Why Amazon’s Warehousing System Wouldn’t Work For All Companies

Posted by Jason Tindley on 15-Dec-2023 12:23:04

A busy warehouse to show why Amazon's warehousing system wouldn't work for all companies.

Amazon is frequently held up as the gold standard for logistics and distribution businesses (frustratingly, it has to be said), and while the e-commerce giant certainly sets a high benchmark in terms of what businesses can achieve with the right organisation and technology, the Amazon warehousing system doesn’t work for all companies.

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The Amazon Fulfilment Network (AFN): How It Works

The Amazon Fulfilment Network (AFN) is rightly recognised for its highly efficient operation, intelligent use of technology, and streamlined cost controls that enable the company to deliver goods to customers quickly and efficiently across the world. Amazon’s distribution centres make strong use of automation, robotics, and cutting-edge software-based inventory management systems, which streamline communication between distribution centres and makes it easy for the business to scale its operations in response to demand, while sustaining high levels of customer satisfaction.

However, it must be noted that not all Amazon facilities have the same level of technology. In some of their flagship distribution centres, for example, robot pickers might bring a product to a static worker, reducing human travel times to the bare minimum, while older Amazon warehouses and smaller centres might not have the same level of automation.

The level of technology required in each distribution centre comes down to its capacity and volume requirements.

Amazon doesn’t ever spend more than it has to in each network location, so if a site doesn’t need drones or robotic assistants, it won’t have them.

Leading edge warehouse technology doesn’t come cheap, even for Amazon, and this level of investment can be a significant barrier for smaller businesses and companies with limited resources.

Drawbacks Of The AFN For Smaller Logistics Businesses:

  • High implementation costs: the main challenge faced by smaller businesses looking to replicate Amazon’s warehousing system is the astronomical costs associated with its implementation. Most businesses simply don’t have the millions or billions of pounds to spare to continually invest in the newest technology.
  • High-volume model: another critical factor to consider is that the AFN is designed to support a high volume and continually growing business model, which may not always align with smaller and niche logistics operators. Businesses with lower order volumes or modest growth vectors may find the costs associated with adopting an AFN-style strategy prohibitive or unnecessary.
  • Designed for distributed networks: the AFN was designed for a sprawling network of warehouses and distribution centres spanning the globe. Businesses with a single or centralised distribution hub and a regional or national fulfilment area don’t have the same supply and inventory management needs, and subsequently may find it easier to expand using alternative optimisation strategies and investments.

Assessing Your Own Warehousing Needs

It’s sometimes a useful thought experiment to compare your warehouse set up with the market leaders in your sector, including Amazon. These large businesses are often early adopters of new and interesting technology, for example, that might be applicable to your circumstances. However, in our experience it’s always more useful to start with a direct assessment of your own capacities and current production challenges, without reference to what Amazon or any other business is doing.

Ultimately the important factor is to develop solutions that work for your circumstances and your customers, so you can be more productive and profitable, whether or not this aligns you with the Amazon warehousing model. While the AFN model can deliver impressive results for distributed networks, it’s crucial to recognise that the model is not a universally practical solution for all warehouse businesses.

Have a chat with one of the logistics planning specialists at LPC today to discuss the most cost-effective and efficient solutions and investments for your business.

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Image Source: Canva

Topics: Warehouse Management System

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