Amazon has to go through all the products you’ve ordered to ensure they are delivered correctly

You can buy one of almost anything on Amazon, and Amazon will deliver it to your doorstep within a day or two. This seems magical.<br><br>The reality is that Amazon stores all your stuff in a warehouse in Kent, Washington, called MSH3 until it’s time to deliver the stuff to you. When there is enough demand for your item and the inventory in transit, Amazon will send the stuff from the warehouse in Kent, Washington to you. <br><br>There are several problems with this process, including:<br><br>1. What if you live on the East coast and ordered a bunch of stuff from sellers who are based in Asia?<br><br>2. What if the item you want is not very in demand?<br><br>3. What if you want to return an item and it’s been sent from Washington to California?<br><br>Amazon has to solve this problem with the same speed, reliability and quality that it has today. <br><br>This is very difficult to achieve, because Amazon has to keep every single item you’ve ever ordered in stock, for every other customer who’s ever ordered anything, in case you need to return the item.<br><br>One possible solution is to do more like Walmart, which relies on just-in-time manufacturing and logistics to get products to the shelf at the moment that a consumer wants to buy it. Amazon tried this in 2014 and called it “Prime Air”, and it worked great for the companies that were partnered with Amazon for the test. They saw big increases in customer satisfaction, and a big increase in sales.<br><br>However, this approach failed to work for Amazon because most consumer goods companies are not set up to do this. <br><br>The next approach that Amazon tried was to use inventory located in fulfillment centers closer to the customer, as opposed to the massive fulfillment center in Kent, Washington. This would have allowed Amazon to offer free two day shipping without storing every single item ordered by every single customer in a massive fulfillment center in one place. <br><br>However, this strategy was not cost-effective. Most customers ordered a few items at a time and shipped them to different places. So, if you ordered one pair of shoes, one book and one kitchen gadget, you would want each item shipped to the place where you planned to wear the shoes, read the book or use the kitchen gadget. <br><br>If all of the inventory is located in a massive fulfillment center in Washington state, Amazon can ship everything from there at once, store all of the inventory in the warehouse until it’s time to ship and save a lot of money on storage, staffing, shipping and transportation.<br><br>If Amazon stores the inventory in the fulfillment center closest to the customer, then Amazon has to pay for more storage space, more people to stock and restock inventory in every single fulfillment center, and more fuel and vehicles to ship every single item from the fulfillment center closest to the customer. This makes the service more expensive to provide to customers. <br><br>Another approach that Amazon tried was to allow consumers to choose the shipping speed that they want for each item. If you want a pair of shoes to be shipped overnight, you pay a premium. If you want your kitchen gadget shipped at a slower speed, you pay less for shipping. <br><br>Amazon found that only 13% of customers are willing to pay extra for same-day shipping. And, 67% are willing to wait 3 days for delivery if they don’t have to pay extra for shipping.<br><br>If Amazon were to allow customers to choose the speed of delivery for every single item they purchase, this would lead to a lot of waste and inefficiency. What if you want something delivered slowly and your spouse wants it delivered quickly? You can’t do that. <br><br>So, Amazon has to find a solution that works for everyone, including the consumer, Amazon and every supplier. <br><br>What Amazon is trying now is called “Delivery from the Depot”. This approach is used by several companies, including Target and Walmart. <br><br>When you order something from Amazon, you have a choice of shipping speeds, but the item will be shipped from the fulfillment center closest to you. For example, if you order something from Amazon and you are located in Colorado, the item you ordered might be shipped from a fulfillment center in Denver, instead of the one in Kent, Washington. <br><br>Amazon uses drones to check on the inventory in the fulfillment centers, to make sure they have the right amount of inventory to meet the demand from customers who have chosen that fulfillment center. <br><br>The problem with this approach is that it leads to waste and inefficiency. Imagine you live in Colorado and you order something that was manufactured in Asia and is currently sitting in the fulfillment center in Kent, Washington. You chose same day shipping, but that item is 4,796 miles away from where you are, and 5,466 miles away from the nearest drone. <br><br>Amazon will check the inventory in the fulfillment center in Kent, Washington. They will see that they don’t have enough inventory in that warehouse to meet the demand from every single customer who has chosen same day shipping and who is getting their item from that warehouse. So, they will order more inventory for that warehouse, pay for extra shipping speeds to get it there faster, check on the inventory every single day using the drones until they have enough to meet demand, ship the item to you from Washington DC, and charge you $5 for standard shipping because they don’t have enough inventory to meet demand where you are. <br><br>You could drive to Kent, Washington faster than this item could ever get to you via air, which is pretty ridiculous.<br><br>What we see here is Amazon trying to solve the coordination problem, the inventory problem and the waste problem that arises when every single item is stored in one place, and the speed of delivery cannot be chosen by the customer. <br><br>If we are honest, we should admit that the speed and reliability of delivery from Amazon is quite impressive. It’s a very complex logistical problem that Amazon has solved extremely well.