Speaker 1: Welcome to Brainstuff, a production of iHeartRadio, Hey Brainstuff, Lauren
Speaker 1: volgeban here. These days, whether you're ordering a book, a smartwatch,
Speaker 1: a tablet piece eve, or a pair of slide sandals,
Speaker 1: the chances are you're anticipating finding that item in a
Speaker 1: box on your doorstep tomorrow, and you're not alone. A
Speaker 1: twenty twenty one study of twelve thousand consumers in the
Speaker 1: United States and other countries found that sixty percent of
Speaker 1: consumers expect two day, next day, or same day delivery
Speaker 1: of products. We've gotten spoiled largely because of the relentless
Speaker 1: efficiency of Amazon and other major online retailers. But how
Speaker 1: do online retailers actually make those products magically appear on
Speaker 1: our doorsteps? For the article this episode is based on
Speaker 1: how Stuff Work. Spoke with Tinglong Daie. He's a professor
Speaker 1: at Johns Hopkins University's Carry Business School and an expert
Speaker 1: in operations management, a discipline devoted to making businesses more efficient.
Speaker 1: He explained that it's a combination of advances in logistics,
Speaker 1: in the science of planning transportation to achieve maximum efficiency
Speaker 1: and reliability, and in the near art of predicting consumers
Speaker 1: purchases in advance. Researchers and experts at universities have been
Speaker 1: working with major companies for years, helping them to speed
Speaker 1: up their supply chains and shorten their delivery times. Dya said,
Speaker 1: it's not that difficult to deliver products quickly per se.
Speaker 1: The target is always to deliver stuff quickly, but also
Speaker 1: in a low cost manner. You can always send something
Speaker 1: from point A to point B quickly, but it just
Speaker 1: might be very expensive. Basically, you have to figure out
Speaker 1: a trade off among responsiveness, cost and quality. That means
Speaker 1: shipping products as cheaply as possible, but while also ensuring
Speaker 1: that there's a variety of stuff for consumers to pick
Speaker 1: from so that they can customize their order. Day explained.
Speaker 1: The reason Amazon has dominated the American retail sector is
Speaker 1: probably the fulfillment center idea. Centrally managed fulfillment centers allow
Speaker 1: Amazon to centralize its supply chain and respond to the
Speaker 1: market quickly. It works so effectively that other retailers all
Speaker 1: over the world have imitated Amazon centers. Here's how they
Speaker 1: apparently work. Whenever a customer purchases an item online, a
Speaker 1: complex process kicks into gear. First, the order is transmitted
Speaker 1: to one of the company's fulfillment centers. These are basically
Speaker 1: massive warehouses where employees pick and pack the products into boxes.
Speaker 1: Those packages are loaded onto large trailer trucks and transported
Speaker 1: to an Amazon Air site, where they're loaded onto aircraft.
Speaker 1: Once the planes land at their destination, the packages are
Speaker 1: transferred to a facility called a sort center, where they're
Speaker 1: organized by ZIP code. They're then loaded onto trucks to
Speaker 1: be taken to yet another facility called a delivery station.
Speaker 1: From there, goods are loaded into delivery vehicles for their
Speaker 1: ride to your doorstep. Amazon doesn't disclose the number of
Speaker 1: fulfillment centers it has on its website, and the company
Speaker 1: didn't respond to House Toaffork's email request for information, but
Speaker 1: cell Go dot com and on affiliated website that provides
Speaker 1: tools and data to Amazon sellers estimated in twenty twenty
Speaker 1: one that the e commerce giant had one hundred and
Speaker 1: eighty five filment centers around the world, including more than
Speaker 1: one hundred in the United States. A centralization is the
Speaker 1: key here. A traditional big box retailer like Walmart might
Speaker 1: have hundreds of stores and a warehouse for every two
Speaker 1: or three stores. Amazon began with just one single fulfillment
Speaker 1: center in the Seattle area to maintain its supply of merchandise,
Speaker 1: and then gradually expanded as their business expanded. Today, each
Speaker 1: fulfillment center meets the needs of a region encompassing a
Speaker 1: whole state or maybe two. Having these big, centralized warehouses
Speaker 1: is a huge advantage because it enables Amazon to stock
Speaker 1: enough products to meet the needs of a variety of
Speaker 1: different customers quickly. Compared to a business like Walmart that
Speaker 1: relies on physical stores, Amazon is thus better able to
Speaker 1: deal with uncertainty and fluctuations in demand. Dye used books
Speaker 1: as an example, at any given moment, there might be
Speaker 1: two or three people interested in buying a physical copy of,
Speaker 1: say the novel Jurassic Park, or I don't know, a
Speaker 1: Warren piece. An online retailer can make sure it keeps
Speaker 1: three to four copies of each book in stock to
Speaker 1: meet that demand, but a physical retailer can't do that.
Speaker 1: A customer who goes into a store looking for whatever
Speaker 1: book may not be able to buy it. A guy said,
Speaker 1: nobody is going to buy something that isn't on the shelf.
Speaker 1: An e commerce consumer doesn't have to wait for their
Speaker 1: local shop to order a copy of the book they want,
Speaker 1: or to settle for whatever's in stock, because an e
Speaker 1: commerce retailer can maintain a larger supply of products and
Speaker 1: ship them right away, and retailers as big as Amazon
Speaker 1: have learned the trade offs between centralization and proximity and
Speaker 1: have built more fulfillment centers closer to their customers to
Speaker 1: reduce shipping times. Okay, but how does an e commerce
Speaker 1: retailer know what to stock in each fulfillment center. That's
Speaker 1: the realm of demand forecasting. A company's employ scores of
Speaker 1: data scientists to do such forecasting, not just across the US,
Speaker 1: but in different states and metropolitan areas. Their research involves
Speaker 1: poring over demographic data and housing income and using artificial
Speaker 1: intelligence and machine learning to make their predictions. Plus they've
Speaker 1: designed inventory systems that replenish supplies automatically whenever stock gets
Speaker 1: low to whatever value of low is assigned to a
Speaker 1: particular product. Another trick to speed things up is positioning
Speaker 1: products in the warehouse according to demand rather than category.
Speaker 1: Amazon warehouses, for example, don't have toy sections, or food sections,
Speaker 1: or even book sections. The most frequently ordered stuff is
Speaker 1: the most accessible, and everything can be located with a
Speaker 1: quick barcode scan, enabling warehouse workers to find products in
Speaker 1: a hurry and get them onto those trucks. E Commerce
Speaker 1: retailers also use another technique called crosstocking, originally pioneered by Walmart,
Speaker 1: for getting goods out of big trucks and directly into
Speaker 1: smaller vans for delivery. Dye said. The idea of cross
Speaker 1: stocking is to reduce the need for warehousing as much
Speaker 1: as possible. Basically, you have outgoing trucks that pick up
Speaker 1: from incoming trucks without having to deal with shelving and
Speaker 1: sorting and warehousing operations. They try to coordinate the timing
Speaker 1: so that when trucks arrive to deliver the goods, you
Speaker 1: have other trucks ready to pick it up. Next day
Speaker 1: delivery works pretty well these days, but with consumers growing
Speaker 1: accustomed to it, online retailers increasingly are offering same day
Speaker 1: delivery for some items. A twenty twenty one forecast by
Speaker 1: Research in Markets dot Com predicted that the same day
Speaker 1: delivery market would grow at a compound rate of more
Speaker 1: than twenty percent between twenty twenty one and twenty twenty five.
Speaker 1: Also in twenty twenty one, a leaked internal Amazon memo
Speaker 1: suggested that the company could run out of warehouse workers
Speaker 1: by twenty twenty four. Amazon has been accused of churning
Speaker 1: through warehouse workers and emphasizing their productivity above everything else,
Speaker 1: including employee safety and comfort, but workers are fighting back.
Speaker 1: The Staten Island, New York warehouse called JFK eight, was
Speaker 1: Amazon's first in the US to successfully vote to form
Speaker 1: a union in April of twenty twenty two, and other
Speaker 1: warehouses are pushing to unionize as well. Today's episode is
Speaker 1: based on the article how does Amazon deliver stuff so Fast?
Speaker 1: On how Stuffworks dot Com written by Patrick D. Kiger.
Speaker 1: Brainstuff is production of iHeartRadio in partnership with how Stuffworks
Speaker 1: dot Com and is produced by Tyler Klang. Four more
Speaker 1: podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,
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