Tag: Amazon

OM in the News: AI and Amazon’s Army of Workers

Amazon uses software to manage in a way that’s unlike almost any other company, reports The Wall Street Journal (Feb.6-7, 2021). Whether they’re driving a delivery van or picking items from shelves, Amazon’s employees are monitored, evaluated, rewarded and even flagged for reprimand or coaching by software.

Amazon is expanding automated capabilities, including fleets of robots in warehouses.

Executives at the company are emphatic about their desire to preserve the health of employees, and give them opportunities to grow and develop, but the way Amazon manages both employees and seller-partners with algorithms is often at odds with those values. 

Throughout the supply chain of Amazon’s e-commerce operation, humans are onboarded rapidly into jobs that require almost no training. This is possible because of how directed and constrained by algorithms and automation these roles have become. In some fulfillment centers, employees who pick items for orders from robot shelves are surveilled by AI-enabled cameras. A cloud-connected scanning gun monitors the rate at which they pick items, the number and duration of their breaks and whether they’re grabbing the right items and putting them in the right places. Managers step in only if software reports a problem, such as a worker falling behind.

 Amazon objected to the characterization that anyone in its facilities is “managed by algorithm,” because all associates have a human manager who is responsible for them and who coaches them. “Our front-line workers are the heart and soul of Amazon,” said an exec. “Only a small percentage of associates are fired or leave the company because of performance issues.”

Whether all this AI, software and automation will be used to ease the burden of its employees, or to force them to work harder to keep up, is a choice all companies face in the age of digitization, and none more so than Amazon.

Classroom discussion questions:

  1. What are the advantages and disadvantages of being an Amazon warehouse worker?
  2. How does Amazon’s approach differ from the four labor standards methods discussed in Chapter 10 of your Heizer/Render/Munson text? (See pages 420-429)

OM in the News: Amazon Gets U.S. Approval for Drone Fleet

Amazon’s latest drone is designed to carry packages weighing 5 pounds and fly a round-trip distance of 15 miles.

Amazon just received federal approval to establish a fleet of drones and will begin limited tests of package deliveries to customers in the U.S., reports The Wall Street Journal (Sept. 1, 2020).

The approval from the FAA is a milestone in Amazon’s push to use unmanned aircraft to deliver packages to global consumers. The company also has testing sites in Canada, Austria, and the U.K.

Routine drone deliveries to U.S. consumers are still years away, partly because the FAA needs to complete rules for remote identification of more than 480,000 drones currently registered for commercial operations, and issue separate rules permitting drones to fly regularly over populated areas. Amazon has now joined UPS and Wing (a unit of Google) in gaining approval to operate unmanned air fleets in the U.S. for tests involving customer deliveries. Amazon has sought regulatory approval for a broader range of drones and over a larger geographic area than its competitors.

Amazon CEO Jeff Bezos made the ambitious prediction in 2013 that drone-delivered packages would arrive at the doors of customers in 5 years. Although the company completed its first test flight in England in 2016, the process has taken longer than Amazon expected.

Wing last year began to deliver food and other supplies to customers in Virginia. The company has been conducting tests in partnership with Walgreens and FedEx. UPS, which received FAA approval to set up an airline fleet last year, has been using its drones to carry medical supplies at a hospital network in Raleigh, N.C. Other companies such as Uber Technologies have also conducted limited drone-delivery tests in the U.S.

Classroom discussion questions:

  1. What are the strengths and weaknesses of this delivery approach?
  2. Why does Amazon wish to enhance its shipping strategy?

OM in the News: As Country Shuts Down, Amazon Hires Up

Amazon plans to hire an additional 100,000 employees in the U.S. as millions of people turn to online deliveries at an unprecedented pace and Americans continue to reorient their lives to limit the spread of coronavirus. It will deploy the new workers to fuel its e-commerce machine and is raising pay for all employees in fulfillment centers, transportation, stores and deliveries in the U.S. and Canada by $2 an hour. (Amazon now pays $15-per-hour as a starting wage and has 800,000 employees). Amazon also expanded its sick-leave policy to include part-time warehouse workers and set up a relief fund, with an initial $25 million for delivery partners such as drivers affected by the outbreak.

The tech giant’s decision to go on a hiring spree and boost worker pay shows the dual challenge companies such as Amazon face as they seek to meet surging demand for food and key household items and also take care of employees at the front lines of the pandemic. Large, well-capitalized companies such as Amazon are moving to meet an extraordinary uptick in orders, writes The Wall Street Journal (March 17, 2020). “Amazon is big enough and powerful enough and decisive enough to take up a significant amount of the slack being caused by all of the shutdowns,” said the former CEO of Sears-Canada. Amazon accounts for 39% of all online orders in the U.S.

The 100,000 new Amazon jobs come at a time when broader retail is contracting and retailers rethink operating physical stores during a pandemic. Apple, Nike. and Lululemon, among others, have announced store closures. With people trying to limit their exposure, customers will rely on companies with e-commerce arms and the ability to rapidly replenish inventory more than ever. Execution so far has been spotty. Struggling with demand, many retailers have had to cancel portions of online orders or significantly delay shipping dates of some items.. The delivery-time windows of online grocers has surged to more than a week in many cities where customers were accustomed to next-day delivery.

Classroom discussion questions:

  1. Referring to Ch. 2 of your Heizer/Render/Munson text, how is Amazon achieving competitive advantage?
  2. What are Amazon’s key success factors and core competencies?

 

OM in the News: Walmart’s Secret Weapon Against Amazon–the Supercenter

A robot scans for product levels at a Walmart

“After years of internal debate about how to compete with Amazon, Walmart recently revealed the centerpiece of its plan to thrive in an e-commerce era: giant stores,” writes The Wall Street Journal (Dec. 21, 2019).

Walmart said it wasn’t going to win by building an unprofitable e-commerce operation or other stand-alone ventures. Instead, its supercenters will be the heart of a web of businesses all working together to attract shoppers and drive profits. The supercenters are sprawling stores of around 180,000 square feet offering 100,000 products, bathed under LED lights. Groceries, clothes, camping gear and TVs are for sale; customers can fill medical prescriptions, transfer money or get their hair done. They’re often open 24 hours and are community gathering spots, or a place for senior citizens to take a walk in cold weather–a re-emphasis on the giant outlets Walmart started building in the 1980s.

Walmart poured investment into e-commerce operations by lowering prices online, spending more on marketing and prioritizing faster shipping to better integrate its store and online activities for shoppers. The company took “Stores” out of its corporate name as “a symbol of how customers are shopping us today and how they’ll increasingly shop us in the future,” said its CEO. The company plans to add e-commerce warehouse capacity to have more of its products available for next day delivery. Like Amazon, Walmart also plans to invest in more capacity to offer fulfillment services and warehousing for third-party merchants—the outside companies that list their goods on Walmart.com.

The retailer has largely weathered the shift to online shopping and the rise of Amazon. Sales from U.S. stores and websites have risen for 20 straight quarters, as Walmart added online grocery pickup in store parking lots, cleaned up stores and lowered prices. As other traditional retailers lose customers and fail to compete, Walmart has increased its market share.

Classroom discussion questions:

  1. What is Walmart’s operations strategy, using the three competing approaches in Chapter 2 of your Heizer/Render/Munson text?
  2.  How does it differ from Amazon?

Happy New Years to all our readers–from Jay, Barry and Chuck!

OM in the News: Are Ruthless Quotas at Amazon Maiming Employees?

Amazon’s famous speed and technological innovation have driven the company’s massive global expansion and a valuation over $800 billion, writes The Atlantic (Nov. 25, 2019). It’s also helped make Amazon the nation’s second-largest private employer. But now the Center for Investigative Reporting has found that the company’s obsession with speed has turned its warehouses into injury mills, finding the rate of serious injuries for Amazon facilities more than double the national industry average: 9.6 serious injuries per 100 full-time workers in 2018, compared with an industry average of 4. Some centers, such as the Eastvale, California warehouse, were especially dangerous, with 422 injuries–more than 4 times the industry average.

The former head of OSHA states: “According to Amazon’s own records, the risk of work injuries at fulfillment centers is alarmingly, unacceptably high. Amazon needs to take a hard look at the facilities where so many workers are being hurt and either redesign the work processes, replace the top managers, or both.”

Many workers spoke with outrage about having been cast aside as damaged goods or sent back to jobs that injured them further. The company does instruct workers on the safe way to move their bodies and handle equipment. But former workers said they had to break the safety rules to keep up. They would jump or stretch to reach a top rack instead of using a stepladder. They would twist and bend over to grab boxes instead of taking time to squat and lift with their legs. They had to, they said, or they would lose their jobs. So they took the risk.

The root of Amazon’s success appears to be the root of its injury problem: the blistering pace of delivering packages to its customers. And during Amazon’s busiest (“peak”) season, employees face the exhaustion of mandatory 12-hour shifts where expectations are precise. Workers have to pick 385 small items or 350 medium items each hour and are expected to meet 100% of this productivity performance standard. Amazon CEO Jeff Bezos, meanwhile, is focused on customers. “We are ramping up to make our 25th holiday season the best ever—with millions of products available for free 1-day delivery,” he said.

Classroom discussion questions:

  1. What are the ergonomic issues discussed in this article (which we encourage you to read in full)?
  2.  What is the solution?

OM in the News: Amazon Marries Drones and Intermodal

“Amazon wants its inventory everywhere”, writes Supply Chain Dive (Nov. 8, 2019). It is expanding its network of fulfillment locations with a focus on intermodal containers. Intermodal-based fulfillment, as Amazon’s patent application describes it, would allow the company to fulfill orders from rail, truck or ship. Here are the steps in the patent:
1. Load intermodal container with inventory.
2. A robotic system picks and loads items onto drone.
3. Launch and retrieval system puts the drone in appropriate position for take-off.
4. Drone departs container through opening in the roof.
5. Drone travels to a customer’s home, delivers package.

Amazon patent graphic for railroad sourcing

6. Drone meets back up with the container at a pre-calculated rendezvous point.

7. Variety of sensors track container’s location.

But wait, drones need new batteries, their propellers might break, and without a human in the loop how does this operation keep running smoothly? Amazon thought of this. One of the details included in the patent application is a maintenance container where drones can have a robotic technician replace propellers or batteries. Amazon says containers could be loaded with inventory before the launch of a book or video game in anticipation of demand spikes, placing inventory in locations where it expects orders.

To compete with brick-and-mortar locations, Amazon wants to cut down on delivery time making it just as convenient to hit order on the marketplace as it is to drive down the road. But this requires a complex network of inventory in fulfillment and sortation centers across the country. It has already promised one-day delivery for a variety of SKUs. Amazon claims drones will enable 30-minute delivery. Making this happen will not just require drones, but a vast web of SKUs across the country.

Classroom discussion questions:

  1. Why does “Amazon want its drones everywhere”?
  2.  What might be the weaknesses of this proposal?

OM in the News: New York City Chokes on Deliveries from On-Line Orders

An Amazon order starts with a tap of a finger. Two days later — or even in a matter of hours — the package arrives. It seems simple enough. But to deliver Amazon orders and countless others from businesses that sell over the internet, the very fabric of major urban areas around the world is being transformed. And New York City, where more than 1.5 million packages are delivered daily, shows the impact that this push for convenience is having on gridlock, roadway safety and pollution.

The average number of daily deliveries to households in NYC tripled to more than 1.1 million shipments from 2009 to 2017, writes The New York Times (Oct. 27, 2019), With households receiving more shipments than businesses, trucks are pushed into neighborhoods where they had rarely ventured. About 15% of NYC households receive a package every day.

Delivery trucks double-park on streets and block bus and bike lanes. UPS and FedEx alone racked up more than 471,000 parking violations last year. The main entryway for packages into NYC, leading to the George Washington Bridge from New Jersey, has become the most congested interchange in the country. Officials are racing to keep track of the numerous warehouses sprouting up, to create more zones for trucks to unload and to encourage some deliveries to be made by boat or at night as the city struggles to cope with a booming online economy.

Amazon is now moving toward 1-day delivery rather than 2 days for Prime customers and plans to spend $1.5 billion this quarter to reach that goal. As the delivery armada has ballooned, so, too, have the complaints.  “There is just not enough room for all the trucks that need to make deliveries, the cars that need to get past them and the people who live here,” said a NYC councilman.  From 1990 to 2017, carbon dioxide emissions from automobiles and trucks in the NYC area grew by 27%, making the region the largest contributor of driving-related carbon dioxide emissions in the country.

Classroom discussion questions:

  1. What are the impacts from the surge in on-line deliveries in metropolitan areas?
  2.  Ask students who live in high-rises how the deliveries have affected them. Solutions?

OM in the News: Amazon’s Bangladesh Problem

Clothing sellers formed safety-monitoring groups after the 2013 Rana Plaza collapse.

Ethical lines aren’t clear-cut in the global garment-supply chain, which remains a murky network in which clothes pass from factories through traders around the world. After a 2013 factory collapse killed more than 1,100 people in Bangladesh, most of the biggest U.S. apparel retailers joined safety-monitoring groups that required them to stop selling clothing from factories that violated certain safety standards.

Amazon didn’t join, reports The Wall Street Journal (Oct. 24, 2019). The site today offers a steady stream of clothing from dozens of Bangladeshi factories that most leading retailers have said are too dangerous to allow into their supply chains. Apparel appears on Amazon that is made in factories whose owners have refused to fix safety problems, such as crumbling buildings, broken alarms, and missing sprinklers and fire barriers. Walmart, Target, Costco, and Gap have agreed to have their supply chains inspected and to disclose to the groups the factories that supply them.

Clothing including pants, sweaters, and robes that originate from blacklisted factories have ended up on Amazon, which has become a major player in apparel. Other retailers must compete in this market, where customers often seek the lowest price. Amazon may have overtaken Walmart as America’s No. 1 clothing seller and dominates the online-retail market.

Amazon runs its platform without many of the constraints that other companies apply to their products and stores, sometimes in ways that can put customers and workers in danger. That is particularly true for Amazon’s third-party marketplace, made up of millions of individual sellers. Many are anonymous and aren’t subject to some of the oversight Amazon applies to its own brands and to items it sells directly. Thousands of products listed on Amazon are deemed unsafe by federal agencies, are deceptively labeled or are banned by regulators—items that many retailers’ policies bar. They include items such as unsafe children’s toys and recalled motorcycle helmets. Amazon doesn’t inspect factories making clothing that it buys from wholesalers or that comes from third-party sellers.

Classroom discussion questions:

  1.  Is this a significant supply chain issue? Why?
  2.  What is Amazon’s responsibility in selling products from Bangladesh–and elsewhere?

OM in the News: Amazon Delivery Aims Electric, But Employees Want More

Amazon plans to buy 100,000 electric delivery vehicles as it seeks to reduce its carbon emissions in the face of criticism of its environmental impact, reports The Wall Street Journal (Sept. 20, 2019). The e-commerce giant is ordering the electric vehicles from startup Rivian Automotive, in which it invested $700 million this year. Amazon said the vehicles will start delivering packages to customers in 2021. The company plans to have 10,000 of the new electric vehicles on the road by 2022, and all 100,000 by 2030. Amazon has built up its delivery fleet in recent years and has become a force in the shipping industry, although it still works with companies such as UPS.

The sustainability commitments are part of a new climate pledge that promises Amazon will report greenhouse-gas emissions regularly and implement strategies to reduce carbon emissions. Amazon said it expects 80% of its energy use to come from renewable sources by 2024, up from 40% now. It is working toward its facilities being 100%-powered using renewable energy by 2030, helped in part by the development of large-scale wind and solar projects.

Amazon’s climate pledge comes one day before more than 1,550 Amazon employees world-wide threatened to walk out of work if the company didn’t do more to fight climate change. The group of Amazon employees said that the company’s announcement was a win, but said they still plan to walk. “The Paris Agreement, by itself, won’t get us to a livable world. Today, we celebrate. Tomorrow, we’ll be in the streets,”

Classroom discussion questions:

  1. What are various components of Amazon’s delivery strategy?
  2.  Should employees be able to dictate the firm’s sustainability strategy?

OM in the News: Best Buy’s E-Commerce Fulfillment Drive

The box-making machines at Best Buy’s facilities can cut about 15 cardboard boxes every minute

Tucked away in a fulfillment center near NYC, Best Buy is using dozens of robots to sort through boxes of iPads, HP laptops, DVDs, video games and more to ship to shoppers’ homes. The thousands of bins overflowing with goods have traditionally been picked by hand, requiring the tedious work of warehouse employees. An average worker could track more than 7 miles by foot in a single day just searching for items. But new technology at three facilities in L.A., Chicago and Piscataway, N.J., does the heavy lifting now, reports CNBC.com (Aug. 28, 2019).

There’s much talk about the shipping wars between big-box retailers Walmart and Target and e-commerce giant Amazon. But Best Buy has likewise been chipping away at its delivery strategy for the past few years. It started shipping online orders from stores in 2014. Now its 3 metro e-commerce centers help with the process. These centers differ from the company’s 6 regional distribution centers for store fulfillment as they’re much closer to customers’ homes and are able to service next-day orders. They also help with delivering bulky appliances to shoppers’ houses — something Best Buy is doing on a daily basis with its massive appliance business.

Best Buy’s latest logistics push incorporates ways to get online orders to customers more quickly, reduce out-of-stocks in stores and even cut back on excess cardboard — an issue that’s proliferated in the industry with e-commerce’s ascent. A metro e-commerce center is about 50,000 square feet, compared with 750,000 for regional distribution centers. It keeps about 3,000 of Best Buy’s current best-selling items stocked there. The 3 metro facilities set Best Buy up to reach 50 million people with free next-day delivery, giving customers the ability to make purchases as late as 8 p.m. and have the order shipped out that same day.

Classroom discussion questions:

  1. What is the difference between a “metro e-commerce center” and a regional distribution center?
  2. How does Best Buy’s fulfillment system differ from that of Amazon?

OM in the News: Warehouse to Doorstep–Amazon Builds a Shipping Empire

Amazon’s recent breakup with longtime shipping partner FedEx shows how far it has come in creating its own delivery network. As consumers flock to its site for everything from toilet paper to TVs, Amazon has quietly blanketed the nation with hundreds of warehouses and package-sorting centers, flooded the streets with tens of thousands of vans and taken to the air. The costly effort is enabling Amazon to control how goods reach its customers—and increasingly turning it from a customer of delivery companies into a rival. Here is The Wall Street Journal’s (Aug. 30, 2019) look at Amazon’s vast shipping empire.

Storing, Sorting and Shipping The 2013 holiday season was a turning point for Amazon, after orders overwhelmed carriers and led to late packages and upset customers. Since then, it has multiplied the number of fulfillment, sorting and other facilities from 65 to 400+, planting facilities near city centers across the country to be as close to each customer as possible. That has enabled Amazon to deliver more packages to doorsteps within a day, catering to demanding online shoppers.

Big Spender Amazon’s aggressive pursuit of greater shipping control and speed has raised the amount it spends on shipping and fulfillment. Those costs have risen from $5.5 billion in 2010 to $61.7 billion in 2018, and they now equal more than 1/4 of Amazon’s revenue. It spent more than $800 million alone in the second quarter to shift its standard free shipping option to next-day from 2 days.

Heavy Lifting Amazon is no longer handling a small glut of overflowing orders. It is the primary carrier of its brown boxes. The shift over the past few years is staggering. It now delivers 1/2 of its orders, up from 15% in 2017.

By Land, Sea and Air All of this means Amazon needs more ways to transport its increasing volume. Last year it created a program where entrepreneurs with their own delivery companies could begin delivering packages in Amazon-branded trucks. Amazon is also renting 60 planes, and expects to adding another 10 by 2021. It has even sought to manage ocean freight.

Classroom discussion questions:

  1. What unique strategies is Amazon using to expand its delivery services?
  2. How is Amazon achieving competitive advantage through OM? (See Ch. 2).

 

OM in the News: Amazon’s Package Streamlining

Eight years ago, we reviewed an excellent book called Force of Nature: The Unlikely Story of Wal-Mart’s Green Revolution. At that time Wal-Mart, which was long the target of environmentalists, created nothing less than a green revolution. One of its changes was forcing suppliers to reduce packaging sizes, which ended up saving $3.4 billion a year while reducing trash.

Now, in a similar vein, the new giant on the block, Amazon, is pressuring brands to make their packaging more efficient, prompting vendors to make costly changes to their businesses or face fines. Amazon has told companies they must make packaging for thousands of larger products more compact and easier to open. Eventually, Amazon wants every product it ships to meet similar standards. The firm said the requirements will make packages more environmentally friendly.

The new packaging requirements are the latest example of Amazon’s power to get vendors to change the way they do business, writes The Wall Street Journal (July 30, 2019) . Manufacturers of items from soup to garden rakes say they have to sell through Amazon to reach more customers. Philips Norelco OneBlade said it cut the components in its razor packaging to 9 from 13 and reduced the volume of packaging by 80% to meet the new standard. Hill’s Pet Nutrition said it decreased the packaging volume of its Science Diet premium dog food by 34% and the amount of wasted space, or air shipped, by 82%. The maker of Rubbermaid FreshWorks said it cut the components used to ship its containers to 2 from 7.

Amazon’s expanding e-commerce footprint has been consuming more cardboard and plastic packaging. Now, it is trying to address consumer calls to cut back on waste while reducing excess weight and volume to generate savings on shipping as well.

Classroom discussion questions:

  1. What are the similarities between Wal-Mart and Amazon in this regard? The differences?
  2. Why is this an important OM issue?

OM in the News: Using Robots to Bring Efficiency to Small Warehouses

An Amazon fulfillment center in New Jersey. Attabotics’s automation is aimed at helping e-commerce retailers to use space more efficiently.

Canada’s Attabotics is part of a growing field of automation technology providers that are devising new ways to store and handle goods as e-commerce reshapes traditional distribution networks. Amazon and other businesses looking to speed up delivery are opening more warehouses near major population centers. Those facilities are often smaller than the sprawling sites that process online orders near logistics hubs in Pennsylvania, Texas and Southern California, putting pressure on operators to make them more efficient.

The trend has driven greater interest in “micro-fulfillment” centers, which use robotics and automation to pack more goods into small spaces to help deliver orders more quickly to customers, writes The Wall Street Journal (July 30, 2019). Attabotics’s technology uses robotic shuttles to retrieve goods stored in vertical structures. The shuttles move horizontally across a grid at the top, then navigate vertically down shafts with storage on four sides, pulling product bins that they deliver to workers at stations set around the perimeter of the structure.

The system can pick, pack and ship using 20% of the labor and 15% of the space of traditional fulfillment operations. The company has customers in North America in sectors including luxury retail and wholesale food distribution. Attabotics’s technology could also be placed in the back of retail stores to help bricks-and-mortar merchants fulfill online orders more quickly.

Classroom discussion questions:

  1. Why is there a need for Attabotics’s product?
  2. How does this system differ from the Kiva robots used extensively at Amazon?

OM in the News: Picking Inventory at Amazon With Humans and Robots

While this Amazon center is highly automated, some tasks are likely to remain in human hands for years to come.

Every day, about 50 truckloads of merchandise turn up at Amazon’s warehouse in Staten Island, NY. One group of workers unloads the goods, and another group distributes them to work stations. There, a third group, stowers, transfers the items onto large shelving units that hold several dozen bins, and are attached to robots that move through the building. Stowers choose the bin where they want to place each item, trying to make the task as easy as possible for the worker, a picker, who will have to grab items out of the bin.

Picking inventory off shelves to fill customer orders is usually the most common job at an Amazon warehouse, and the company has worked for years to make its pickers more productive. At many warehouses, pickers walk miles each day in search of items, but algorithms provide them with the optimal route. In robotics fulfillment centers like the one on Staten Island, the pickers are stationary and the robots deliver items to them. (These warehouses account for more than 50% of its 175 centers).

The robots have raised the average picker’s productivity from 100 items per hour to 300 or 400 –and help explain why Amazon managed to ship more items than ever during last year’s holiday season with about 20% fewer seasonal workers. But robots have also made the job far more repetitive. Unlike pickers in manual warehouses, the pickers on Staten Island have almost no relief from plucking goods off shelves

Amazon  plans to fully automate picking in the near future, reports The New York Times (July 7, 2019). It calculated that there was so much productivity to be gained from reducing the millions of miles its workers walk each year that it was better off finding robots well suited to moving goods all those miles, not worrying whether the system would later be compatible with robotic pickers.

Classroom discussion questions:

  1. Why would it be hard to replace the human pickers?
  2. Outline the process of merchandise flow in an Amazon warehouse that uses robots vs. one that does not.

OM in the News: Amazon’s Plane Ambitions

Amazon is expanding its domestic air-cargo operation, adding smaller jets to its rented fleet to link its distribution centers and extend the reach of its next-day delivery service. It is aiming to reach the capacity of its free 2-day option, which is available for more than 100 million products. The firm is also experimenting with local collection centers, its own delivery vans, on-demand taxis and even its own employees to speed deliveries to consumers at a lower cost, bringing it into direct competition, in some cases, with companies that also deliver its packages. FedEx recently said that it would end its air-shipping agreement with Amazon to concentrate on rapid delivery for other retailers that are making more sales online.

Amazon is renting another 15 Boeing 737’s converted to carry cargo, in addition to 5 it’s already leasing, alongside a fleet of 40 larger planes it uses to ship packages around the U.S. It expects to have a rented fleet of 70 planes by 2021 as it takes stronger control of its own logistics operations, writes The Wall Street Journal (June 19, 2019). “These new aircraft create additional capacity for Amazon Air, building on the investment in our Prime Free One-Day program,” says Amazon’s VP. Amazon is opening three more air cargo centers this year, in Fort Worth, Texas, Wilmington, Ohio, and Rockford, Ill. A new hub at Cincinnati’s airport that can handle 100 planes is due to open in 2021.

Amazon continues outsourcing its flying rather than start an in-house carrier. The domestic industry is highly regulated and has a history of turbulent labor relations, creating high barriers to entry.

Classroom discussion questions:

  1. How is Amazon taking more control of its logistics operations?
  2. What are the strengths and weaknesses of this approach?