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Amazon and Walmart: A Repeatable Delivery Playbook?


Amazon Walmart - A Delivery Playbook?

Amazon and Walmart are two retail giants that have been leading the way in last mile delivery solutions. With the rise of e-commerce and the demand for fast, efficient delivery options, both companies have implemented strategies that have revolutionized the way packages are delivered to consumers.

Thanks to their last mile delivery systems, both Amazon and Walmart have reported cost reductions, bolstered orders, and improved efficiency. In this article, we’ll look at how businesses can take inspiration from their approaches. 

Overview of Amazon and Walmart delivery offering

Amazon, with its Prime membership program, offers free two-day shipping for millions of items, along with same- and one-day delivery options in certain locations. The company has also invested heavily in its own delivery network, including drones and autonomous delivery vehicles, to further streamline the process.

Walmart, on the other hand, has focused on leveraging its vast network of physical stores to fulfill online orders. The company offers free same-day pickup for online orders at its stores, alongside its membership-based Walmart+ same-day delivery service.

Amazon: Harnessing the power of technology and regionalization to accelerate delivery

Amazon delivered to Prime members at the fastest speeds recorded globally, with more than seven billion units arriving the same or the next day. This included more than four billion in the US and more than two billion in Europe.

In Q4 of 2023, Amazon increased the number of items delivered in the US by 65% year over year with same-day or overnight delivery.

How was this achieved?

By regionalizing delivery, Amazon was able to shorten delivery distances, improve inventory placement, and expand its same-day delivery service—leading to its fastest global shipping speeds to date. 

Technologically, Amazon deployed AI and machine learning infrastructures and algorithms. This allowed it to analyze customer demand and optimize inventory placement. These implementations also support Amazon’s customer-centric approach which focuses on meeting customer expectations for price points, selection, and delivery speed. 

What’s more, Amazon’s tech investment means that 75% of all global customer orders are delivered with the assistance of robots working within its operations.

Continued advancements and strategic implications of Amazon’s success

The year 2024 sees the marketplace giant continue to expand its drone delivery networks across the UK, Italy, and a new US location. It also intends to grow its same-day delivery service globally, and further regionalize its network to increase delivery quantities. 

In addition, Amazon plans to increase its integration of robotics further, with an aim to enhance efficiency, reduce costs, and create safer working environments. 

The strategic implications of Amazon’s success mean an elevated competitive landscape. Amazon’s relentless focus on speed and convenience sets a demanding benchmark for traditional retailers, necessitating significant innovation and strategic adaptation. 

Walmart: Maximizing store network to expand and densify last mile delivery

Walmart’s store-fulfilled delivery sales increased by 50% in Q4, achieving a $2bn monthly run rate. This has saved on unit economics by spreading delivery costs across its large customer base. In addition, its delivery services and Walmart+ membership have been crucial in attracting upper-income households, further expanding in-store orders and the customer pool.

Walmart also reduced its last mile delivery costs by 20% in 2023, while increasing efficiency and delivery volumes. 

How was this achieved?

Walmart “densified” the last mile by delivering more packages per route. Walmart’s particular advantage lies in capitalizing on its network of 4,700 brick-and-mortar stores within 10 miles of 90% of the US population. More than 4,000 of these stores have become fulfillment centers (FCs) and delivery hubs. 

To enhance last mile efficiency, Walmart introduced parcel stations at its stores to streamline package delivery from FCs to customers through independent contractors or third-party carriers. These parcel stations not only extend the time customers can place online orders for next-day delivery but also facilitate easy and efficient distribution of online orders from stores.

Continued advancements and strategic implications of Walmart’s success

Walmart is incorporating more automation in its fulfillment and distribution centers to further improve delivery unit economics. With the latest technology implemented in five of its 31 FCs, these automated sites can double the capacity and throughput compared to traditional centers, offering significant efficiency gains in delivering packages to customers.

Walmart intends to continue expanding its parcel stations to another 40 locations, as well as using its private fleet network. 

Walmart’s ability to lower delivery costs and improve efficiency through innovations like parcel stations and automation sets a benchmark for competitors to streamline their own delivery processes.

Replicating Walmart and Amazon’s success

Retailers can use their stores and FCs to recreate Walmart and Amazon’s offerings. This involves regionalizing their networks, diversifying the last mile, and integrating technological advancements.

Regionalizing the network for speed and efficiency

Traditional retailers already have a head start with their existing stores. If they optimize store and FC placements and utilize them effectively for fulfillment, they can establish a similarly robust regional network. 

Furthermore, by analyzing regional customer demand, businesses can strategically divide operations based on population density, order volume, and proximity to fulfillment centers or stores, enabling traditional retailers to utilize store-based fulfillment and optimize inventory placement. 

In addition, route optimization and real-time tracking allow retailers to densify the last mile—reducing costs, increasing order fulfillment, and offering shorter delivery times for customers, with greater flexibility.

Diversifying the last mile 

Diversified delivery services that include strategic partnerships with Delivery Management Platform (DMP) providers help to unlock last mile delivery excellence. This was made apparent by Amazon’s heavy investment in expanding its same-day delivery service, with customers now expecting lightning-fast service. 

To achieve this, companies must offer a variety of order and delivery methods, such as same- and next-day, click-and-collect, curbside pickup, and subscription-based models. Alongside this, premium services such as designated delivery windows, white-glove delivery, and personalized concierge services increase profitability while offering convenience and a luxury experience for the consumer.

Working with a DMP that can facilitate third-party, in-house fleet management, or a hybrid model is imperative to achieve this. Walmart, for example, integrates its store infrastructure with online platforms to utilize both in-house and third-party delivery services. 

DMPs can help businesses choose the right delivery mode for each order based on factors like profitability, order density, and distance. Analyzing these factors and assigning orders to the most efficient delivery method allows businesses to optimize resource allocation.

This also expands a business’s geographic coverage, especially when coupled with advanced logistics capabilities that include drones, cargo planes, and delivery vans.

Technology powering the engine

Technological advancements are key for businesses wanting to replicate Amazon and Walmart’s last mile delivery success—and to meet increased customer demand and expectations. 

A sophisticated order routing system integrates order details, inventory availability, and delivery options to determine the most efficient fulfillment and delivery pathways. This might involve splitting orders (sending items from different FCs) or consolidating packages for streamlined delivery routes. Plus, real-time tracking enhances the customer experience with accurate and transparent delivery updates and maximum flexibility.

Investing in automation and robotics in warehouses and FCs can further streamline order fulfillment processes, reduce manual labor, and increase operational efficiency. Automated picking and packing systems and autonomous vehicles can accelerate order processing and minimize errors. They can also speed up delivery times, thereby improving customer satisfaction. 

Likewise, employing AI algorithms to analyze vast amounts of data helps to predict demand patterns and optimize inventory placement within the regional network, ensuring readily available stock at the closest FCs for rapid fulfillment. Both Amazon and Walmart use this technology to position inventory, minimize transit times, and reduce stockouts.

DMPs: The future of last mile delivery

Customers increasingly expect a seamless last mile delivery experience, with exact ETAs, ease of returns, and on-demand, same-day delivery. Amazon and Walmart’s methods highlight their focus on efficiency, speed, and leveraging technology to improve the end-to-end delivery experience with great success. 

With technology such as AI, machine learning, and robotics, this further emphasizes the need for centralized DMPs to meet increased customer demand and expectations. 

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