Amazon plans to open 1,000 small delivery hubs across the United States, with plans to increase this number to approximately 1,500.
The move is to further the company’s goal of same day delivery to customers. Walmart and Target have been using their network of stores to provide same day delivery, with Walmart implementing Walmart+, its own version of Amazon Prime.
Amazon’s small delivery hubs are planned to be about 200,000 square feet, one-quarter the size of the company’s fulfillment centers. Moreover, these suburban hubs will provide parking lot space for hub workers, Amazon delivery vans, and the gig workers who make Amazon deliveries.
Overall, it is expected that each small delivery hub will generate around 1,000 vehicle trips per day.
- Amazon to Put 1,000 Warehouses in Suburban Neighborhoods (Sept 17, 2020, Bloomberg QuickTake: Now)
This post is based on the Yahoo Finance article, Amazon Plans to Put 1,000 Warehouses in Suburban Neighborhoods, by Spencer Soper, September 16, 2020, and the YouTube video in the Spotlight. Image source: jeremyiswild/Getty Images
1. What advantage does the small delivery hub offer?
Guidance: These small hubs allow inventory to be closer to the customer. As a result, Amazon can deliver orders on the same day. This reduces problems associated with the last mile delivery. By being able to delivery many items on the same day as ordered, Amazon can now complete with in-person retail stores. The consumer can now decide whether to go to the store, or have products delivered from Amazon.
2. What are the drawbacks to the small delivery hub?
Guidance: The small delivery hub system doesn’t come without expense. Amazon must acquire the land and build the facilities. From an inventory management perspective, it is more difficult to manage inventory that is spread out over multiple facilities. It will require more inventory in total across more small hubs to achieve the same service level compared to fewer large fulfillment centers. It also presents a more complicated supply chain management system to coordinate the restocking of these small delivery hubs, and the delivery from them.
3. What factors should be considered in locating the small delivery hubs?
Guidance: Of course, the driving factor is locating these small delivery hubs close to the customer population in order to allow for same day delivery. However, the desire to be close to customers pushes other location factors in the wrong direction. One is cost. Many times, being close to customers increases the cost of the land for the small delivery hub.
Also, traffic can be a consideration. Many of these locations already have substantial traffic, and the hub adds to this traffic. Obviously, Amazon wants its deliveries to not be tied up in traffic. Some of this problem can be overcome by examining traffic patterns, and scheduling deliveries for off-peak times.
Finally, the NIMBY (Not In My Back Yard) factor comes into play. Customers want same day delivery, but not the added traffic, or the look of a small delivery hub in their suburban neighborhoods.