In an effort to reduce how far packages travel and improve profitability, Amazon.com has optimized its logistics network, according to a report from the Wall Street Journal.
The company’s overhaul has already cut delivery times, improved inventory management and altered search results customers see on its website, according to executives, analysis and sellers who list their products on Amazon.
Amazon expanded rapidly during the COVID-19 pandemic, adding warehouses and staff to keep up with bustling demand in the logistics industry. However, as the technology and logistics industries have slowed down in the first half of 2023, Amazon has implemented significant cost-cutting measures, including laying off roughly 27,000 employees since November.
Revamping its delivery network appears to be the next step in Amazon’s plan to slash spending. The WSJ report noted that Amazon has created eight self-sufficient shipping regions in the past year, moving away from its previous nationwide delivery that would send products across the country. Leveraging its network of some 1,000 facilities throughout the U.S., Amazon now doesn’t need to move products outside of their region, the report said.
The company sees an opportunity to improve profitability by limiting how far packages travel to reach their destinations.
“When we offer faster speeds, customers are more likely to buy something,” Amazon Vice President of Transportation Udit Madan told WSJ. “They come back more often to shop with us.”
Amazon has rolled out its new strategy over the past few months and has already seen an impact. About 76% of products customers order are being delivered from facilities within their region, compared with 62% a year ago, according to Madan.
“This isn’t something we could have easily done in 2019 because we had a much more sparse network,” he said. “The doubling of footprint really allowed us to have a lot more facilities that were closer placed to customers.”