Amazon has undertaken an ambitious initiative called "Dragon Boat" to build a global logistics network and supply chain. This will allow Amazon to bypass carriers like UPS and FedEx to gain more control over deliveries and reduce costs. As part of this, Amazon has rapidly expanded their network of fulfillment centers, sortation centers, delivery stations, and Prime Now hubs across the US and worldwide. The sortation centers help improve efficiency by sorting packages by zip code for regional delivery. This initiative aims to place Amazon at the center of the logistics industry and give them an advantage in speed and control of the delivery process.

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Amazon’s Supply Chain Initiate
Abstract:
This project report will provide information about the Amazon’s Distribution NetworkStrategy
Initiation and it will also talk about the supply chain initiate undertaken by Amazon internally
called as “Dragon Boat” which is intended to launch a new business called Global Supply Chain
by Amazon this year. As Amazon is dependent on external delivery companies like UPS, FedEx
to carry out delivery function of the interface with the customer which can often lead to
uncontrollable service problems and potential cost increases in line with wider transportation
industry such as rising fuel and increased vehicle taxation. If these cost are not absorbed they
are passed back to the customer both with potential negative effect. This report will talk about
how Amazon plans to overcome this hurdle and increase its profit and place itself at the center
of a logistics industry.
Introduction:
We all have bought things from Amazon (www.amazon.com). It is first online shopping site. It
was founded in 1995 by Jeff Bezos, who is the CEO of amazon.com. Amazon is one of the best
online shopping site and ranked among top 20 sites on internet. Apart from knowing as a
shopping site amazon is also known for its excellent customer services. This is due its exemplary
supply chain management. Amazon ships goods within the estimated time to the customers.
These goods are shipped by the third party to the customers. To be on the top, amazon has
taken several measures like adding a new product on the site once in every six weeks. From its
2009 financial results amazon is reported to be $24 billion in annual revenue. Since the launch
of Amazon in 1995, Amazon has shown consistent behavior with big vision, long term
strategies, dedicated to streamlining, surgically eliminating costs, prolific innovations, strategic
investments and an obsession over the customer. And it is still continuing to show all these
behavior. Amazon is working on an ambitious logistics initiative that would let it bypass
traditional middlemen and carriers and cut costs for deliveries as reported by Bloomberg.
Logistics:
Jeff Bezos, CEO of amazon.com said that logistics of distribution are the iceberg below the
waterline of online bookselling. The customer’s today know the convenience of purchasing
online and having the product delivered at their door steps. They don’t need to travel all the
way to the store, find a parking spot, and deal with traffic. Today’s consumers are purchasing
goods from long distances.

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Amazon’s distribution network strategy initiation:
During 2014 amazon took the initiation of building company’s new distribution center network
of sortation centers. This was kept a secret and they were building it quickly.
Amazon had weakness in its supply chain, therefore it was necessary to have amazon
distribution network. The weakness in the supply chain were:
1. As amazon is an online B2C retailer, it needs to have human resources for the final 2 -2.5
months of the year. For the year 2013 during the peak season, Amazons hiring of
temporary associates was reported to be about 70,000 people. And during the same
year Target had hired about 50,000 people. This shows how fragile it is, how much
pressure is placed to add human resources on complete online retailer during peak
season.
2. Robots work best when the workload is consistent. That’s the reason few companies
really invest in automation technologies for handling extreme peaks in shipping volume.
3. The most prominent weakness and which still remains for amazon is its outbound
transportation network.
a. Most retailers have their own outbound transportation to the stores. While some
small retailer’s ship using UPS or FedEx to replenish their retail stores. While the
other larger retailers with regional distribution centers use dedicated carriers or
private fleets to ship full truckloads to replenish their stores.
b. Amazon does not have these control over their outbound transportation function.
They use national parcel couriers like UPS or FedEx to ship the product to the
consumers. As these carriers are not dedicated only for amazon they are also used
to serve all other customers too. And hence during peak season the shipments are
delayed. Amazon has to face the consequences of transportation infrastructure
constraints.
Hence to overcome this weakness, Amazon’s sortation network and Amazon’s supply chain
initiate undertaken by Amazon internally called as “Dragon Boat”which is intended to launch a
new business called Global Supply Chain by Amazon this year, is about enabling new
competitive advantages which pertain to the speed of delivery.
What is Amazon sortation network?
Fulfillment centers are massive distribution centers which are used for storing large variety of
products. Hundreds of people and high speed conveyor systems are used to move the products
out the door at these fulfillment centers. These fulfillment centers are designed differently than
the sortation centers. Sortation center was first introduced by a company in the United
Kingdom in mid-2013. It is relative new concept to Amazon.

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Size of fulfillment center range from 1.0-1.2 million square feet, whereas the size of Sortation
center ranges between 200 – 300,000 square feet. Which is smaller than the fulfillment center.
Fulfillment center requires 1,000 – 2,500 full time associates, while sortation center needs only
100 – 300 associates. These sortation centers can be located beside, adjacent to, or nearby
fulfillment centers.
Fulfillment centers are required to fill customer orders, while sortation center are required to
aggregate shipments from one or more fulfillment centers for delivery into a defined regional
grouping of zip codes, which belong to nearby set of populated urban areas. After the arrival of
pallets of sealed shipments, these parcels are unloaded onto the conveyor belts, which are then
sorted according to the zip code ranges. In turn they are then shipped to individual post offices
like United States Postal Service (USPS) post offices or local courier depots that can deliver to
each of the zip code ranges. These post offices USPS or local courier are required to do the last
mile delivery.
Amazon will be benefited from this strategy as it will be able to deliver on Sundays. Due to
sortation center amazon can increase the speed to market for shipments and it can save a day
or more off of the order cycle time. With the help of sortation center and amazon’s own last
mile delivery will help amazon to reduce its shipping costs relative to the current approach of
last mile delivery which is performed by local couriers. For example, fulfillment center can now
deliver parcels to the local customers without the involvement of UPS or FedEx. It cuts the cost
of their sortation and delivery cost from the equation.
Sortation centers have become the consolidation hubs that provide the volume and synergy to
construct efficient last mile delivery operations. It has made it possible for same day or next day
delivery because of a separate and efficient infrastructure, outbound routes and efficient
logistical operations.
Amazon’s global supply chain management which also known as dragon boat will help amazon
to control its outbound transportation function, this is a very potent competitive advantage.
Where is the Amazon sortation network?
Amazon has been busy developing their sortation center network since late 2013. Amazon has
already build a number of delivery hubs in London. The size of these facilities is in the range of
50,000 square feet. Which serve highly populated regions of London and promise short travel
distances.
Amazon has already build 20 sortation center in United States since September 2013. These will
help to improve transportation efficiency. It is expected that Amazon will implement this
strategy in a way that all the major fulfillment center ‘clusters’ will be supported by a sortation
center so that they can serve regional high population markets.

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Fulfillment centers:
Amazon first started with two fulfillment centers in Seattle and Delaware. These fulfillment
center at Seattle is 93,000 square foot which is relatively small compared with the new
fulfillment centers built today. The expansion of the fulfillment center internationally was quiet
slow until 2005 and since then expansion of fulfillment network has been growing at an
incredible pace around the world. In United States currently Amazon operates variety of
fulfillment and distribution centers which include small sortable, large sortable, large non-
sortable, specialty fulfillment centers, apparel and footwear, redistribution centers, returns
centers and 3PL outsources facilities. Detail list of few Amazon fulfillment and distribution
centers is given in table below.

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Amazon Regional Sortation Center Network in United States:
To gain control over the outbound transportation of packages within its own distribution
network, Amazon has a network of regional sortation centers across the United States. Local
couriers like USPS, UPS and FedEx are used to deliver packages from these sortation center.
These facilities are used to sort packages by zip code to pallets, then these pallets are delivered
to the post office responsible for each zip code for smaller packages. Then USPS delivers these
to the customers. These sortation center are also used to ship packages to amazon’s delivery
stations, which is the final node in supply chain. Amazon regional sortation center network was
instrumental in amazon this takes greater control over its outbound shipping costs, after being
introduced to the U.S. in 2014. Sortation centers also handle packages for a regional area for
multiple fulfillment centers. A detail list of few Amazon Sortation Centers is given below.

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Amazon Delivery Station Network in the United States: (Late 2013)
To delivery last mile packages to the customers in a tightly defined area, Amazon launched a
built-out of its delivery station distribution network. It consist of small facilities typically in the
60,000 to 100,000 sq. ft. range. These buildings are located close to large metropolitan cities
across the country. These last mile delivery is performed by local courier companies like USPS,
UPS, and FedEx which are contracted by Amazon to service specific routes.
Amazon Prime Now Hub Network in United States: (Late 2014)
Amazon has built latest distribution network, these consist of small distribution buildings which
are located close to the centers of large metropolitan cities across US. These Hub are stocked
with the highest velocity items which are popular like bestseller books, etc. These Hub are

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stocked with only limited stock for example 10,000 different items for the amazon prime
members. Such that after an Amazon prime member places an order these product from the
amazon prime hub is delivered rapidly (60 minutes) from the time of order placement. These
buildings will be built out throughout 2016 and beyond. These buildings can also be used as
retail stores as they enable customers to receive their product in one or two hours or same day.
The table below list the few amazon prime now hubs:
What is Dragon Boat?
Amazon’s ambition is to build a Global Shipping and Logistics Business. This project is internally
called as Dragon Boat. It is a project to launch a new business called Global Supply Chain by
Amazon. This new initiate will have direct competition with companies like FedEx and UPS. It is
reported that Dragon Boat will be a revolutionary system, which will automate the entire
international supply chain and eliminate the waste associated with document handling and
fright booking.
The strategy aims to control the entire delivery process, right from picking up the product at
the factory to delivering it to the end customer in United States. This will help Sellers to book
directly with amazon bypassing local couriers like UPS, DHL or FedEx.

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Global supply chain business will place Amazon at the center of a logistics industry which
involves shippers like FedEx, UPS, legions of middlemen who handle cargo and paperwork
associated with transnational trade. Amazon will bypass these brokers, will provide a massive
inventory from thousands of merchants around the world and buying space on trucks, planes
and ships at reduced rates. Amazon’s “one click-ship for seamless international trade and
shipping” will help merchants to book cargo space online or via mobile devices.
Ease and Transparency:
The ease and transparency by removal of middlemen will be revolutionary and sellers will no
longer book with DHL, UPS or FedEx but they will directly book with Amazon given the
competitive pricing.
As per reports amazon plans to partner with third-party carriers to build the global enterprise
and once the business reaches sufficient volume and amazon learns enough to run it on its own
they will then gradually squeeze them out.
After predicting a small increase in the flow of merchandise from Amazon sellers in one country
to buyers in another, in 2013 Amazon laid out its logistics strategy. The company described it as
“revolutionary system that will automate the entire international supply chain and eliminate
much of the legacy waste associated with document handling and freight booking”
Global Supply Chain business will rely on networks of merchants in manufacturing nations like
China and consolidate their inventory in shipping hubs. Global Supply Chain business and the
operation Dragon Boat will close the gap between merchants in China and India. Global supply
chain business will open cross-border commerce to smaller merchants. This will help amazon
shoppers around the world to shop from a massive variety of products.

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Conclusion:
Amazon has already started working on this Dragon Boat project of Global Supply Chain
Business. San Francisco Logistics Company has reported that Amazon’s Chinese subsidiary
registered in the U.S. as a Non-Vessel Operating Common Carrier, enabling it to provide ocean
freight services to other companies in the $350 billion ocean freight industry. And as reported
Amazon was said to be leasing 20 Boeing Co. 767 freighter jets to control more of its delivery
and cost.
And we should also take time to think about the strategy of Sortation Centers. It is true stroke
of genius that makes perfect sense. Person who thought about Sortation Center strategy should
be congratulated, because it is truly a winning strategy that is based on sanity.
This two initiates by Amazon will truly help Amazon to overcome its weakness and place
Amazon at the center of a logistics industry.

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References:
http://www.mwpvl.com/html/amazon_com.html
http://www.mwpvl.com/html/amazon_building_new_sortation_network.html
https://www.bloomberg.com/news/articles/2016-02-09/amazon-is-building-global-delivery-
business-to-take-on-alibaba-ikfhpyes
https://www.inddist.com/news/2016/05/report-amazon-reaches-out-tech-companies-about-
shipping-software?cmpid=horizontalcontent
http://www.computerworld.com/article/3032656/retail-it/amazons-supply-chain-move-could-
prove-devastating.html
http://www.businessinsider.com/leaked-documents-about-amazons-global-logistics-business-2016-2
http://www.businessinsider.com/leaked-documents-about-amazons-global-logistics-business-2016-2
http://qz.com/636404/how-amazon-is-secretly-building-its-superfast-delivery-empire/
http://www.saycocorporativo.com/saycoUK/BIJ/journal/Vol1No1/article_4.pdf