Rapid fulfillment on an unprecedented scale: interview with Amazon.com's Dave Clark
Amazon.com has become a dominant online retailer through a combination of vast product offerings and speedy order fulfillment. The secret, says Dave Clark, is in the people and the technology.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
On Black Friday this holiday season, e-commerce behemoth Amazon.com had 29 million visitors, according to a report in Forbes magazine. On Cyber Monday, Amazon led all other e-commerce businesses. While overall e-commerce sales enjoyed a healthy 17-percent jump over 2011 Cyber-Monday levels, Amazon's sales for the day climbed 42 percent, according to Businessweek.
Those millions of visits mean millions of orders, and getting those orders out the door for delivery to customers as soon as the next day—or in some cases, the same day—is an enormous undertaking for the company's fulfillment operations. Add rapid growth to the mix, and the challenge becomes mind-boggling. Yet it's one that the company meets thousands of times a day.
Overseeing that vast fulfillment operation is Dave Clark, vice president of global customer fulfillment for the online retailing giant. He is responsible for the company's supply chain, transportation, and fulfillment networks in North America, Japan, and Europe.
Clark, who holds an M.B.A. from the University of Tennessee and a B.A. from Auburn University, has been with Amazon through most of its growth. He joined the company in 1999, four years after its founding and two years after it went public, at a time when it was rapidly expanding the number of fulfillment centers it operates. Since then, he has held several key roles at Amazon, including general manager of a fulfillment center in Pennsylvania and regional director of operations. He was promoted to his current position in January 2012.
Editorial Director Peter Bradley talked with Clark at the Council of Supply Chain Management Professionals' Annual Global Conference in October about Amazon's hyperefficient fulfillment machine.
Q: There's been a lot of speculation about upcoming changes in Amazon's fulfillment strategy. Can you tell me what's ahead? Will same-day fulfillment be part of Amazon's future? A: We have had some incredible growth over the years and continue to have that. We expanded the network substantially. There are 75 fulfillment centers (FCs) around the world. In the United States, we continue to expand as well. We target development of FCs based on a couple of things, but as with everything we do, it starts with the customer. So we begin by asking questions like: Where are the customers? What is customer demand? We love to have our fulfillment centers as close as possible to customers.
Our priority is around improving the experience of our Amazon Prime customers. [Subscribers to Prime service get free or low-cost shipping as well as other benefits for a flat annual fee.] Prime customers now have a suite of opportunities, ranging from free two-day and discounted one-day shipping to video, Kindle, and visual library benefits. Our goal is to make that Prime experience even better. We already do same-day in some places in the United States as the opportunity presents, but our focus is really on the Prime service today.
Q: You've spent a lot of money on technology, both software and hardware like Kiva's order fulfillment robots [Kiva was acquired by Amazon in May 2012]. How does all this technology fit into your strategic business plans? A: We are super excited about the Kiva team. They are a great group of people and a great technology platform. Right now, we are still working through exactly how we want to deploy it across Amazon.
We really do essentially no third-party software solutions. We do everything in house because so much of what we do is very specialized and because all the decisions we make in technology are based on what we want to do for the customer.
Q: What are the criteria for determining where you're going to invest technology dollars? A: It is really a simple function. What is the best thing for the customer? What is going to provide the most benefit to the customer by either enabling greater selection on the platform, through enabling a faster delivery, or being able to lower prices?
I'm always amazed at the selection that is on the site and how much customers buy across that full selection of product. We always get questions relative to why we carry the tail [items with relatively low demand] because the typical distribution model wants to get rid of the tail. Operators don't like the tail. It is painful. It is highly variant—the cost to store it, what have you. But customers like the tail. It turns out selection is something people really care about, and so we leverage a great group of people in technology to find solutions to be able to deal with it.
Q: Amazon customers, like me, have come to expect next-day or second-day delivery as routine. What does it take in the design of both your DC operations and your logistics network to make that possible without breaking the bank? A: This goes back to the technology that you talked about. We are very focused on a couple of things. One, hiring and developing the best industry talent there is. We've had a long history of recruiting great people and great technologists, whether it be physical engineering, software engineering, or supply chain engineering types of folks. The other is the technology backbone that allows us to manage the inventory placement, order allocation, and facility design for the supply chain network.
Q: Let's talk a little more about the technology. Your customers interface with some of your technology directly, but a lot of it is not visible to consumers. Tell me something about how you bring all that together. A: They all have to work together, right? It is again part of why we do everything ourselves in house, because if you are trying to optimize for the customer and not each discrete portion of the operation, then everything has to be able to fit together. The system is looking at your order vs. the thousands of other orders placed around the same time or currently in the system and saying, OK, what is the best way to optimize this pool of orders and distribute it across a nationwide network? And to do it at the lowest cost that meets the standard of speed we need to achieve? Every step of the process, we're constantly running another optimization around the best place to allocate that order and the best transportation method to allocate that order and the best package type to allocate that order.
Technology is so ingrained in the way we think about solving problems and the way we think about creating innovations for customers that we really don't have an IT department. What we have are technology teams embedded in business teams, so they really work as one unit. Every team is thinking about innovation on a regular basis and how to leverage technology for innovation.
Q: Interesting. If it ain't broke, fix it anyway. A: If it ain't broke, it's probably just because you don't know it's broken.
Q: You've had an insider's view of many of the things that have enabled Amazon's growth. What are some of the major elements that make for a successful supply chain? A: There are two big things I would point to. One is hiring and developing the best. In fact, that's one of our core principles at Amazon—hiring and developing the best talent. We have done it for a long time and continue to do it because getting the right analytic and leadership firepower in your leadership team is critical to being successful.
The second part is integrating technology into the daily life of all the teams. There is no team that I know of in operations that isn't in some way connected to technology or embedded with technology teams. I think these are two things that I've seen over my time at Amazon that have really allowed us to be successful.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.