ChannelAdvisor Scot Wingo By Scot Wingo

Inside Amazon’s Fulfilment Centre Network – 2015 Update.

Every year before the critical festive selling season, we update our database and publish new maps that detail Amazon’s Fulfilment Centre (FC) network.  2014’s post is here and might be handy to review if you are interested in seeing what Amazon has been doing over the last year.

Amazon’s Shipping Services Recap

To understand Amazon’s logistics network (the backend), it helps to first review all of the services Amazon now offers to consumers around shipping:

  • Amazon Prime – In the UK, you pay £79/yr and get all you can eat free 1 day shipping (on Prime eligible products) as well as Prime Video, Prime Music and access to the Kindle Owners Lending Library.
  • Amazon Prime Fresh – In the US, for $299/yr members get free delivery on groceries worth over $50/order. Currently available in Seattle, Los Angeles, San Francisco and New York City. In the UK, Retail Week reports that fresh grocery deliveries are being trialled in the Birmingham, with a view to rolling out Amazon Fresh in early 2016.
  • Amazon Lockers – These lock-boxes enable you to deliver and pick up items.  These are very popular in the UK and the rest of the EU.
  • Amazon Flex – Amazon is testing an Uber-like programme in the US where third party drivers deliver Prime Now packages from Amazon facilities to your house in 1-2 hours.
  • Amazon Saturday / Sunday Delivery – In November 2013, Amazon announced a deal with the USPS to deliver on Saturdays and Sundays in select regions.
  • Ama/zonGlobal – Amazon helps sellers ship internationally to over 75 countries.
  • Amazon Prime Now – Amazon’s 1-2 hour service is available in 14 regions (slightly different than the same day delivery metros).  The Prime Now app allows Prime members to receive items for free in 2 hours.  One hour delivery costs £6.99 per order with a minimum order of £20.  The regions where Prime Now is available as of this writing are: (a * denotes that this location does NOT also offer same day delivery).
  1. London, UK*
  2. Atlanta, GA
  3. Austin, TX*
  4. Baltimore, MD
  5. Chicago, IL*
  6. Dallas, TX
  7. Houston, Tx*
  8. Indianpolis, IN
  9. Los Angeles, CA*
  10. Manhattan+Brooklyn, NY
  11. Miami, FL*
  12. Minneapolis+St. Paul, MN*
  13. Portland, OR*
  14. Seattle, WA

Amazon’s Fulfilment Centre Assets

To provide such a wide range of services, Amazon has these different components in its logistics infrastructure:

  • Fulfilment Centre (FC) – A large warehouse (typically 1m+ sq-ft) that receives items in bulk, stores them and ships them out individually.
  • Sortation Centre (SC) – After the shipping debacle of 2013, Amazon started adding SCs that allow them to pre-sort packages for carriers like UPS and FedEx and this has also helped them with their Saturday and Sunday delivery via USPS.
  • Redistribution Fulfilment Centre (RFC) – Amazon is now getting enough FCs that in some regions they are opening B2B (pallets) facilities to feed into individual FCs in the region.  For example, in California they now have ONT8 which is a RFC for the other ONT and California FCs.
  • Prime Now hub (PN) – Sometimes a FC is close enough to a metro to support Prime Now (e.g. Atlanta).  In other regions, Amazon opens a specific Prime Now hub (e.g. Chicago, IL).

Amazon’s Non-Domestic FC Footprint

Here is an interactive map of the non North American (non-domestic in Amazon speak) Amazon FC footprint.

 

By our calculations, Amazon now has 69 facilities outside of North America.

What non-domestic facilities did Amazon add since our last post?

In our 2014 post we did include a lot of the FCs being built in India and that is still a huge investment area in 2015 and beyond.  Aside from India, the biggest region that is receiving investment is Eastern Europe, mostly in Poland.  After Poland, the UK has a new FC and a new Fresh facility this year.  Finally, Amazon is rounding out it’s Chinese facilities with a smaller facility (potentially a local hub/Prime Now type facility) in the Huangpu Development Zone.

Eastern Europe: (3)

  • WRO1 – Part of 3 Poland FC’s announced that launched in October 2014
  • POZ1 – Part of 3 Poland FC’s announced that launched in October 2014
  • WRO2 – Part of 3 Poland FC’s announced that launched in October 2014

UK: (2)

  • LBA2 – 250K square foot FC in the UK announced in September 2015. Expected to open later this Autumn
  • M25 – Amazon Fresh facility for London that was announced in August 2015

China: (1)

  • CAN4 – 86K square foot facility that opened in November 2014 in Huangpu Development Zone

Amazon’s North American FC Footprint

By our calculations, Amazon now has 104 facilities in North America.  The interactive map below shows all of the Amazon locations.  Note that each Amazon facility has its own ‘code’ which is usually three letters (Amazon tends to borrow airport codes) and a number that is usually the sequence the FC was built. For example, IND3 is the third FC build in or near Indianapolis, IN.

What did Amazon add in North America since our last post?

It’s interesting to see where Amazon is investing by watching how they are building out their fulfilment logistics network.  The region with the largest investment is the North East with a new FC and SC in NJ, a new SC in CT, a large FC in the Boston, MA area and a SC in PA.

The Midwest is also receiving a lot of investment with five new facilities.  The Chicago area received two FCs and a SC and the Twin Cities are getting two large FCs.

The West Coast, South East, South West and Mexico have all received relatively smaller investments this past year.

Since our last report here are the FCs that have been added:

USA – Northeast (5)

  • ACY5 – (Swedesboro, NJ) 200K square foot SC that opened in October 2014
  • BLD5 –  (Wallingford, CT) Announced in August 2015, sortation centre
  • BOS3 – (Fall River/Freetown, MA) Million square foot FC announced March 2015. Expected to open in summer/Autumn of 2016. 
  • MDT1 –  (Carlisle, PA) 7K facility that opened in early 2015. Adjacent to other Carlisle, PA FC
  • (TBD) (Carteret, NJ) – Amazon Fresh FC announced in May 2015. Expected to open soon

USA – Midwest (5)

  • MDW2 – (Joliet, IL) Announced in August 2015. First FC/warehouse in the state of Illinois 
  • MDW3 – (Goose Island, IL) Opened in July 2015 as a Prime Now hub for Chicago metro area
  • MDW4 – (Joliet, IL)
  • MSP1 – (Shakopee, MN) 820k square foot FC announced in April 2015. Expected to open early 2017
  • MSP5 – (Shakopee, MN) Second Shakopee facility announced in March 2015. No timeline of launch date announced yet.

USA – West Coast (2)

  • ONT8 – (Moreno Valley, CA) opened in August 2014 as a redistribution centre within the larger Moreno Valley FC (Ont 6)
  • ONT9 – (Redlands, CA) Opened in October 2014. 700,000 square foot facility

USA – Southwest (1)

  • (TBD) San Marcos, TX – New 885K square foot FC announced in August 2015

USA – Southeast (1)

  • MIA5 – (Miami, FL) Sortation that opened in October 2014

USA – Mexico

  • MEX1 – First Mexico FC announced in November 2014

Conclusion

Putting it all together, Amazon has 104 North American plus 69 non-domestic facilities bringing the total up to 173 facilities worldwide.  That’s an increase of 15 domestic plus 6 non-domestic = 21 or 14%.  From a sq-ft standpoint, that’s well over 115m sq-ft worldwide under management.  While impressive this does represent a slow-down from a percentage standpoint.  Our view on this is that in addition to building new facilities, Amazon is investing in automation, FBA fee structure, retooling/renovations and other areas to get more performance out of the existing infrastructure.  Together, the new facilities and improvements prepare Amazon to handle the 25-35% y/y growth that their 3P/EGM/FBA businesses are enjoying.

Amazon is very far ahead of any other retailer in the build out of e-commerce oriented logistical infrastructure.  Amazon now has the ability to put millions of products miles away from a large portion of the US population.  In a world where selection/assortment, fast/inexpensive shipping matter to the consumer, Amazon has built a huge competitive moat that is 10X larger than the nearest competitor.

As Amazon pushes down delivery times and costs, with programs like Amazon Prime Fresh, same day delivery, and next hour delivery via Prime Now, other retailers are going to struggle to come close.  Buy online, pick-up in store (BOPUS) and Ship from Store are interesting innovations, but they do not offer nearly the same level of selection and efficiency that Amazon’s logistical network provides.

Amazon becomes a package carrier?

Long-time Amazon followers are familiar with the Amazon playbook:

  1. Test a new innovation in a region or with a small set of consumers.  If consumers love it, scale, if they don’t shut it down.
  2. Keep scaling it globally
  3. Once at scale, to extract expenses, open up the infrastructure to third parties to ‘share the expense’.  AWS, FBA, etc. are examples of this.

As Amazon builds out the logistical network, we are hearing more and more stories of Amazon employees delivering packages to businesses and houses.  It seems that Amazon is doing the math and is cutting out third party carriers like UPS and FedEx in Prime Heavy areas.  Colin Sebastian @ Baird Equity research had a note out Monday morning that is a must read if this is an interesting topic to you (available here).  Colin speculates that this is a $400b industry ripe for disruption.  He even goes as far to call it Amazon Transportation and Logistics. Imagine one day that after receiving your daily Prime+Fresh deliveries, you ship packages to your Aunt in Chicago on the Amazon ATL network for $3/package nationwide.

I’ll close that thought with this famous Jeff Bezos quote: “Your margin is our opportunity.”

 

This post was written by Scot Wingo and Jordan Smith. Scot is Co-founder and Executive Chairman of ChannelAdvisor Corp and Jordan is a fearless researcher of all things FCs and a Corporate Communications Specialist @ChannelAdvisor.

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