Dive Brief:
- Amazon aims to improve its inbound fulfillment processes and inventory positioning this year as part of its continued push to reduce costs in its logistics network, CEO Andy Jassy said on a fourth-quarter earnings call Thursday.
- “We've challenged every closely held belief for our fulfillment network and reevaluated every part of it, and found several areas where we believe we can lower costs while also delivering faster for customers,” Jassy said, according to a Seeking Alpha transcript. “Our inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there's more upside for us.”
- Amazon is using generative AI to help its inventory positioning efforts, as it has built an application using the technology that forecasts how much inventory it needs in each of its fulfillment centers, Jassy said.
Dive Insight:
Amazon made strides in lowering its fulfillment costs and improving delivery times in 2023 through its shift from a national network model to a regional one. The company's cost to serve customers fell year over year for the first time since 2018, and it achieved its fastest-ever shipping speeds to Prime members, Jassy said.
Now, Amazon wants the process in which products enter its facilities to see similar improvements in efficiency and speed, as Worldwide Amazon Stores CEO Doug Herrington pointed out in a post on the company's website Tuesday.
“The goal is for our operations teams to have a better sense of what inventory — and how much of it — is coming in, which will allow them to align that inventory to what customers in that particular region want and need, helping to make our whole process more efficient,” Herrington said.
This goal aligns with Amazon's new "inbound placement service fee" for sellers, which takes effect March 1. The company has said this fee reflects the cost of sending products into facilities nearest customers, a top priority in its transition to a regional fulfillment model.
Amazon also plans to invest more in its same-day delivery service to reach more customers in 2024, after expanding the offering to 18 additional U.S. cities this past year, according to Herrington.
"This year, we also plan to add sites across a variety of U.S. metro areas, and, around the world, we aim to offer more products customers want and need the same or next day," Herrington said.
