Amazon’s Next DC Strategy: Brownfields
Two recent news stories may indicate that Amazon has a new “brownfields” strategy for building DCs closer to their customers. It was recently announced that the company is going to be redeveloping the site of the demolished Pontiac Silverdome in Michigan and the recently abandoned Necco candy factory in Revere, Massachusetts.
The Pontiac Silverdome property will be the site of a 3.7 million-square-foot, two-building distribution campus for Amazon. According to development authorities, the DCs will employ at least 1,500 workers, further increasing the competition for warehouse workers in the Detroit area. The fulfillment center is expected to be completed by the third quarter of 2021.
Secondly, the 830,000 square foot Necco Plant that was shuttered in September 2018 will become another distribution center for Amazon to reach their customers in Massachusetts. When the new DC opens in 2020, Amazon will become the largest employer in Revere.
Amazon’s Bad Food Problem
A recent report by CNBC indicates that Amazon DCs are struggling to manage expiration and quality issues for food products. Unlike traditional grocery retailers or food distributors, it appears that Amazon is not adequately managing sell-by dates on third party products it ships through it’s DCs. Similar to the issues it has faced around counterfeit products, the food distribution issues are creating consternation among the food manufacturers. Read the full report here.
It’s not unusual for Lucas customers to capture date and lot information on food items at the point of pick in the DC (often using a combination of voice and scanning), managing variable sell-by dates for different customers, and avoiding customer service and product quality issues in their operations.
DC Tech Issues Spell Trouble For Fresh Direct
FreshDirect, the NY-based online grocery retailer recently suffered a setback due to tech roll-out issues in their new Bronx, NY distribution center that damaged their customer reputation. According to news reports in the NY Post, the problem was in a new pick-and-pack technology which did not function well with their customer-facing software. Customers received out-of-stock notifications, received packages with missing items and many shipments arrived much later than expected.
One casualty of the upgrade issues and subsequent customer service woes was co-founder and CEO Jason Ackermann. Fresh Direct was one of the first to enter the grocery delivery market, but it has since lost market share in the face of rising competition from traditional brick and mortar grocers rolling out their own same-day delivery and pick up services. The company is apparently now on the market. Not surprisingly, the potential buyers include Walmart and Amazon.
Shopify Gambles on Robots With Its 6 River Acquisition
Ecommerce technology provider Shopify recently announced that it is purchasing 6 River Systems, a developer of autonomous mobile robots that was founded by ex-members of Kiva Systems (which itself was acquired by Amazon in 2012). Shopify intends to run its fulfillment network with a number of 3pl partners and in the future to build out its own DC network.
Shopify’s purchase of 6 River Systems is intended to optimize their distribution network with robots. The $450 million purchase price is 60 times 6 River’s 2018 revenue. It is not 100% clear how 6 River customers will be supported in the future. However, Shopify has stated that 6 River will continue to build and sell their solution to warehouses outside of the Shopify network. When Amazon purchased Kiva they ended sales to external customers.
Reducing DC Travel 30-70% With Artificial Intelligence
Labor is the single largest operating cost in most DCs, and travel often accounts for half of all labor time, especially in order picking. Lucas Dynamic Work Optimization (DWO) uses advanced mathematical models and artificial intelligence (AI) to reduce travel 30-70%. Customers using DWO have more than doubled picking productivity and cut labor hours in half without making any changes to their warehouse layout or adding expensive automation or robotics.