in America. It's not available for all products, but it's available for 10 million products. I'm pretty sure at least one of the products you desire today can be shipped in one day.
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It's a game-changer. Amazon excels in bringing a product from the maker/entrepreneur to the customer as quickly and flawlessly as possible. It changes people's expectations, and Amazon is continuously improving those expectations. Behind every Amazon one-day delivery box you receive, we have several people, technology, and money spent.
Here's What Happens When You Buy a Prime Item on Amazon
Amazon spends billions in shipping yearly. In Q2 2019, Amazon set aside $800 million to make one-day shipping the norm. All this money goes to the infrastructure and transportation associated with the delivery, intending to make one day the new normal for the 161 million prime members.
To reduce the cost, Amazon is minimizing its reliance on UPS and USPS, investing heavily in logistics. As of March 2023, Amazon has 86 airplanes and 40,000 semi-trucks. They operate ocean freight services between US and China. Amazon has over 3,000 Rivian (RIVN) electric delivery vans (EDVs). They now delivered 75 million packages emission-free using electric vans.
They want to do it all. The only thing that matters to Amazon is the customer is HAPPY because that means they pay for Prime yearly or monthly. Amazon wants to rely on partners, but they also want to guarantee they can do the delivery and logistics if the partners are inconsistent.
Competition is Good (for Us Customers)
Other high-profile retailers have to keep up with the expectations set by Amazon. Walmart has also rolled out next-day shipping, while Target offers 2-day shipping. Amazon will be 29 years old this July 2023. It sounds like a long time, but 29 years is a relatively short period to be the number #1 player. Can other companies compete with Amazon? Yes. But can they sustain (for years and decades)? That is the more interesting question. As of writing, I don't see any that can.
The Journey of Your Package
The journey starts before you order. Most products on Amazon were sold to you by a 3rd party, the business that made/manufactured that product. Amazon charges a fee to the 3rd party for listing a product on Amazon. It starts at around 15% of the item selling price. Most products will be sent directly to you or an Amazon Warehouse once you click that oh so satisfying Place Your Order button.
Amazon also sells directly. They buy products from 3rd parties and then sell it to us. It includes Amazon owned brands like the Echo Smart Speakers with Alexa, Ring Home Security Devices, Lark & Ro, AmazonBasics, and Amazon Essentials. These items are in an Amazon Warehouse, waiting to be ordered and shipped.
Your order is picked, packaged, and shipped from one of 185 Amazon Fulfillment Centers globally. Who does this work? Amazon Warehouse Workers and robots. They have 250,000 warehouse workers and 100,000 robots.
Day in the Life of a Fulfillment Center Employee
I talked to Jane, Jill, and John. That's not their real name to maintain privacy. They are fulfillment center employees. They prepares packages everyday, along with many other employees.
Jane picks up a product, scans it, and double check on a screen to verify that it's the item she is holding. She organizes it on a bin. A camera takes pictures of her hands of where the product goes.
Jill is a picker. She picks products that will end up at the packing department for ship out to customers.
John puts the product on a box. A screen tells him what type of box to use. He puts the item on the package, covers it with tape, scans it, and drops it on a machine.
Day in the Life of Robots?
So what do the robots do? According to Amazon, the robots make this process more efficient. The company owns a robotics company called Kiva. Amazon bought this company in 2012 for $775 million. There's a variety of robots. There are driving robots that move inventory around. They look like big orange Roomba Vaccuum Cleaners. There are big robotic arms that lift heavy boxes. There's a robot that can package items in custom sized boxes.
Robots are controversial. Many people are concerned that robots will take over human jobs. But Jill, in particular, loves the robots. She said there was a time when employees like her had to walk around the fulfillment center all day. Now, she stays in her small space while the robots move around.
To adapt to the advancing technology, Amazon also announced in a press release that they will re-train their workers for in-demand and more advanced jobs by 2025.
Life (of your Package) After the Fulfillment Center
After leaving the fulfillment center, your package goes across the country or the world. It then goes to the warehouse in your region. Some boxes get sent to one of the shipping giants; however, Amazon is cutting costs by sending packages using one of its semi-trucks or airplanes. Their building an air network for a few years now, along with their partner networks. They even have a $1.5 billion air hub in Northern Kentucky. It has a capacity for 100 planes.
The Last Mile
When your product arrives in your city, it waits for a delivery person to pick it up and bring it to your door. That is called the Last Mile. We've talked about how Amazon now owns several planes, robots, and infrastructure worth billions, but the Last Mile, for them, is the most expensive part of the delivery process. The products are hand delivered to your home and different addresses. The Last Mile takes a lot of people and time.
Amazon outsources much of the Last Mile to carriers like UPS and USPS. That comes with a fee. The best way for Amazon to keep Last Mile delivery at a reasonable cost is to keep it in-house. They use small business partners, some of them deliver from those Amazon Vans, which you might have seen on the road already. They also launched Amazon Flex in 2015.
Image from CNBC
Amazon Flex Requirements
*Over 21
*Driver's License
*Auto Insurance
*4-door, a mid-size sedan or larger
Amazon Flex is crowdsource deliverer. It is available in over 50 US cities. After a basic background check and if their area has an open spot, drivers can start delivering packages. They use the flex app to sign-up for a block of 3-6 hours. They go to the warehouse to see how many boxes they need to deliver in that time block. They will also see on the app how much they will earn. Amazon advertises that drivers make $18-25 per hour. They are responsible for their own vehicle cost like gas, toll fee, parking, ect. They also intend on expanding on their small business partners for the last mile delivery options.
Amazon Tells Employees to Quit and Start Your Own Business?
In a May 2019 press release, Amazon stated that they will contribute as much as $10,000 (or equivalent) if full time employees leave the company and start their own delivery business. The company believes this will complement their carrier partners. It's also great for employees who don't want to do the same job they've been doing for years. It will allow people to develop new skills and make them an entrepreneur. No wonder 60,000 employees have already taken it.
Drone Strike
Amazon is also exploring high-tech solutions for the Last Mile delivery. In September 2020, Amazon got an FAA approval to operate their fleet of delivery drones. These fully electric drones can fly up to 15 miles and deliver your packages under 5 lbs. within 30 minutes.
Amazon also has patents out for a giant flying warehouse (it looks like a giant blimp) and drones that could react to screaming voices and flailing hands, in case you see your drone package coming. They are also testing a sidewalk robots called Scout to deliver to your door. Scout looks like a small and fat rolling trash can. It's kinda cool.
Image from Tech Vision YouTube Channel
What About Humans? (Questionable Working Conditions)
In recent years, Amazon had a barrage of negative press about employee working conditions. There's a report of Amazon UK employees needing to pee in bottles in fear of punishment for taking a break. There was a report that ambulances were called 600 times in 3 years at an Amazon warehouse.
I talked to Dave and Don, not their real names. Unlike the employees I mentioned earlier, who seemed happy at their jobs, Dave and Don are not too happy.
Dave stated that he worked at several buildings in different states, saying that working conditions were 'dangerous.' He didn't mention any specifics. Don felt like he was disposable. According to a CNBC interview Airline Professional Associate President Dan Wells, many Amazon pilots are looking for employment elsewhere.
In 2018, Amazon raised their minimum wage to $15 for all US employees. They even challenged other top retailers to match this. Amazon also has good benefits. Even Dave said he is happy with the medical benefits, saying this is why he stayed.
But he also mentioned that the pace in the company is too fast. The expectations are high. In addition, he said that the bathroom in his office is quite far. That's why they limit breaks because a bathroom break can eat 15-20 minutes.
But Amazon claims that they have world-class facilities with restrooms everywhere. They have decent breakrooms with TV. They even invite media outlets to take tours anytime.
They track worker productivity based on how often and how many times they scanned a package. They also have a patent for a GPS wristband to track employee movements and breaks. Amazon claims this is also a safety device. In April 2019, The Verge reported that Amazon terminated 300 employees in one year (2017 - 2018) for inefficiency.
Protests
There have been several protests in recent years of employees demanding better working conditions. This is around the world, not just in America. In April 2019, the National Council for Occupational Safety and Health placed Amazon in the Dirty Dozen Companies. They cited 6 deaths in 7 months and 13 deaths since 2013. Amazon stated that in 2019, they spent $55 million on safety in their fulfillment centers while their employees received 1 million hours of safety training.
Amazon Air Challenges
Contract pilots from Atlas Air, ABX, and Southern Air fly Amazon Air planes. Pilots have reported working conditions deteriorated. In May 2019, the pilots union protested during the annual shareholders meeting of Amazon with concerns including low pay and poor working conditions. In February 2019, an Amazon airplane operated by Atlas Air crashed near Houston. 3 Pilots dead. Weeks before the accident, Business Insider reported that several pilots said an accident was inevitable. They cited the low wages make it difficult to attract experienced pilots. They also cited fatigue, low morale, and shoddy training. Below is a statement from Amazon regarding these issues.
"All of our airline delivery providers must comply with the Amazon Supplier Code of Conduct and Federal Aviation Administration Regulations. We take seriously any allegation that a delivery provider is not meeting those requirements and expectations, and review accordingly."
Last Mile Delivery Safety
There are also safety concerns in that Last Mile delivery. One reason cited is Amazon does not have branded clothing to identify Flex Drivers. It may lead to ordinary residents doubting and even attacking innocent Flex Drivers, seeing them walk into their front door wearing civilian clothes. Some drivers had to buy Amazon Flex-branded clothes elsewhere, like in Etsy. Here's the company's statement.
"They are welcome to wear the safety vests that we have available for them in the delivery stations while they're on their route, which can help customers identify Flex participants."
Some drivers also stated that the Flex App may cause distracted driving because they have to tap refresh for their next assignment. Here's another statement.
"Safety is our top priority and we are proud of our safe driving record. We regularly communicate a variety of safety topics, including loading and driving practices with drivers. Amazon Flex participants can also sign up for delivery blocks up to a week in advance through the Amazon Flex app.
People + Technology = Happy Together
Amazon is working to ease the burden for all employees and save money with high-tech solutions like drones and sidewalk robots. They are also working to make fulfillment centers more automated to remove the most tedious and heavy-lifting tasks for human workers. As for now, Amazon still relies on people to deliver packages. The expectations for rapid delivery are also growing. Amazon will have to continue innovating to make shipping speeds even faster. It's crazy that they already have certain regions that can deliver in an hour, but the company says the speed and innovation will not stop. It will improve every day.
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