I found this great video from CNBC about how Amazon is building out its logistics capacity, both in response to the supply chain crisis, and for the long-term.  I recommend watching it, but here is an overview of what it discusses:

Control of the Logistics Process

• Amazon wants to control every step of the shipping process of getting packages to customers
• The more Amazon controls the shipping process, the less it has to pay other companies to move its products, and the less vulnerable their products are to industry-wide issues like the supply-chain crisis
• Amazon spent over 61 billion on shipping in 2020, up from 38 billion in 2019
• Amazon now ships 72% of its own packages, up from 47% in 2019

Making Their Own Containers

• Containers are so scarce that the cost to ship a container from China to LA has gone from $1,200 before the pandemic to $20,000 today
• The container shortage is partially caused by the imbalance of trade, where many containers have been brought into the country but then need to be sent back to where they started
• In response, Amazon is having their own 53-foot containers manufactured
• Amazon has made between 5,000 to 10,000 containers in the last 2 years
• After Amazon uses the containers to ship goods to the US, Amazon uses the containers domestically rather than having to return them to Asia because they own the containers
• By creating their own containers, Amazon guarantees they will have containers available to use

Ships and Ports

• Amazon is now a global freight forwarder for Chinese sellers, a program Amazon calls “Operation Dragon Boat”
• Amazon’s volume of containers is over 10,000 per month for these small/medium sized Chinese sellers
• 40% of containers enter the US through LA or Long Beach, and because smaller ports can’t handle large ships, a backlog is created at these 2 ports
• In response to the backlog, other smaller ports that aren’t congested as LA or Long Beach are being used
• This year, other retailers are doing what Amazon already does by chartering their own vessels to bypass the busiest ports
• Some of these ships were originally built to ship lumber or agricultural products, but are now being re-purposed to ship containers
• Smaller cargo ships can get through the Panama canal and utilize less-busy ports, although it’s twice as expensive to ship using smaller ships than using large ones

Aircraft

• Amazon has been building its own air cargo fleet since 2016, reaching 85 total aircraft in 2021
• Amazon’s air fleet flies out of 42 US airports making at least 164 flights per day
• Amazon is interested in obtaining 10 large long-haul planes traditionally used to fly goods across the Pacific ocean
• Moving products in a plane is so much more expensive than ocean freight that it’s not a viable option to replace ocean freight capacity with planes

Challenges with Labor and Facilities

• Lack of labor has been a major supply-chain constraint
• Amazon is offering sign-on bonuses of $3,000 to all 150,000 seasonal workers it is hiring in 2021
• Amazon hired 100,000 people in 2020, so the 150,000 it hired this year is 50,000 more than last year
• Amazon has opened 250 new facilities in the US in 2021
• Amazon wants to be within 10 to 15 minutes of 90% of the US population to efficiently make deliveries
• The global supply chain is vulnerable to future backlogs and shortages.  In response, the infrastructure bill signed into law this year is allocating $17 billion for port improvement and $66 billion for freight and passenger rail over the next 5 years

Scale

• Amazon will continue to scale their logistics network, and will eventually rent cargo capacity to other companies
• Amazon wants to be the largest logistics company, not the largest retail company

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Interested in seeing what it’s like inside an Amazon fulfillment center? See this page.