Having claimed the title of America’s largest delivery service, Amazon has targeted last-mile shipping as its next Holy Grail.

Amazon now matches or exceeds the delivery volume of both UPS and FedEx, handling an estimated 10.6 billion packages in 2023. As highlighted recently by Amazon CEO Andy Jassy, “We took a fulfillment center footprint that we’ve built over 25 years and doubled it in just a couple of years.” Now, they are faced with meeting the demands of this extreme last-mile delivery growth.

Amazon’s last-mile network refers to the final stage of the delivery process, where packages are transported from a local fulfillment center or delivery station directly to the customer’s doorstep. The company has invested heavily in building and optimizing its last-mile delivery operations to ensure fast and efficient package delivery. To date, key aspects of Amazon’s last mile network have included:

Delivery Stations – Amazon operates numerous delivery stations strategically located in urban and suburban areas. These stations serve as hubs for sorting packages and dispatching them for local delivery.

Flex Drivers – Amazon Flex is a program that allows independent contractors to deliver packages using their own vehicles. Flex drivers, similar to Uber or Lyft drivers, use the Amazon Flex app to receive delivery routes, pick up packages from delivery stations, and deliver them to customers.

Delivery Service Partners – Amazon has established partnerships with independent delivery companies to handle last-mile deliveries. These companies operate their own fleets of vehicles and hire drivers to fulfill Amazon’s delivery requirements. Amazon provides support, training, and technology to these partners, highlighting the need for more precision in targeted management strategies, to ensure consistent service quality.

More recently, the company introduced Amazon Prime Now, a service available in select cities that offers ultra-fast delivery, often within one or two hours. It utilizes local warehouses, called Prime Now hubs, to store commonly ordered items and employs dedicated delivery drivers to fulfill orders promptly. This service is designed to complement Amazon Lockers, which provides additional convenience through the use of secure self-service lockers in various locations, such as retail stores, apartment buildings, and public spaces. Customers can choose to have their packages delivered to a nearby locker and retrieve them at a convenient time.

Amazon has also expanded its own logistics capabilities through the Amazon Logistics network. It includes a fleet of delivery vehicles, including vans and trucks, operated by Amazon employees. This initiative allows Amazon to have more control over the entire delivery process and reduce reliance on third-party carriers. Amazon has taken further steps to leverage advanced technologies and automation to optimize its last mile operations, including innovative solutions like drones and robots for future delivery possibilities.

As technologies advance, the ability for customers to analyze route optimization algorithms to streamline delivery routes becomes critical, along with real-time tracking to monitor packages, using cloud-based applications that can provide integrated data of ALL parcel activity in a single dashboard.

A New Science?

Emphasizing its commitment to last-mile data collection and management, the company has also partnered with universities to develop research demonstrations dedicated to the topic. At MIT’s Center for Transportation and Logistics, they sponsor the Amazon Last Mile Routing Research Challenge, asking participants to leverage real-world routing operations data to find new and better ways to solve real-world routing problems using AI methods and applications.

It remains unclear the impact Amazon will ultimately have on smaller shippers as it pulls away from traditional services, using AI to push products that are in same day/next day footprint to utilize their own local carriers, instead of UPS, who may be forced to raise rates to cover their costs and seek greater efficiencies. Nevertheless, they are expected to maintain leadership by leveraging a combination of in-house resources, partnerships, and advanced technologies to ensure delivery dominance.

References

Bowman, J., Amazon CEO Predicts More Growing Pains for His Company This Year.

February 2023. The Motley Fool. https://www.fool.com/investing/2023/02/17/amazon-ceo-predicts-more-growing-pains-this-

year/

Merchán, D., Arora, J., Pachon,J., et.al., 2021 Amazon Last Mile Routing Research

Challenge: Data Set. September 2022. Transportation Science 0(0). https://doi.org/10.1287/trsc.2022.1173