

Amazon Takes a Big Step Toward Making Its Own Deliveries - denzil_correa
http://www.wired.com/2014/09/amazon-takes-big-step-toward-competing-directly-ups/?mbid=social_twitter

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zrail
This article has a bit more detail on how the sortation centers actually work:

[http://multichannelmerchant.com/opsandfulfillment/warehouse/...](http://multichannelmerchant.com/opsandfulfillment/warehouse/amazon-
open-15-sortation-centers-2014-05082014/#_)

tl;dr: They move packages from their distribution centers to one of these
"sortation centers" (they may be co-located, it's hard to tell from either
article). From the sortation center they truck packages directly to the USPS
distribution center (DDU) closest to the customer, and then the USPS carries
the package on the last leg to the customer. This means they bypass
UPS/FedEx/DHL/OnStar in favor of USPS's much cheaper non-express rates because
it sounds like once a package is at the DDU it will be in the customer's hands
same or next day.

Edit: I believe this is how FedEx SmartPost works as well. FedEx does the
merchant -> DDU leg and then USPS takes it the rest of the way.

~~~
saosebastiao
That is exactly how SmartPost (and UPS' SurePost) works. It really is
magnificently expensive to do the last mile, and economies of scale _really
matter_. The USPS has the last mile down like no other company in the country,
and so for items that fit within the USPS dimensional categories, it is often
less expensive for it to go through the USPS' last mile than it is to add
delivery density to their own last mile.

~~~
enobrev
Interesting article, thanks for that.

An anecdotal addition, but FedEx SmartPost can be incredibly annoying
depending on how well the local PO works. In some instances, FedEx tracking
would mark a package as "delivered" when it was just dropped it off at the
local post office. When I was living in Brooklyn, this basically meant I was
going to get a pink slip on my mail box within the next 3 days (even though I
work from home, they NEVER rang the bell). And since, apparently, none of the
local carriers were delivering packages in the neighborhood, this meant I was
going to have to wait in a line of disgruntled neighbors with pink slips
dangling from clenched fists for at least half an hour and often twice that.

Because of this, I would generally avoid FedEx when it was an option. I
believe UPS does this as well with some category of their service, but I
haven't dealt with it in my own experience.

I don't mean to say that all of USPS is broken. I'm generally impressed by the
system as a whole. When I was living in Seattle, the service was superb, and
now that I'm in Chicago, it's somewhere in between. I'm just saying that the
service isn't necessarily consistent, and has, in the past, led me to find
other options.

~~~
fibonachos
SmartPost is a risky proposition for online sellers like the one I work for.
Feedback is important, and a couple negatives at the top of [popular review
site] can hurt for a while. Looking at ours, there are some legitimate screw
ups in there, but 4 out of 5 negatives are slow shipping complaints, all of
which can be attributed to the local PO sitting on the package for 2-3 days
before sending it out for delivery.

~~~
amputect
Agreed. Heck, I cancelled my Amazon Prime subscription because of SmartPost. I
don't do that much shopping online anyway, and the free two-day shipping was
consistently actually 3-5 day shipping.

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discardorama
It's about time. I bought something from Amazon, and had to return the first
two packages that came. The first one's sealing tape (the paper one, typically
advertises Fire phone) had popped because of how hard it had been dropped. The
second one was torn, and in such a bad shape that when I went to a UPS
location to return it as-is, they refused to accept it, even though they had
delivered it in the first place! (Note: both had been delivered to an Amazon
Locker, so I couldn't refuse delivery).

And then you see things like these daily:
[http://i.imgur.com/cYaZU4y.jpg](http://i.imgur.com/cYaZU4y.jpg)

I have a lot more trust in USPS than UPS. Yes, there may be the occasional
rogue, but in general, they have been much better. I know the local mail
carrier, and it feels a lot more personal.

~~~
silencio
I have a lot of trust in USPS too, but ... I feel like USPS is a temporary or
secondary measure until Amazon ramps up their own delivery service in big
cities. Part of the appeal of DIY delivery is same day/next day and Sunday
service, and USPS can't necessarily offer that.

In SF, Amazon already does some of the last mile deliveries, and I haven't
been impressed so far. A blender chucked over a ~8 foot gate so it busted the
box inside despite a ton of packaging. A package that was left _outside_ the
gate - when I live right on Market Street (if you don't know local geography,
it's one of the biggest streets in SF)... that was stolen before I even
realized it was delivered. Bonus points because it was a birthday gift but
Amazon wouldn't rush the replacement package showing up a day late. One
package carefully put in front of the basement door, almost missed. Another
wedged through the gaps in the gate and damaged. One time a person rang the
doorbell and just dropped the box in front of the gate when they heard the
buzz. Did I mention I've been home for all these packages and have no idea why
people can't just ring the doorbell and wait 10 more seconds? Lastly, I have
an order going to a commercial address and I'm worried they might try Sunday
evening delivery instead of a saner time like 9am on Monday for all other
carriers.

USPS works because the same people tend to work the same routes and end up
knowing a lot about when and where to leave things - I also know the UPS guy
for my address and when he's doing deliveries, it works flawlessly too. I'm
worried that Amazon isn't planning for something like that.

~~~
cowsandmilk
> Part of the appeal of DIY delivery is same day/next day and Sunday service,
> and USPS can't necessarily offer that.

This reminded me, has anyone actually had a package from Amazon delivered on
Sunday by USPS?

[http://www.nytimes.com/2013/11/11/business/postal-service-
an...](http://www.nytimes.com/2013/11/11/business/postal-service-and-amazon-
strike-deal.html)

~~~
goodcanadian
Yes. My most recent purchase was delivered on a Sunday. I was surprised
because I didn't know that was a thing.

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chdir
Interestingly, this is a problem that Indian e-commerce players tackled early
on but probably due to different business dynamics. There's no dearth of
courier services but none of them has the mindset of providing A-class
customer experience. As a result, most of the top players handle the logistics
themselves in many cities. In fact, half of their employees are associated
with last mile deliveries. The result is a delightful customer experience with
the top 3-4 players. Returns/exchanges are a breeze too. Time will till if it
scales well while maintaining good margins.

~~~
spdy
Isn't this always the case if you have access to cheap labor?

But do they tap into the resource of dabbawala`s[1] as well? That`s one of the
most sophisticated end to end delivery system i have ever seen.

[http://en.wikipedia.org/wiki/Dabbawala](http://en.wikipedia.org/wiki/Dabbawala)

~~~
chdir
That's not my point. They built the logistics to provide good customer
experience despite having tonnes of traditional delivery/logistics options
available. They didn't do it just because they can, they built it because they
had to differentiate themselves. And dabbawalla is an entirely different
entity. They have shared ownership of the food delivery network. This is not
going to be the case with e-commerce logistics.

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DIVx0
A couple months ago I was contacted by Amazon recruiters, they are/were hiring
heavily for a new 'logistics' operation. The recruiter would not say a whole
lot except that they were working on a delivery network.

So it seems they have the physical stuff in place but now they're working out
on how to do the 'last mile' as it were.

The work sounded really interesting, I did not pursue because I did not want
to move to Seattle.

~~~
mabbo
There's also office in Toronto (where I'm sitting), the Bay area, and a lot of
other cities. It's a neat place.

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serve_yay
I have a relative who works at the FedEx Ground HQ, they told me Amazon keeps
hiring away their executives. Unsurprising of course, especially if you know
anything about what it's like in there (typical TPS reports type hellish
corporate environment). I mean I'm sure Amazon isn't all peaches and cream but
they at least seem better than that.

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ErrantX
Amazon have been doing this for a while in the UK. Opening local distribution
centres and using their own van. A lot of items I buy come from there now, a
suprisong amount. I bought some tassimo capsules the other week and they
arrived same day, in fact they arrived 2 hours after ordering - free delivery.

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baldfat
USPS always just leaves a note that they will try again to deliever WHEN I WAS
HOME AT THE TIME. 50% of items from USPS always gets returned to sender due to
unavailable times. UPS and FEDEX seem to deliver my items 90% of the time.

~~~
cowsandmilk
that has a lot more to do with your local mailman and delivery guys than the
overall organizations. The UPS guy absolutely refuses to leave packages, won't
buzz my apartment, misses when I sign the sticky note saying he can leave the
package, etc. I regularly have to rent a zipcar to drive to the UPS
distribution center and pick up my packages.

~~~
MichaelApproved
Have you complined to ups or Amazon?

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Someone1234
I think Amazon did do a lot to help that issue last year by, frankly, giving
customers a deadline by which packages won't arrive by Christmas.

It wasn't subtle either, it was in big bold letters (they might have sent out
an email too) that more or less said "Order by X or it won't arrive by
Christmas day."

It is both interesting and scary if Amazon moved into the delivery business.
It both seems like a natural progression of their business model but also
scary in the sense that it might drive one of the other delivery companies out
of business and result in even more Amazon dominance.

~~~
CocaKoala
Wasn't last year the year that a bunch of people ordered by the deadline
posted by amazon, but still didn't get their packages in time? A friend of
mine is a sales manager for UPS and I recall him having just a terrible,
terrible December. They were all hands on deck for weeks, even the salespeople
were out on trucks delivering packages to try and get stuff to people on time.

~~~
brudgers
UPS and USPS have been all hands on Dec. for many many years. Both ramp up
staff with casual employees for the holiday season. I have a buddy who drives
for UPS. He typically ends his route near or after 9pm during crunch time. The
overtime pay makes up for it, somewhat.

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tfinniga
In the UK I've had packages delivered by "Amazon Logistics" before.

~~~
clarkdave
I'm getting Logistics more often and haven't had any problems yet. It seems to
be evolving fairly quickly - they now send me emails when a delivery has been
signed for which they didn't do a few months ago. I hope that one-hour
delivery windows (like DPD and a few others offer) will be the next step.

I have asked a few Logistics drivers what the deal is and they seem to just be
contracting with their own unbranded van, so mileage probably varies a lot.

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tfederman
At this point I already get my stuff from Amazon fast enough, and I don't even
have a prime account. I'd rather see Amazon improve working conditions for its
employees (if what that I've read about that is true) than chase this
obsession with feeding my desire to get more material things as fast as
possible.

Ironically their focus on customer satisfaction has started to make me feel
dirty about buying from Amazon.

~~~
Igglyboo
Most of the employees in their warehouses are actually contractors and not
employed by Amazon, IIRC it's like 90% contractors in the warehouses.

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chiph
Amazon should team up with someone like Uber X or uShip to do premium delivery
services.

I'm thinking of high-dollar purchases (those that are $25k and up) where
getting your package delivered by a guy in brown shorts doesn't really add to
the experience. But someone in a suit and a really nice car or SUV could make
the impression you want.

~~~
AJ007
Team up or undercut? Amazon doesn't need to make any margin from delivery. The
end game here is pretty clear. You don't go to retail stores for commodity
items any more. This is bad news for Walmart, Walgreens, and CVS.

Apparel will remain safe as long as consumers buy clothing that doesn't fit
perfectly.

~~~
cpwright
Apparel isn't safe when you get free shipping both ways. Or even free shipping
one way. I know several women who purchase much more online and return half of
it than they do in a store. One of them says going to a store is pointless,
because they often don't stock plus sizes anyway, but have them online.

~~~
Theodores
Maybe if she walked or cycled to the stores as regularly as she shops online
then she might not need those plus sizes.

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mwsherman
I’d like to see an analysis of how close a carrier needs to be to feasibly do
the last mile delivery. How far is the typical Fedex delivery from its points-
of-presence? How many POP’s does Fedex have?

How many people are within reasonable last-mile distance of an Amazon POP?

~~~
saosebastiao
I won't comment on Amazon for NDA reasons, but in terms of feasibility of the
last mile, the answer is "it depends". Sorry to disappoint you.

The following factors can have orders-of-magnitude effects on the costs of the
last mile.

* Cycle Times (the time from route start to route finish). If you offer short cycle times, you lower your delivery density (distance between deliveries).

* Market Share. The more customers you have, the higher your delivery density.

* Range. The bigger the delivery area, the further you have to travel at the beginning and ends of delivery cycles. Short cycles with large ranges can add up to very large dead weight losses.

* Street patterns. Street patterns can ease or severely inhibit efficient routing. In a town full of cul-de-sacs, you have almost no flexibility to optimize your routing. In a pure grid, you can optimize extremely well.

* Vehicle requirements. Smaller vehicles are extremely nimble, aren't subject to the same traffic considerations, and don't have problems with parking, ingress, or egress. Larger vehicles can be much more difficult to move around. This is actually a huge benefit to companies like Taobao, and pizza delivery, because they can use motorcycles effectively. Refrigerator Delivery, not so much.

And to compound that, labor and fuel costs are a multiplier for the factors
mentioned.

~~~
pinkyand
What about deploying parcel lockers ? is it just not perceived as comfortable
enough by people ? or the economics aren't that good ?

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jonknee
Seems like it would be moderately easy to take off a nice chunk by first
rolling out Amazon Direct Delivery (or whatever) to large buildings in urban
areas. You can probably fill a truck between a couple condo and office towers.

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tkinom
They knew exactly for each city, zip code how many folks has order each week,
each Christmas season.

When the cross over point reach for their own profitability, they just turn on
the switch for that part of the system.

Nice!

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cm2012
This has been brewing for years. Amazon controls a ton of the rest of their
processes, and with Amazon Fresh experiments and the huge logistical network
it is inevitable.

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adultSwim
Vertically integrated monopoly

~~~
Igglyboo
Literally everything Amazon sells, other than stuff they make themselves like
the Kindle, can be bought somewhere else.

