Amazon is shaking up its network of fulfillment centers, presumably to prepare for its commitment to change its Free 2-Day Prime Shipping to 1 day, a bombshell announcement it made on Thursday.
In response to our inquiry about closures of some fulfillment centers, an Amazon spokesperson provided no details. "We are constantly evaluating our fulfillment network to ensure best customer selection and convenience. After thoughtful review, we've determined some of our facilities across the US would be better suited to handle different customer inventory and delivery."
But an article on Yahoo Finance
indicated centers in California, Illinois, Texas, and New Jersey would be closed for remodeling, reporting that the centers are all "Amazon Robotics Quick Deploy," which are facilities that carry smaller items, ranging in size from 6 -18 inches, and use Kiva robots. "The buildings will be retrofitted for different purposes, including sorting centers, print-on-demand book facilities and Amazon Fresh delivery hubs," according to the article.
The move comes as Amazon gets its fulfillment network ready for the transition to free next-day delivery for Prime members, who currently get free 2-day shipping.
Amazon Chief Financial Officer Brian Olsavsky said during a conference call with Wall Street analysts after releasing first-quarter earnings on Thursday that it had already begun increasing availability of 1-day delivery and had "turned the dial significantly" in April. It will see costs rise this quarter (ending June 30th), estimated it will spend $800 million in the three-month period. Most of the capacity it needs to build out will be worked on throughout the year (2019).
Olsavsky cited several benefits of the change to 1-day shipping during the call, including the following:
- it will enhance price, selection, and convenience for the customer.
- it will open up a lot of potential purchases.
- it helps increase the speed on *all* orders.
The CFO said Amazon will use its own AMZL logistics as well as third-party carriers to meet its next-day promise. Amazon needs the continued support of external transportation partners, he said.
One of the Amazon facilities impacted by the temporary closures is in Illinois, according to this KMOV news story
from last week in which it said Amazon was changing a Fulfillment Center in Edwardsville "to allow it to handle different inventory," and said it was impacting hundreds of jobs.
Amazon said, "All employees have jobs waiting for them at nearby facilities as well as the option to explore career opportunities within Amazon across the country. We are working closely with each employee to ensure they are supported during this transition and we look forward to expanding our customer offerings in the months to come."
It's not clear if any sellers who use Fulfillment by Amazon (FBA) will be impacted.
We can only imagine how executives at rival retailers and marketplaces are taking the news.
Update: One day after Amazon announced it would be moving to 1-Day Prime delivery, Walmart indicated it would do the same.