Update on Amazon’s fulfilmentCenter (FC) Network

September 25, 2014

Marketplaces Scot Wingo By Scot Wingo

Every year as we head into the fourth quarter holiday selling season, we roll up our sleeves and update our database of Amazon fulfilmentCenters (FCs).  The job has gotten easier over the years as Amazon now announces most of the new FCs with local press, or talks about them on earnings calls.

In this post there are five Amazon FC related resources for you:

  1. Background and summary of Amazon’s FC buildout
  2. North American interactive map
  3. European interactive map
  4. Asia Interactive map
  5. List of newly identified Amazon FCs in the last year

Background on Amazon FCs and sortation centers

Back in ~2009, I noticed that I was receiving many of my Prime purchases on the next day even though I didn’t pay for next day.  I explored and discovered that previously most of my packages came from an address in Hebron, KY and the next day packages were coming from an address much closer (we are in Raleigh, NC) in Columbia, SC.  I get to Columbia a fair amount (Go Gamecocks!) and drove by the address shortly after getting the package.  I was greeted by a giant warehouse with no branding or signage at all.  Hmmm.  We started researching and realized that it is quite hard to find detailed information about Amazon’s fulfilmentcenter network (especially from Amazon). Since then there have been several resources that have come out and Amazon has become much more open about sharing FC information.

That being said, we like to update our database annually and report on what we’re seeing.  Our last post was here if you want to check it out to compare year/year trends.

Naming, purpose, etc.

Amazon’s FC network uses a naming system that is usually a three letter code (usually the closest airport) and then a number. For example, in Phoenix, AZ you have:

  • PHX1 – The first Phoenix FC, has been retired (it was smaller footprint)
  • PHX2 –  Dame as above
  • PHX3 – A 1m sq-ft FC that replaced PHX1/2
  • PHX4 – Not exactly sure what happened here, sometimes Amazon gets temp/leased space and gives it a disignator and then moves on
  • PHX5 – 1.4m sq-ft (that’s big) facility in Goodyear AZ.  You can see it here to get an idea of what we are talking about
  • PHX6 – 1.2m sq-ft
  • PHX7 – Newest FC in Phoenix – 1.2m sq-ft, came online in 2011

In addition, sometimes FCs have specific purposes.  For example, some FCs are specialized for FBA receiving, large item storage and fulfilment(think golf bags and kayaks), small media items (books, dvds, etc.) and consumer returns.

Introducing Sortation

Last year after the UPS delivery situation, Amazon started opening a new type of building for their FCs called sortation centers.  Prior to sortation centers (SCs), the way a delivery worked is:

  1. Orders came in and routed to FC that was a) close and b) had the product in stock.
  2. Orders are all placed on a UPS truck – destinations could be anywhere in the US
  3. UPS takes them to local airport, sends them to sorting facility
  4. Packages are routed appropriately, many go through the big hub (Louisville, KY) (good article here if you are a logistics geek)
  5. Packages delivered to consumers.

In their Q2 conference call, Amazon casually said they are building/have built 15 sortation centers.  Once a sortation center is in the mix, here’s the process:

  1. Orders came in and routed to FC that was a) close and b) had the product in stock.
  2. Orders are sorted at a sortation center (usually adjacent and/or connected via conveyor belt to a FC) – SCs are 300k sq-ft vs. 1.2-1.4m for FCs, so a much smaller facility, largely conveyor belt and automation driven.
  3. Orders are placed into zip code bands (e.g. NYC-downtown, midtown, uptown, etc.).
  4. Orders are injected into different carriers (USPS if sunday delivery, UPS if not).
  5. UPS takes them to local airport, bypasses  sorting facility.
  6. Packages are routed appropriately, many go through the big hub (Louisville, KY) (Good article here if you are a logistics geek).
  7. Packages delivered to consumers.

So SCs move a big piece of the logistics value chain INTO Amazon and away from the third-party logistics company.  This has allowed Amazon to utilize USPS for Sunday delivery. (Presumably because USPS may not be able to sort and deliver fast enough for Amazon’s needs).

If you want to learn more about sortation centers, here are three resources we have found helpful:

  • Insights into the first SC opened in Kent, WA and here.
  • WSJ article here.
  • Logistics industry article here

Summary

  • North America – 75 existing, 15 in process = 90 FCs 63m sq-ft
  • Europe – 27 existing, 3 in process = 30 FCs
  • Asia – 33+2=35
  • Total – 155 FCs – ~100m sq-ft

 

Logistiscs: Amazon vs. other e-commerce/retialers 

Whenever I talk about Amazon with retailers or at conferences, I always cover the FC network because I have found most people in our industry don’t realize how big it is.  Usually the first question I get after showing the maps is ‘how does this compare to…X?’  The top X in there is Walmart, sometimes I get Target, UPS, Fedex, etc.  Let’s look at Walmart.

Walmart has ~150 distribution centers in the USA, so has a much bigger logistics footprint than Amazon, just if you compared Walmart US to Amazon global.  However, this is an apples-to-oranges comparison because a Walmart DC essentially is part of a store logistics network – trucks/pallets of products come in from manufacturers, then are sorted out to stores (back out as trucks/pallets).  This is sometimes called cross-dock and is more of a B2B function vs. online fulfilmentwhich is Trucks/Pallets in and onesy-twosy out, or B2C.

Walmart doesn’t disclose how many B2C centers they have, but what they have said:

  • In 2013, they built 2 ‘large scale’ centers dedicated to online order fulfilment(Penn and TX).
  • There is a ‘ship from store’ initiative that looks to turn all 4,200 stores effectively into their own FCs. Walmart has said 20% of items are coming from stores now vs. FCs.
  • In June 2014, they announced a 1.4m FC in Indiana.
  • Walmart has also said they have ‘online fulfillment’ areas inside some of their DCs.

So it’s hard to get apples to apples here, but if we assume:

  • 5 dedicated online FCs
  • 10% of DCs acting as FCs = 15

That’s a total of 20 FC’s equivlent to an Amazon FC in the US.  Using that math, Amazon has 90 vs. 15 or 6X (also Amazon’s FCs are generally bigger so it would be a bigger difference).

It’s impossible to factor in ship-from-store. One of the challenges that you find with BOPIS (Buy-Online-Pickup-In-St0re) is the SKU footprint.  The average Walmart Super Center has 150,000 SKUs (source: walmart’s corp site). Walmart.com has 6m SKUs (source:2014 IR500).  The math on that is 2.5% of the online SKUs are available in a store.  If you adjust for the fact that most stores have the top selling SKUs, then you get to maybe 20-30% of the products that can be shipped from store (or picked up).  Therefore, you can’t really compare the store inventory to the FC inventory.

What does Amazon’s FC growth mean for the future?

The biggest areas of growth in the Amazon FC count from 2013/2014 are:

  • State based (FL, CA, GA, NY/NJ) expansion – Amazon has been making deals with states for online tax collection.
  • East Europe – Amazon is building out several FCs in Poland and there are rumors of them launching in the Netherlands.
  • Sortation centers – As mentioned there are plans to build 15 in the US for Holiday 14.
  • India – there is one FC operational and we have found reports of 4 more being built which signals a pretty significant buildout.

Amazon is already substantially ahead of any other pure-play retailer and brick and mortar retailer when it comes to a consumer-oriented FC network.  With Amazon’s growth into the sortation process in the US, they clearly are trying to further ‘own’ the fulfilmentprocess.  Amazon Fresh (LA, SFO, Seattle) – includes product deliveries from Amazon branded trucks.  We’re receiving more and more reports of Amazon owned and operated delivering products in Prime-dense zip codes.  Therefore reading the tea leaves, some possible next steps:

  • What if Prime offers next day shipping vs. 2-day?
  • What if Amazon increased the number of metros that have same-day shipping?
  • Amazon has expanded the USPS Sunday delivery program, which indicates they are pleased with the results, so expansion of that to more metros is possible.
  • Finally, logistics experts believe its only a matter of time before Amazon has a large selection of trucks, effectively placing them in competition with UPS, FedEx and USPS.

We’ll be keeping an eye on all of these trends and keep you updated.

North American interactive map

On these interactive maps:

  • Green markers are operational FCs with their FC designators.
  • Wrenches are FCs that are under construction.
  • Blue stars  are sortation centers.
  • Green clovers – kidding!

You should be able to click on each FC to see it’s details such as size and physical address.  If you switch into satellite mode, you can even drill down to the individual buildings where we have included the complete address.

 

European and Asia interactive map

The same legend for the US map applies here.

 

This blog post was written by Scot Wingo, CEO, ChannelAdvisor.