1 00:00:01,840 --> 00:00:07,760 Speaker 1: Welcome to Brainstuff, a production of iHeartRadio, Hey Brainstuff, Lauren 2 00:00:07,800 --> 00:00:13,360 Speaker 1: volgeban here. These days, whether you're ordering a book, a smartwatch, 3 00:00:13,440 --> 00:00:16,440 Speaker 1: a tablet piece eve, or a pair of slide sandals, 4 00:00:16,760 --> 00:00:20,079 Speaker 1: the chances are you're anticipating finding that item in a 5 00:00:20,120 --> 00:00:25,959 Speaker 1: box on your doorstep tomorrow, and you're not alone. A 6 00:00:26,079 --> 00:00:29,040 Speaker 1: twenty twenty one study of twelve thousand consumers in the 7 00:00:29,120 --> 00:00:32,640 Speaker 1: United States and other countries found that sixty percent of 8 00:00:32,720 --> 00:00:36,960 Speaker 1: consumers expect two day, next day, or same day delivery 9 00:00:36,960 --> 00:00:42,480 Speaker 1: of products. We've gotten spoiled largely because of the relentless 10 00:00:42,479 --> 00:00:48,280 Speaker 1: efficiency of Amazon and other major online retailers. But how 11 00:00:48,360 --> 00:00:52,559 Speaker 1: do online retailers actually make those products magically appear on 12 00:00:52,600 --> 00:00:56,720 Speaker 1: our doorsteps? For the article this episode is based on 13 00:00:56,800 --> 00:01:00,000 Speaker 1: how Stuff Work. Spoke with Tinglong Daie. He's a professor 14 00:01:00,280 --> 00:01:04,000 Speaker 1: at Johns Hopkins University's Carry Business School and an expert 15 00:01:04,000 --> 00:01:08,320 Speaker 1: in operations management, a discipline devoted to making businesses more efficient. 16 00:01:09,600 --> 00:01:13,119 Speaker 1: He explained that it's a combination of advances in logistics, 17 00:01:13,160 --> 00:01:17,520 Speaker 1: in the science of planning transportation to achieve maximum efficiency 18 00:01:17,520 --> 00:01:22,240 Speaker 1: and reliability, and in the near art of predicting consumers 19 00:01:22,319 --> 00:01:27,360 Speaker 1: purchases in advance. Researchers and experts at universities have been 20 00:01:27,400 --> 00:01:30,760 Speaker 1: working with major companies for years, helping them to speed 21 00:01:30,840 --> 00:01:35,440 Speaker 1: up their supply chains and shorten their delivery times. Dya said, 22 00:01:36,000 --> 00:01:39,200 Speaker 1: it's not that difficult to deliver products quickly per se. 23 00:01:39,760 --> 00:01:42,720 Speaker 1: The target is always to deliver stuff quickly, but also 24 00:01:42,760 --> 00:01:45,680 Speaker 1: in a low cost manner. You can always send something 25 00:01:45,680 --> 00:01:48,400 Speaker 1: from point A to point B quickly, but it just 26 00:01:48,480 --> 00:01:51,960 Speaker 1: might be very expensive. Basically, you have to figure out 27 00:01:52,000 --> 00:01:58,000 Speaker 1: a trade off among responsiveness, cost and quality. That means 28 00:01:58,000 --> 00:02:01,800 Speaker 1: shipping products as cheaply as possible, but while also ensuring 29 00:02:01,840 --> 00:02:04,560 Speaker 1: that there's a variety of stuff for consumers to pick 30 00:02:04,600 --> 00:02:09,080 Speaker 1: from so that they can customize their order. Day explained. 31 00:02:09,639 --> 00:02:13,000 Speaker 1: The reason Amazon has dominated the American retail sector is 32 00:02:13,080 --> 00:02:18,160 Speaker 1: probably the fulfillment center idea. Centrally managed fulfillment centers allow 33 00:02:18,200 --> 00:02:21,640 Speaker 1: Amazon to centralize its supply chain and respond to the 34 00:02:21,639 --> 00:02:27,400 Speaker 1: market quickly. It works so effectively that other retailers all 35 00:02:27,440 --> 00:02:31,520 Speaker 1: over the world have imitated Amazon centers. Here's how they 36 00:02:31,560 --> 00:02:35,840 Speaker 1: apparently work. Whenever a customer purchases an item online, a 37 00:02:35,960 --> 00:02:41,160 Speaker 1: complex process kicks into gear. First, the order is transmitted 38 00:02:41,160 --> 00:02:44,880 Speaker 1: to one of the company's fulfillment centers. These are basically 39 00:02:45,080 --> 00:02:49,799 Speaker 1: massive warehouses where employees pick and pack the products into boxes. 40 00:02:50,840 --> 00:02:54,799 Speaker 1: Those packages are loaded onto large trailer trucks and transported 41 00:02:54,800 --> 00:02:57,960 Speaker 1: to an Amazon Air site, where they're loaded onto aircraft. 42 00:02:58,760 --> 00:03:01,840 Speaker 1: Once the planes land at their destination, the packages are 43 00:03:01,880 --> 00:03:05,200 Speaker 1: transferred to a facility called a sort center, where they're 44 00:03:05,280 --> 00:03:08,560 Speaker 1: organized by ZIP code. They're then loaded onto trucks to 45 00:03:08,560 --> 00:03:11,640 Speaker 1: be taken to yet another facility called a delivery station. 46 00:03:12,440 --> 00:03:15,480 Speaker 1: From there, goods are loaded into delivery vehicles for their 47 00:03:15,600 --> 00:03:20,280 Speaker 1: ride to your doorstep. Amazon doesn't disclose the number of 48 00:03:20,280 --> 00:03:23,520 Speaker 1: fulfillment centers it has on its website, and the company 49 00:03:23,560 --> 00:03:27,880 Speaker 1: didn't respond to House Toaffork's email request for information, but 50 00:03:28,400 --> 00:03:31,960 Speaker 1: cell Go dot com and on affiliated website that provides 51 00:03:32,040 --> 00:03:36,000 Speaker 1: tools and data to Amazon sellers estimated in twenty twenty 52 00:03:36,080 --> 00:03:38,600 Speaker 1: one that the e commerce giant had one hundred and 53 00:03:38,600 --> 00:03:41,880 Speaker 1: eighty five filment centers around the world, including more than 54 00:03:41,920 --> 00:03:46,920 Speaker 1: one hundred in the United States. A centralization is the 55 00:03:47,080 --> 00:03:51,360 Speaker 1: key here. A traditional big box retailer like Walmart might 56 00:03:51,400 --> 00:03:54,600 Speaker 1: have hundreds of stores and a warehouse for every two 57 00:03:54,680 --> 00:03:59,280 Speaker 1: or three stores. Amazon began with just one single fulfillment 58 00:03:59,320 --> 00:04:02,760 Speaker 1: center in the Seattle area to maintain its supply of merchandise, 59 00:04:03,080 --> 00:04:07,200 Speaker 1: and then gradually expanded as their business expanded. Today, each 60 00:04:07,280 --> 00:04:10,320 Speaker 1: fulfillment center meets the needs of a region encompassing a 61 00:04:10,400 --> 00:04:16,320 Speaker 1: whole state or maybe two. Having these big, centralized warehouses 62 00:04:16,400 --> 00:04:20,039 Speaker 1: is a huge advantage because it enables Amazon to stock 63 00:04:20,120 --> 00:04:22,599 Speaker 1: enough products to meet the needs of a variety of 64 00:04:22,600 --> 00:04:27,080 Speaker 1: different customers quickly. Compared to a business like Walmart that 65 00:04:27,160 --> 00:04:30,919 Speaker 1: relies on physical stores, Amazon is thus better able to 66 00:04:30,960 --> 00:04:37,240 Speaker 1: deal with uncertainty and fluctuations in demand. Dye used books 67 00:04:37,240 --> 00:04:40,520 Speaker 1: as an example, at any given moment, there might be 68 00:04:40,600 --> 00:04:43,720 Speaker 1: two or three people interested in buying a physical copy of, 69 00:04:43,960 --> 00:04:47,080 Speaker 1: say the novel Jurassic Park, or I don't know, a 70 00:04:47,120 --> 00:04:51,200 Speaker 1: Warren piece. An online retailer can make sure it keeps 71 00:04:51,320 --> 00:04:53,880 Speaker 1: three to four copies of each book in stock to 72 00:04:54,040 --> 00:04:58,160 Speaker 1: meet that demand, but a physical retailer can't do that. 73 00:04:58,720 --> 00:05:01,599 Speaker 1: A customer who goes into a store looking for whatever 74 00:05:01,640 --> 00:05:04,839 Speaker 1: book may not be able to buy it. A guy said, 75 00:05:05,240 --> 00:05:07,799 Speaker 1: nobody is going to buy something that isn't on the shelf. 76 00:05:09,839 --> 00:05:12,800 Speaker 1: An e commerce consumer doesn't have to wait for their 77 00:05:12,839 --> 00:05:15,400 Speaker 1: local shop to order a copy of the book they want, 78 00:05:15,680 --> 00:05:19,040 Speaker 1: or to settle for whatever's in stock, because an e 79 00:05:19,080 --> 00:05:23,039 Speaker 1: commerce retailer can maintain a larger supply of products and 80 00:05:23,120 --> 00:05:27,120 Speaker 1: ship them right away, and retailers as big as Amazon 81 00:05:27,279 --> 00:05:31,479 Speaker 1: have learned the trade offs between centralization and proximity and 82 00:05:31,560 --> 00:05:34,520 Speaker 1: have built more fulfillment centers closer to their customers to 83 00:05:34,600 --> 00:05:40,719 Speaker 1: reduce shipping times. Okay, but how does an e commerce 84 00:05:40,760 --> 00:05:45,320 Speaker 1: retailer know what to stock in each fulfillment center. That's 85 00:05:45,360 --> 00:05:50,240 Speaker 1: the realm of demand forecasting. A company's employ scores of 86 00:05:50,320 --> 00:05:54,520 Speaker 1: data scientists to do such forecasting, not just across the US, 87 00:05:54,760 --> 00:05:59,560 Speaker 1: but in different states and metropolitan areas. Their research involves 88 00:05:59,720 --> 00:06:03,960 Speaker 1: poring over demographic data and housing income and using artificial 89 00:06:04,040 --> 00:06:09,360 Speaker 1: intelligence and machine learning to make their predictions. Plus they've 90 00:06:09,400 --> 00:06:14,040 Speaker 1: designed inventory systems that replenish supplies automatically whenever stock gets 91 00:06:14,120 --> 00:06:17,120 Speaker 1: low to whatever value of low is assigned to a 92 00:06:17,160 --> 00:06:22,560 Speaker 1: particular product. Another trick to speed things up is positioning 93 00:06:22,600 --> 00:06:26,080 Speaker 1: products in the warehouse according to demand rather than category. 94 00:06:27,000 --> 00:06:31,320 Speaker 1: Amazon warehouses, for example, don't have toy sections, or food sections, 95 00:06:31,440 --> 00:06:35,800 Speaker 1: or even book sections. The most frequently ordered stuff is 96 00:06:35,839 --> 00:06:39,000 Speaker 1: the most accessible, and everything can be located with a 97 00:06:39,080 --> 00:06:42,880 Speaker 1: quick barcode scan, enabling warehouse workers to find products in 98 00:06:42,920 --> 00:06:47,120 Speaker 1: a hurry and get them onto those trucks. E Commerce 99 00:06:47,160 --> 00:06:52,120 Speaker 1: retailers also use another technique called crosstocking, originally pioneered by Walmart, 100 00:06:52,400 --> 00:06:55,480 Speaker 1: for getting goods out of big trucks and directly into 101 00:06:55,520 --> 00:06:59,800 Speaker 1: smaller vans for delivery. Dye said. The idea of cross 102 00:07:00,000 --> 00:07:03,000 Speaker 1: stocking is to reduce the need for warehousing as much 103 00:07:03,000 --> 00:07:07,040 Speaker 1: as possible. Basically, you have outgoing trucks that pick up 104 00:07:07,120 --> 00:07:10,080 Speaker 1: from incoming trucks without having to deal with shelving and 105 00:07:10,160 --> 00:07:14,160 Speaker 1: sorting and warehousing operations. They try to coordinate the timing 106 00:07:14,360 --> 00:07:17,000 Speaker 1: so that when trucks arrive to deliver the goods, you 107 00:07:17,080 --> 00:07:21,760 Speaker 1: have other trucks ready to pick it up. Next day 108 00:07:21,760 --> 00:07:25,440 Speaker 1: delivery works pretty well these days, but with consumers growing 109 00:07:25,480 --> 00:07:29,680 Speaker 1: accustomed to it, online retailers increasingly are offering same day 110 00:07:29,680 --> 00:07:33,680 Speaker 1: delivery for some items. A twenty twenty one forecast by 111 00:07:33,680 --> 00:07:36,680 Speaker 1: Research in Markets dot Com predicted that the same day 112 00:07:36,680 --> 00:07:39,560 Speaker 1: delivery market would grow at a compound rate of more 113 00:07:39,600 --> 00:07:42,800 Speaker 1: than twenty percent between twenty twenty one and twenty twenty five. 114 00:07:44,680 --> 00:07:48,119 Speaker 1: Also in twenty twenty one, a leaked internal Amazon memo 115 00:07:48,320 --> 00:07:51,160 Speaker 1: suggested that the company could run out of warehouse workers 116 00:07:51,200 --> 00:07:55,280 Speaker 1: by twenty twenty four. Amazon has been accused of churning 117 00:07:55,320 --> 00:07:59,760 Speaker 1: through warehouse workers and emphasizing their productivity above everything else, 118 00:07:59,840 --> 00:08:04,880 Speaker 1: including employee safety and comfort, but workers are fighting back. 119 00:08:05,720 --> 00:08:09,160 Speaker 1: The Staten Island, New York warehouse called JFK eight, was 120 00:08:09,200 --> 00:08:12,440 Speaker 1: Amazon's first in the US to successfully vote to form 121 00:08:12,480 --> 00:08:15,480 Speaker 1: a union in April of twenty twenty two, and other 122 00:08:15,560 --> 00:08:23,600 Speaker 1: warehouses are pushing to unionize as well. Today's episode is 123 00:08:23,600 --> 00:08:26,679 Speaker 1: based on the article how does Amazon deliver stuff so Fast? 124 00:08:26,720 --> 00:08:29,280 Speaker 1: On how Stuffworks dot Com written by Patrick D. Kiger. 125 00:08:29,840 --> 00:08:32,920 Speaker 1: Brainstuff is production of iHeartRadio in partnership with how Stuffworks 126 00:08:32,920 --> 00:08:35,800 Speaker 1: dot Com and is produced by Tyler Klang. Four more 127 00:08:35,840 --> 00:08:39,520 Speaker 1: podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts, 128 00:08:39,600 --> 00:08:50,160 Speaker 1: or wherever you listen to your favorite shows.