Amazon.com has been launching fulfillment centers at a quick pace since it announced earlier this year that it could create over 100,000 jobs from the U.S. over the next 18 months.
But the latest business news regarding a fulfillment center caught attention since the project will be constructed on property in which a former shopping mall once stood. Let us find out why this former mall site is so complementary to the corporation's expansion plans.
Amazon is sending more stuff than ever
Amazon posted 25% year-over-year revenue increase in its latest quarter, but the business is experiencing even quicker unit expansion during its fulfillment centers to the tune of 40%. A key driver of this growth is the success of the Fulfillment by Amazon (FBA) program, which enables third-party sellers to list their products on the Amazon's market when using the business's fulfillment centers to shop and send ordersfrom online shopping.
Brian Olsavsky, Amazon's chief financial officer and senior vice president, highlighted the joint benefits of both FBA and its popular Prime membership:
We're quite satisfied with the FBA program. We all know clients actually like it, the extra choice that FBA provides.
As more consumers sign up for Prime -- and boost their spending Amazon and its vendors as a result -- FBA volume goes up as well. Olsavsky also suggested that the company is matching the achievement of the FBA program using a "30% increase in square footage", which means building new fulfillment centers -- a lot of them.
Converting a mall into a logistics center
One of these, in North Randall, Ohio, is on the Website of this now-demolished Randall Park Mall, after the biggest mall in the United States. It is not surprising to me that Amazon chose a former mall site instead for its own expansion.
The property offers a variety of benefits for the e-commerce business. The footprint needed for the 855,000 square-foot centre and parking lot is about 67 acres, which the mall readily provides. The drive to Pittsburgh, Detroit, or Columbus is under three hours, placing the warehouse in close proximity to more than 3 million individuals. Being situated close to clients reduces Amazon's shipping prices and makes it much easier for the company to supply Prime orders in 2 days, 1 day, and even on the same day or within the hour.
Productivity improvements can not keep up with expansion
Not all this capacity growth comes from creating new warehouse space -- some comes from efficiency improvements at existing facilities. In its 2014 yearly report, Amazon said it had been on the eighth production of its fulfillment center, that's the culmination of "robotics, vision systems, and nearly twenty years of software and mechanical invention to meet customer requests." At the moment, the business reported utilizing 10,000 robots in 10 fulfillment centers. Currently the company is thought to have over 80,000 robots deployed in 25 fulfillment centers, but that is still a small part of its complete facilities.
Reports say the company will spend $177 million on this newest project in Ohio, and it'll take several years before it is entirely up to capacity. Darin Manney, head of Amazon's investor relations, suggests that new centers take up to three years for the desired "network efficiency."
With such tremendous unit development, Amazon can't enhance its capacity fast enough to keep up with demand. But with more than 400 malls having closed their doors in the U.S., Amazon should have lots of places to build out its network for the near future.
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