Amazon warehouse with overlaid text 'Grown Concerns Over Amazon', indicating logistics challenges.

Amazon Announces Dramatic Cutbacks Amid Growth Concerns

by LJM Group

Citing sluggish sales growth, Amazon is reportedly abandoning plans to construct dozens of warehouse facilities around the United States. Meanwhile it further rejected plans to assemble new stockroom offices across the country, amid canceled lease deals under development. As an additional cost-cutting measure, Amazon recently announced plans to lay off 10,000 employees, estimated to be 3% of their corporate employees. The Seattle company has also been seeking to sub-lease at least 10 million square feet of warehouse space, again citing over-expansion concerns and lowered sales estimates.

The cuts were announced after the company realized that it over-hired during the pandemic, when e-commerce and social media companies experienced a massive boom in demand. Not only was it the most profitable era on record for the company, but Amazon also doubled its workforce from the beginning of 2020 to the end of 2021!!

Much like others that thrived during the first year of the pandemic, Amazon has not done as well in the last year, becoming the first company to lose $1 trillion in market value. When homebound shoppers stampeded online during the pandemic, Amazon responded by doubling the size of its logistics network over a two-year period, a rapid buildout that exceeded that of rivals and partners like Walmart, UPS, and FedEx. For a time, Amazon was opening a new warehouse somewhere in the U.S. roughly every 24 hours. WOW!!

Amazon’s Chief Executive Officer Andy Jassy told Bloomberg News that the company decided in early 2021 to build toward the high end of its forecasts for shopper demand, erring on the side of having too much warehouse space rather than too little. Jassy has pledged to unwind part of a pandemic-era expansion that encumbered Amazon with a surfeit of warehouse space and too many employees. The company has typically controlled its ranks of hourly workers by leaving vacant positions open, slowing hiring and tightening disciplinary or productivity standards. But warehouse closings are also part of the mix, and workers are bracing for more. During the second quarter, Amazon’s workforce shrank by roughly 100,000 jobs to 1.52 million, the biggest quarter-to-quarter contraction in the company’s history.

The logistics research firm MWPVL reports that the web-based retailer is suspending plans to open 42 offices across the US, which would have added nearly 25 million square feet of usable warehousing service space. The firm says that Amazon has likewise postponed opening 21 different areas and dropped a few European ventures, for the most part in Spain. 

The company nevertheless maintains that they have many customer service and conveyance stations under development and are advancing rapidly around the world. “Amazon is a powerful business and we are continually investigating new areas,” company representative Maria Boschetti told Fox News. “We gauge various variables while choosing where to foster future locales to best serve clients. It’s normal as far as we’re concerned to investigate numerous areas all the while and change schedules in light of needs across the organization.” 

Amazon posted its slowest development rate in over 20 years in July, though overall posted results were better than anticipated, which made the stock leap 12%, the New York Times announced. “Despite continued inflationary pressures in fuel, energy and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” Jassy said, in explaining cutback decisions. 

As an additional efficiency measure, Amazon also reported that it would start subleasing some distribution center space as internet shopping numbers have been dialing back. Representative Alisa Carroll said subleasing permits the organization to “ease the monetary commitments related with a current structure” that no longer addresses its issues. The report comes after it was announced that the company is shutting two conveyance stations in Maryland that use in excess of 300 individuals. The Maryland closings are part of an initiative to shift work to more modern buildings, Amazon says. “We regularly look at how we can improve the experience for our employees, partners, drivers and customers, and that includes upgrading our facilities,” company spokesperson Maria Boschetti said. “As part of that effort, we’ll be closing our delivery stations in Hanover and Essex and offering all employees the opportunity to transfer to several different delivery stations close by.”

Given the emerging level of unprecedented market volatility and resulting challenges within the shipping industry, more than ever companies need to effectively make evidence-based decisions in business intelligence applications, making logistics analysis a top priority. In a post-COVID environment, it becomes even more critical for companies to invest in specialized data and analytics that provide the foundation for advanced business intelligence. 



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