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  • About 13 million times per day, someone clicks the order button on amazon.com.

  • Some days later, all, or at least almost all, of those 13 million orders arrive at their

  • destination.

  • But what happens in between?

  • How does Amazon get a package to you?

  • Well, it depends… a lot.

  • In fact, Amazon's fulfillment system, their shipping system, is more complicated and convoluted

  • than that of almost any logistics company.

  • It's far more complicated than that of UPS, or FedEx, or DHL, or any other major delivery

  • company.

  • In a counterintuitive way, this complicated and convoluted fulfillment system is a crucial

  • component of the secret sauce that's driving Amazon's success.

  • They're striving to make the consumer experience simple through behind-the-scenes complexity.

  • So, back to the question: how does an Amazon package get to you, and the answer, it depends.

  • It depends first on who's fulfilling the packageAmazon or the seller.

  • About one fourth of sales in the US are fulfilled directly by the seller, as most products on

  • Amazon are listed there by a third-party, which can send packages directly through UPS,

  • FedEx, the postal service, or another consumer delivery company if they choose.

  • Amazon has nothing to do with the fulfillment of those orders, and the process looks largely

  • the same as with any other e-commerce company.

  • What's different is how the other three quarters of Amazon packages in the US get

  • to youthe ones that are fulfilled directly by Amazon.

  • The path that these take depends first on how big the package is.

  • You see, Amazon's fulfillment centers are more-or-less split into three categories:

  • small sortable, large sortable, and large non-sortable.

  • That first category, small sortable, represents the bread and butter of Amazon's business.

  • These are items that are less than 12 by 16 by 6 inches or 30 by 40 by 15 centimeters

  • in size, and about 25 pounds or 11 kilograms in weight.

  • The next category, large sortable, is basically anything larger than this up to a weight of

  • about 60 pounds or 27 kilograms.

  • Now, the reason for the split between large and small is because the fulfillment operations

  • of smaller items is much easier to automatethey can fit on conveyor belts and automated robots

  • and other tools that lower the company's reliance on humans.

  • For example, Amazon uses a robot called the Kiva which fundamentally changed the way the

  • job of the company's pickers, the people who find and grab an item out of storage,

  • worked.

  • Previously, pickers would walk some 10 to 12 miles or 16 to 19 kilometers a day through

  • cavernous rows of shelves.

  • Now, at least in their most advanced fulfillment centers, a robot picks up an entire mobile

  • shelf, on which a required product is located, and transports it to the picker, who picks

  • it.

  • Essentially, rather than the picker going to the shelf, the shelf goes to the picker.

  • With these robots, one person can pick three to four hundred items an hour rather than

  • the one hundred or so that was possible on foot.

  • Of course, fewer humans in the mix is good for Amazon, given the amount of criticism

  • it receives for its treatment of workers, and also because humans, even low-paid ones,

  • are expensive.

  • The fulfillment process for larger items, though, is just tougher to automate cheaply,

  • so the company chooses to segment the two processes out, and runs a far more manual

  • and distinct fulfillment system for larger items.

  • However, in most, but not all cases, the fulfillment centers for large and small items are under

  • the same roof, even if they're operated completely independently.

  • Of course, the ideal scenario for Amazon would be to have every single item they sell in

  • every single warehouse, but that's not realistic.

  • Therefore, they use predictive modeling to try to put items closest to those who are

  • likely to buy them.

  • The US is far from homogeneous, so demand for different products varies from place to

  • place.

  • For example, in Miami, people probably aren't looking to buy many ice scrapers for their

  • cars.

  • Meanwhile, in Fargo, North Dakota, demand for this item is almost certainly quite high.

  • It's therefore no wonder why that, if you look at the data, the colder the city, the

  • faster you can get an ice scraper on Amazon.

  • That is Amazon's predictive stocking at work.

  • While most examples of this system are far more nuanced and far less intuitive, the concept

  • is simple: their algorithms put products closest to the consumers most likely to buy themsomething

  • only possible at this scale thanks to modern big-data analytics.

  • Of course, there's then that third category of productslarge non-sortable.

  • The distinction here is because Amazon likes to aggregate products together into as few

  • packages as possibleunsurprisingly, fewer packages equals lower costs.

  • So, both the sortable categories include anything that could possibly be packaged together in

  • a single box.

  • The largest itemssay a 70 pound beanbag, for exampleare shipped from the large non-sortable

  • fulfillment centers.

  • These facilities are even less automated than the large-sortable ones, and even include

  • workers who create custom boxes for odd-sized items.

  • In Colorado, for example, this is a completely separate facility, located in Aurora, from

  • the sortable fulfillment center in Thornton.

  • Now, some large items will go directly into the system of a third-party provider, typically

  • XPO Logistics, which would deliver these bulky items to their final destination, while others

  • will continue on in Amazon's system.

  • The portion of large non-sortable items not sent to a third party logistics provider,

  • plus all the large and small sortable packages would next be sent to a regional sortation

  • center.

  • In Colorado, those two fulfillment centers send their packages to a single sortation

  • center, located just minutes away from the Aurora fulfillment center.

  • This is a massive facility, almost half a million square feet in size, with robots running

  • around, dropping packages into different chutes, which each represent a different grouping

  • of zip codes.

  • Now, not all the sortation centers are quite so automated, but each outputs the same thingpallets

  • of packages going to roughly the same place.

  • What happens next, though, once again, depends.

  • A package heading to Miami, for example, would end up on a pallet with other packages for

  • Miami, which itself would end up on a truck carrying pallets for Tampa, North Carolina,

  • Houston, Baltimore, New York City, Connecticut and a few other cities and states to the east.

  • This truck would then drive the 15 minutes to a waiting 767 cargo plane at Denver International

  • Airport branded inPrime Airlivery.

  • Now, Amazon Air started in 2015 with its lease of about 20 aircraft from Air Transport International

  • and has since grown to almost 70 aircraftall leased from other airlines.

  • However, the company recently announced the purchase of their first 11 aircraftalso

  • 767, bought from Delta and WestJetmeaning they'll soon both own and operate their

  • own aircraft.

  • Those eastbound pallets would all be loaded around 4:00 am, before the aircraft's scheduled

  • departure time of 4:54 am.

  • Now, anyone familiar with UPS or FedEx's operations will know why this departure time

  • is strange.

  • If UPS was transporting this package to Miami, at least at its fastest speed, it would have

  • departed on an aircraft the previous night at 9:40 pm, been flown to Louisville, sorted

  • through the company's hub, then flown to Miami, arriving at 5:50 am.

  • FedEx would have done roughly the same, just through Memphis instead.

  • That's because FedEx, UPS, and most other major delivery companies are oriented towards

  • overnight deliverythey make a big chunk of their money charging big rates to take

  • a package from one part of the US one day and deliver it to another the next day.

  • Amazon, meanwhile, built their Prime brand off of the promise of two-day deliveryordering

  • a package on a Monday and getting it on a Wednesday, for example.

  • While they've since strayed from the rigidness of that system, the fastest shipping they'll

  • offer for an item not stocked at a local fulfillment center is two days, meaning they don't have

  • to worry about being able to get a package from Denver to Miami overnight.

  • That's why UPS and FedEx's planes take off in the evening, while Amazon's leave

  • in the morning.

  • So, that means it's about 9:00 am by the time that Amazon Air plane from Denver gets

  • to Cincinnati airport each day.

  • Through the morning hours, a dozen or so aircraft land in Cincinnati, and this timing gives

  • the company a major advantage.

  • Cincinnati airport is also home to DHL's main Americas hub, but DHL, like FedEx and

  • UPS, conducts its operations primarily overnight starting at around midnight, when dozens of

  • their aircraft from all around the world land and unload.

  • Over the next few hours, packages and pallets are sorted and loaded onto other aircraft,

  • which all tend to take off by 8:00 am.

  • That means DHL only really uses their facility during the overnight hours, so Amazon leases

  • it for daytime use.

  • While Amazon is building their own, larger facility at Cincinnati airport, this partnership

  • gave them a huge head-start.

  • So, each day, between 8:00 am and 4:00 pm, Amazon's there, turning their planes around,

  • and sorting pallets from where they come from, like Denver, to where they need to go, like

  • Miami.

  • That Miami flight takes off each weekday at 2:15 pm, and then it lands in Florida just

  • before 5:00 pm eastern time.

  • Now, not every Amazon Air itinerary looks like this.

  • In fact, while UPS and FedEx route almost all of their flights through their Louisville

  • and Memphis super-hubs, or through some of their secondary hubs across the country, only

  • 20% of Amazon Air's flights go through their main Cincinnati hub.

  • That's because, with the orientation towards two-day delivery versus one, they just have

  • more time.

  • The more time means that, in order to service the entirety of Florida, Amazon only needs

  • to fly to three destinationsMiami, Tampa, and and Lakeland.

  • That's because Amazon's flights to these airports typically land by 5:00 pm, meaning

  • there's a whole twelve hours before packages have to be at the local delivery center for

  • the final destination.

  • The entirety of Florida is within an eight-hour drive of Lakeland, meaning Amazon can deliver

  • to all of Florida by only serving effectively one, but in practice three airports.

  • Meanwhile, FedEx, for example, flies from Memphis to Fort Lauderdale, Fort Myers, Jacksonville,

  • Tallahassee, Tampa, and Palm Beach, then, from Fort Lauderdale, it operates feeder flights

  • on smaller aircraft to Key West and Marathon.

  • So, in summary, in order to serve all of Florida, this is what FedEx has to do and this is what

  • Amazon has to do.

  • The required number of destinations for full coverage is greatly reduced by orienting for

  • two-day delivery, and this also means that Amazon doesn't have to route every flight

  • via one main hub.

  • Because they operate to far fewer destinations, it's much easier for Amazon to fill a plane

  • from California, for example, exclusively with packages destined for Florida, since

  • while a given UPS or FedEx flight carries packages from or to just one city, a given

  • Amazon Air flight likely carries packages from or to a whole state or region.

  • Therefore, Amazon Air has flights from all these airports to Lakeland, meaning that,

  • while a package from Denver would have to route via Cincinnati, one from Los Angeles

  • or Dallas or Chicago could fly direct.

  • With a full hub-and-spoke strategy, like that of UPS or FedEx, a package would have to be

  • loaded and unloaded from aircraft twice, and sometimes more, while Amazon Air's nonstop

  • flights only require loading and unloading once, which reduces cost, and can fly packages

  • direct, which also reduces cost.

  • This is how Amazon can transport packages by air more efficiently than UPS or FedEx.

  • The airplane, however, is just one of five routes that an Amazon package could take onwards

  • from the Denver sortation center.

  • For those that are to be delivered locally, in the Denver area, they'll be driven to

  • one of four delivery stations for Denver.

  • There, they'll be loaded into smaller delivery vans, operated by independent companies or

  • individuals contracted by Amazon, which will take the packages to their final destinations.

  • This is the one and only case in which an Amazon package is handled by Amazon logistics

  • from start to finish, and it's generally how their packages are delivered within major

  • urban and suburban areas.

  • Only a slim majority of their overall package volume is delivered this way, though, as when

  • you leave major urban areas, things get a bit more complicated.

  • Now, a package heading outside the Denver area with a later delivery date, or with a

  • destination within the greater Rockies region, would end up on an Amazon-branded, but independently

  • operated semi-truck.

  • For example, packages to the Aspen area, about a three to four hour drive into the mountains,

  • leave at around 1:00 am each night.

  • Early in the morning, however, at around 5:00 am, they arrive at the local post office and

  • from there, they're fully transferred into the United States Postal Service system for

  • final delivery.

  • You see, in less populous areas, like the mountains of Colorado, it just doesn't make

  • sense for Amazon to operate their own last-mile delivery.

  • They need a certain amount of scale for that to be cheaper than the alternative, and, at

  • least right now, that scale is only possible in major metro areas.

  • Therefore, they need alternatives for smaller cities, towns, and rural areas, and that alternative

  • is more often than not the USPS.

  • That's because the postal service charges very low rates for last-mile delivery, assuming

  • Amazon transports the packages to the local post office themselves.

  • While exact numbers aren't publicly known, estimates indicate the USPS charges Amazon

  • about $2 per package for last-mile deliveryabout half of what other delivery companies would

  • for the same service.

  • After all, the USPS services every address in America, so wherever Amazon needs to deliver,

  • the USPS is going there anyways.

  • That's why for smaller places that still have a decent volume of packages, like mid-sized

  • towns and cities, USPS delivery is often the cheapest option for Amazon.

  • But then there's that next step downthe most rural places in America.

  • Everything that can't be cheaply delivered by Amazon or the USPS, typically because they're

  • destined for low-density areas where you couldn't even fill a truck to send to the local post

  • office, or because of capacity or speed reasons, is sent through UPS.

  • Right now, it's believed that about 20% of Amazon's packages end up delivered by

  • UPS.

  • In Colorado, a package destined for the most rural areas, like the western edge of San

  • Miguel County, for example, would take this route.

  • It would cost Amazon far more, and they'd likely end up losing money on the cheapest

  • items, but it's what's required for them to be able to service every address in the

  • US quickly.

  • No matter which of these routes a package takes, the end result is, at least hopefully,

  • the sameUPS, the USPS, or Amazon itself drops off a package at its final destination,

  • after a few days of travel across the US.

  • It's a very simple process from a consumer perspective, but the behind the scenes is

  • incredibly complex.

  • The complexity is what's needed, though, for a business who's whole value proposition

  • is to get anything to your door quickly and cheaply.

  • The core of Amazon, their competitive advantage, is now logistics, to the point where many

  • experts believe that the company will start offering delivery as a service to other companies

  • in the coming years.

  • They believe that they've perfected their system enough that they're going to take

  • on UPS and FedEx.

  • Of course, Amazon still has competitors, which are going after the company as aggressively

  • as ever.

  • Target, for example, has been able to build a delivery system with similar speed through

  • completely different meansones that are far simpler.

  • They've essentially turned each