June 11, 2024

Amazon’s fulfillment network restructure: How to adjust your shipping strategy

Amazon has successfully restructured its national network of U.S. fulfillment centers, intermediate sorting centers, last-mile delivery hubs, and transportation fleet into eight largely self-sufficient regional networks. This “regionalization” ensures that e-commerce parcels are delivered from local centers closer to consumers. By reducing delivery distance and transit time, Amazon makes it easier to achieve same-day or next-day delivery for more orders, thereby lowering last-mile delivery costs. Let’s explore what this means for Amazon and how you can adjust your shipping strategy.

Amazon Regionalization Network

What does regionalization mean for Amazon?

Shirking costs

Amazon is facing rising warehouse rents this year, with leases typically lasting over 7 years, sometimes even 10 years. Amazon expanded by less than 20,000 square meters last year and is expected to be very restrained in warehouse expansion over the next couple of years.

Another major cost is labor. Last year, Amazon laid off 17,000 employees but added an average of 1,000 robots per day. By 2030, they plan for robots to outnumber employees.

Speeding up delivery

In 2023, Amazon claimed to deliver over 7 billion items on the same or next day at the “fastest speed ever.” Regionalization is proving effective, with regional order fulfillment increasing from 62% to 76%, and expected to climb further.

This shift has also optimized the national network, with fewer FCs shipping more packages to each destination allows for more efficient FC-to-delivery station direct routes.

Revolutionizing physical retail

Amazon’s ambition extends beyond cross-border e-commerce; it aims to disrupt grocery shopping habits with ultra-fast delivery, potentially creating new business models across various industries.

Years of Amazon infrastructure development have raised the bar for e-commerce logistics, challenging brick-and-mortar stores. After all, no one can resist low prices and fast delivery. Waiting for your order at home is much more convenient than driving to the supermarket and waiting in line.

How does regionalization affect e-commerce sellers?

E-commerce sellers need to increase stock levels, achieve faster turnover, and operate more precisely.

Larger sellers can adapt more easily, while smaller sellers should focus more on popular SKUs and categories. They must avoid the burden of suppliers’ minimum order quantities and maintain sufficient stock in different regions. Those with wide product categories need to narrow their SKUs.

More challenges are:

  • First-leg costs have skyrocketed, with storage fees for some categories exceeding profits.
  • Sellers have no control over unexpected logistics delays, disrupting inventory flow.
  • Minimum order quantities set by their suppliers cannot be adjusted.
  • A single channel has too many uncertainties.
  • Sellers need time to improve their supply chain management.

How should e-commerce seller adjust their logistics strategy?

After Amazon’s regionalization, some product categories are not suitable for using FBA anymore. Sellers may need to consider shifting from FBA to third-party warehouses. Options include:

  • Maintaining inventory in multiple fulfillment centers to serve both FBA and other platforms.
  • Using a central fulfillment center to distribute products across multiple platforms.
  • Partnering with end-to-end warehousing service providers for local delivery to FBA.

How can sellers meet the different shipping requirements of e-commerce platforms? Consider using one fulfillment partner to serve multiple platforms and placing the right products in the most convenient fulfillment center, sellers can maximize profits and minimize risk effectively.

CIRRO Fulfillment - U.S. No. 8 Fulfillment Center in Ontario, California

Why CIRRO Fulfillment can remove your hassles

To match Amazon’s current delivery speed with its regionalization, each region would theoretically require an average of 200,000 square meters of warehouse space. For the eight regions in the United States, this totals 1.6 million square meters. This might seem challenging, but don’t you worry.

Similar to Amazon, CIRRO Fulfillment has established multiple regional fulfillment center clusters in the U.S., with seven major clusters in North America (including fulfillment clusters in Canada and Mexico) totaling 850,000 square meters. These centers reduce delivery distances and optimize operational performance.

CIRRO Fulfillment_Fulfillment network in the U.S.

With notable additions in Chicago, Dallas, and Savannah, we can ensure that most orders to be delivered within 2-4 days. This helps sellers optimize their multi-warehouse setups, improving delivery speed and reducing costs.