Dusseldorf Amazon boss Andy Jassy sounded the alarm back in the fall. In view of the worldwide delivery bottlenecks, he announced additional costs in the billions – also due to massive investments in his own logistics.
The fourth quarter then showed the full extent. The operating result halved to 3.5 billion euros, without the profits from the cloud business it would have been negative. Sales rose by just nine percent – a disaster for the platform, which has been spoiled by success. And a survey by the consulting firm Oliver Wyman revealed that every second consumer could not find the product they wanted there during the Christmas trade.
An improvement in logistics processes should now make the retail leader more resistant to problems in the supply chain, as became clear in the corona pandemic. “This has once again sharpened our awareness of reliability in the chain,” says Norbert Brandau, regional director responsible for the Amazon logistics centers in northern and eastern Germany, in an interview with the Handelsblatt. “We also had to contend with challenges.”
A still unpublished study by the logistics professor Christian Kille from the Würzburg-Schweinfurt University of Applied Sciences commissioned by Amazon shows the general uncertainty among customers. In a survey of 1001 German citizens, the participants named “reliability” as the first thing when asked what they value most when ordering online.
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Even the expert Kille calls this “amazing” in his study. The speed of delivery, which used to be the most important criterion for customers, only came in fourth place – just behind the ease of processing and the price. This is also leading to a rethink at Amazon, once the pioneer of delivery on the day of the order.
Amazon invests in ships, airplanes – and in people
The company is therefore not only investing in planes, ships and trucks worldwide, the delivery infrastructure in Germany is also being rethought. “It is extremely important to react to the increasing volatility,” emphasizes Amazon manager Brandau. “You have to invest in technology and people to further improve the interaction between the two areas.”
One example of this is the Amazon warehouse in Graben near Augsburg, which reopened in September 2021 and in which the company has invested 150 million euros in conversion. It was not only converted to transport robots. At the same time, the number of employees was increased by 250.
The process in the online retailer’s warehouses should become more reliable and secure.
(Photo: imago images / Cord)
When Brandau started at Amazon 20 years ago, the goods for the customers in the warehouse were still put together with paper and pencil, usually books or DVDs. Today, a German Amazon warehouse has up to 17 million different items, and this complexity can no longer be managed without the appropriate technology.
The boom in online trading during the Corona period dramatically accelerated this development. “In 25 years we built up a delivery infrastructure that we then had to double again within just 24 months,” Amazon boss Jassy recently described the current challenge in an interview with “Time” magazine.
According to the Federal E-Commerce and Mail Order Association, goods worth almost 100 billion euros were ordered online in Germany last year. According to the survey by the Würzburg-Schweinfurt University of Applied Sciences, every second consumer has increased their online orders. The shipping volume increased accordingly by 400 million to more than four billion packages per year.
GfK expert: “The supply chains have become vulnerable”
But the existing infrastructure in the entire industry can only insufficiently keep up with this boom. “Supply chains have become very volatile and vulnerable, which has a significant impact on the availability of goods,” observes Tatjana Wismeth, supply chain expert at market researcher GfK.
“The gaps on the shelves and the problems in the supply chains will be with us throughout the year,” warns trade expert Rainer Münch from Oliver Wyman. “This complex chain has so many sensitive points that it will probably take some time before it settles down again.”
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For this reason, many retailers are increasingly setting new priorities – from delivery speed to more reliability. “We can see that the planning goals are being extended significantly,” explains GfK expert Wismeth. “Companies are rethinking the principle of just-in-time delivery and creating more decentralized storage and delivery structures.”
More and more online retailers are securing large storage areas. The company Relaxdays, for example, which only put a new logistics center near Halle into operation last summer, now wants to rent a further 50,000 square meters in Schkeuditz in Saxony. The luxury fashion retailer Mytheresa is also building a logistics center there. After record sales, the mail order company Baur is also investing 150 million euros in a new, fully automated warehouse.
This dynamic in the industry and the increased expectations of customers put even the online leader under pressure. “We are creating more and more hubs so that we can adjust the flow of goods at any time,” says Amazon manager Brandau.
Transport robots support the Amazon employees
Amazon’s 18th logistics center in Germany will soon be opening near the town of Hof in Bavaria. This is also completely equipped with robots. Nevertheless, a thousand new employees are hired there.
Transport robots lift the shelves and drive them to the employees. There, the compartment containing the right article is illuminated. The deployment planning of the employees is computer-controlled, they have to change their activities regularly in order to avoid one-sided ergonomic strains.
However, the process should not only become more reliable and safer in the warehouses. “Right from the moment a product is offered on the website, the capacities for the entire chain have to be planned end-to-end,” explains Brandau. “Only then can the customer rely on us being able to keep our delivery promise.”
During the peak phase of the corona pandemic, even Amazon had to stop delivering numerous items for weeks because the transport and storage capacities were no longer sufficient. Many marketplace retailers, for example for fashion, were no longer allowed to deliver supplies to the Amazon warehouse.
Amazon boss Jassy doesn’t want to experience anything like that again in the future. “It will be expensive for us in the short term,” he commented on the high investments, “but it is the right prioritization for our customers and partners.”
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