Amazon Decentralizes Fulfillment Network to Get Faster and Cheaper Deliveries

Amazon carved up its national fulfillment network into 8 regions that will each be self-sufficient, doing so in order to lower costs and speed up delivery times. CEO Andy Jassy told investors about the change in his annual letter to shareholders on Thursday along with other news about the company.

Each of the eight interconnected regions can operate self-sufficiently thanks to a broad selection of inventory while still being able to ship nationally when necessary. It’s possible Jassy was colored by his experience leading the AWS division in choosing a more decentralized approach to fulfillment.

The CEO did not address the impact to sellers who use Amazon FBA to store and fulfill inventory, so it’s unclear if sellers will have to split inbound shipments more often, or if Amazon will handle the distribution to regional centers once it receives sellers’ inventory. Amazon recently completed the regional rollout, so sellers should have started feeling the impact, if any, by now.

Jassy said Amazon was also using Machine Learning algorithms to better predict what customers in various parts of the country need “so that we have the right inventory in the right regions at the right time.”

“Shorter travel distances mean lower cost to serve, less impact on the environment, and customers getting their orders faster,” Jassy said. “On the latter, we’re excited about seeing more next day and same-day deliveries, and we’re on track to have our fastest Prime delivery speeds ever in 2023.”

Some of the other highlights from Andy Jassy’s letter related to Amazon’s ecommerce business included the following:

• “During the early part of the pandemic, with many physical stores shut down, our consumer business grew at an extraordinary clip, with annual revenue increasing from $245B in 2019 to $434B in 2022.”
• “This meant that we had to double the fulfillment center footprint that we’d built over the prior 25 years and substantially accelerate building a last-mile transportation network that’s now the size of UPS (along with a new sortation center network to assist with efficiency and speed when items needed to traverse long distances)—all in the span of about two years.”
• “Today, Amazon sells nearly every physical and digital retail item you can imagine, with a vibrant third-party seller ecosystem that accounts for 60% of our unit sales, and reaches customers in virtually every country around the world.”

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.