WEBVTT - How Does Amazon Deliver Stuff So Fast?

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<v Speaker 1>Welcome to Brainstuff, a production of iHeartRadio, Hey Brainstuff, Lauren

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<v Speaker 1>volgeban here. These days, whether you're ordering a book, a smartwatch,

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<v Speaker 1>a tablet piece eve, or a pair of slide sandals,

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<v Speaker 1>the chances are you're anticipating finding that item in a

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<v Speaker 1>box on your doorstep tomorrow, and you're not alone. A

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<v Speaker 1>twenty twenty one study of twelve thousand consumers in the

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<v Speaker 1>United States and other countries found that sixty percent of

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<v Speaker 1>consumers expect two day, next day, or same day delivery

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<v Speaker 1>of products. We've gotten spoiled largely because of the relentless

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<v Speaker 1>efficiency of Amazon and other major online retailers. But how

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<v Speaker 1>do online retailers actually make those products magically appear on

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<v Speaker 1>our doorsteps? For the article this episode is based on

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<v Speaker 1>how Stuff Work. Spoke with Tinglong Daie. He's a professor

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<v Speaker 1>at Johns Hopkins University's Carry Business School and an expert

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<v Speaker 1>in operations management, a discipline devoted to making businesses more efficient.

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<v Speaker 1>He explained that it's a combination of advances in logistics,

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<v Speaker 1>in the science of planning transportation to achieve maximum efficiency

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<v Speaker 1>and reliability, and in the near art of predicting consumers

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<v Speaker 1>purchases in advance. Researchers and experts at universities have been

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<v Speaker 1>working with major companies for years, helping them to speed

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<v Speaker 1>up their supply chains and shorten their delivery times. Dya said,

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<v Speaker 1>it's not that difficult to deliver products quickly per se.

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<v Speaker 1>The target is always to deliver stuff quickly, but also

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<v Speaker 1>in a low cost manner. You can always send something

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<v Speaker 1>from point A to point B quickly, but it just

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<v Speaker 1>might be very expensive. Basically, you have to figure out

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<v Speaker 1>a trade off among responsiveness, cost and quality. That means

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<v Speaker 1>shipping products as cheaply as possible, but while also ensuring

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<v Speaker 1>that there's a variety of stuff for consumers to pick

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<v Speaker 1>from so that they can customize their order. Day explained.

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<v Speaker 1>The reason Amazon has dominated the American retail sector is

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<v Speaker 1>probably the fulfillment center idea. Centrally managed fulfillment centers allow

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<v Speaker 1>Amazon to centralize its supply chain and respond to the

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<v Speaker 1>market quickly. It works so effectively that other retailers all

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<v Speaker 1>over the world have imitated Amazon centers. Here's how they

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<v Speaker 1>apparently work. Whenever a customer purchases an item online, a

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<v Speaker 1>complex process kicks into gear. First, the order is transmitted

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<v Speaker 1>to one of the company's fulfillment centers. These are basically

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<v Speaker 1>massive warehouses where employees pick and pack the products into boxes.

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<v Speaker 1>Those packages are loaded onto large trailer trucks and transported

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<v Speaker 1>to an Amazon Air site, where they're loaded onto aircraft.

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<v Speaker 1>Once the planes land at their destination, the packages are

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<v Speaker 1>transferred to a facility called a sort center, where they're

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<v Speaker 1>organized by ZIP code. They're then loaded onto trucks to

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<v Speaker 1>be taken to yet another facility called a delivery station.

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<v Speaker 1>From there, goods are loaded into delivery vehicles for their

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<v Speaker 1>ride to your doorstep. Amazon doesn't disclose the number of

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<v Speaker 1>fulfillment centers it has on its website, and the company

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<v Speaker 1>didn't respond to House Toaffork's email request for information, but

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<v Speaker 1>cell Go dot com and on affiliated website that provides

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<v Speaker 1>tools and data to Amazon sellers estimated in twenty twenty

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<v Speaker 1>one that the e commerce giant had one hundred and

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<v Speaker 1>eighty five filment centers around the world, including more than

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<v Speaker 1>one hundred in the United States. A centralization is the

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<v Speaker 1>key here. A traditional big box retailer like Walmart might

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<v Speaker 1>have hundreds of stores and a warehouse for every two

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<v Speaker 1>or three stores. Amazon began with just one single fulfillment

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<v Speaker 1>center in the Seattle area to maintain its supply of merchandise,

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<v Speaker 1>and then gradually expanded as their business expanded. Today, each

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<v Speaker 1>fulfillment center meets the needs of a region encompassing a

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<v Speaker 1>whole state or maybe two. Having these big, centralized warehouses

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<v Speaker 1>is a huge advantage because it enables Amazon to stock

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<v Speaker 1>enough products to meet the needs of a variety of

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<v Speaker 1>different customers quickly. Compared to a business like Walmart that

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<v Speaker 1>relies on physical stores, Amazon is thus better able to

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<v Speaker 1>deal with uncertainty and fluctuations in demand. Dye used books

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<v Speaker 1>as an example, at any given moment, there might be

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<v Speaker 1>two or three people interested in buying a physical copy of,

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<v Speaker 1>say the novel Jurassic Park, or I don't know, a

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<v Speaker 1>Warren piece. An online retailer can make sure it keeps

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<v Speaker 1>three to four copies of each book in stock to

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<v Speaker 1>meet that demand, but a physical retailer can't do that.

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<v Speaker 1>A customer who goes into a store looking for whatever

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<v Speaker 1>book may not be able to buy it. A guy said,

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<v Speaker 1>nobody is going to buy something that isn't on the shelf.

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<v Speaker 1>An e commerce consumer doesn't have to wait for their

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<v Speaker 1>local shop to order a copy of the book they want,

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<v Speaker 1>or to settle for whatever's in stock, because an e

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<v Speaker 1>commerce retailer can maintain a larger supply of products and

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<v Speaker 1>ship them right away, and retailers as big as Amazon

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<v Speaker 1>have learned the trade offs between centralization and proximity and

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<v Speaker 1>have built more fulfillment centers closer to their customers to

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<v Speaker 1>reduce shipping times. Okay, but how does an e commerce

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<v Speaker 1>retailer know what to stock in each fulfillment center. That's

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<v Speaker 1>the realm of demand forecasting. A company's employ scores of

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<v Speaker 1>data scientists to do such forecasting, not just across the US,

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<v Speaker 1>but in different states and metropolitan areas. Their research involves

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<v Speaker 1>poring over demographic data and housing income and using artificial

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<v Speaker 1>intelligence and machine learning to make their predictions. Plus they've

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<v Speaker 1>designed inventory systems that replenish supplies automatically whenever stock gets

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<v Speaker 1>low to whatever value of low is assigned to a

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<v Speaker 1>particular product. Another trick to speed things up is positioning

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<v Speaker 1>products in the warehouse according to demand rather than category.

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<v Speaker 1>Amazon warehouses, for example, don't have toy sections, or food sections,

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<v Speaker 1>or even book sections. The most frequently ordered stuff is

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<v Speaker 1>the most accessible, and everything can be located with a

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<v Speaker 1>quick barcode scan, enabling warehouse workers to find products in

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<v Speaker 1>a hurry and get them onto those trucks. E Commerce

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<v Speaker 1>retailers also use another technique called crosstocking, originally pioneered by Walmart,

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<v Speaker 1>for getting goods out of big trucks and directly into

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<v Speaker 1>smaller vans for delivery. Dye said. The idea of cross

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<v Speaker 1>stocking is to reduce the need for warehousing as much

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<v Speaker 1>as possible. Basically, you have outgoing trucks that pick up

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<v Speaker 1>from incoming trucks without having to deal with shelving and

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<v Speaker 1>sorting and warehousing operations. They try to coordinate the timing

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<v Speaker 1>so that when trucks arrive to deliver the goods, you

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<v Speaker 1>have other trucks ready to pick it up. Next day

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<v Speaker 1>delivery works pretty well these days, but with consumers growing

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<v Speaker 1>accustomed to it, online retailers increasingly are offering same day

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<v Speaker 1>delivery for some items. A twenty twenty one forecast by

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<v Speaker 1>Research in Markets dot Com predicted that the same day

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<v Speaker 1>delivery market would grow at a compound rate of more

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<v Speaker 1>than twenty percent between twenty twenty one and twenty twenty five.

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<v Speaker 1>Also in twenty twenty one, a leaked internal Amazon memo

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<v Speaker 1>suggested that the company could run out of warehouse workers

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<v Speaker 1>by twenty twenty four. Amazon has been accused of churning

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<v Speaker 1>through warehouse workers and emphasizing their productivity above everything else,

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<v Speaker 1>including employee safety and comfort, but workers are fighting back.

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<v Speaker 1>The Staten Island, New York warehouse called JFK eight, was

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<v Speaker 1>Amazon's first in the US to successfully vote to form

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<v Speaker 1>a union in April of twenty twenty two, and other

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<v Speaker 1>warehouses are pushing to unionize as well. Today's episode is

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<v Speaker 1>based on the article how does Amazon deliver stuff so Fast?

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<v Speaker 1>On how Stuffworks dot Com written by Patrick D. Kiger.

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<v Speaker 1>Brainstuff is production of iHeartRadio in partnership with how Stuffworks

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<v Speaker 1>dot Com and is produced by Tyler Klang. Four more

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<v Speaker 1>podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,

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<v Speaker 1>or wherever you listen to your favorite shows.