Amazon Transportation Services (NASDAQ: AMZN)

In 1994, Jeff Bezos delivered Amazon’s first customer packages to the local Seattle post office by hand. Over the span of 26 years, what started as a book-selling website is now a global enterprise, servicing 300 million customers in over 200 countries and territories. This year, our transportation network celebrated the delivery of our 10 billionth customer package, and counting. So, how did we get here? How did a local Seattle startup build the capacity of an interconnected transportation network of planes, trains, trucks, and vans, capable of managing two- , one-, even sub-same day delivery?

It all starts with Amazon’s customerobsessed approach, which drives innovation from all corners of our operations team. Combining customer obsession with an innovation mindset enabled us to build and optimize our global supply chain so we can meet the needs of our customers, especially during this time when people continue to rely on getting what they need delivered directly to their doorsteps. We couldn’t do that without technology - it’s the backbone of our operations, and helps us drive efficiencies and scale our network so we can support our growing customer base.

Building the Model

Historically, Amazon used to work almost exclusively with large, nationwide delivery companies and established regional delivery companies. As demand for deliveries grew, we saw an opportunity to build our own capacity so we could better control our network. Since 2014, Amazon built and scaled an entire global transportation network from scratch, developing the tools needed to ensure consistency and reliability of the end-to-end Amazon experience for our customers. My team at Amazon Transportation Services is responsible for our air, line haul and sortation and returns and re-commerce networks, which is referred to as “the middle mile,” or as I like to call it, the heartbeat of our operations, which ensures a smooth transition into the “last mile” for customer delivery. We started by partnering with small trucking businesses to haul loads for Amazon in between our customer fulfillment and last mile delivery sites. Now, we work with more than 1,200 line haul service providers employing more than 13,000 drivers. We also utilize our Transportation Operations Management team, which is made up of amazing Amazon associates who work in our trucking yards to manage inbound capacity and keep freight flowing. This joint effort of our associates and partners helps us autonomously manage our freight operation. To put this into context, in North America on the Sunday after Thanksgiving this year, we delivered over 21,000 truckloads compared to 5,000 loads on the same day in 2017, giving you an idea of how the team has scaled.

"As we saw the need for faster delivery grow, we implemented systems that would enable us to travel longer distances within shorter Time Frames "

As we saw the need for faster delivery grow, we implemented systems that would enable us to travel longer distances within shorter timeframes. In 2016, our dedicated air cargo network, Amazon Air, took to the skies. We now operate more than 70 aircraft in our fleet, flying to over 35 air gateways and regional hubs across the country. In 2021, we will open our first central air hub at the Cincinnati/ Northern Kentucky International Airport.

We also have expanded a network of sort centers to more than 100 sites this year, enabling us to better sort packages by zip code prior to customer delivery. As I mentioned, a strong middle mile is catalyst to ensuring a smooth transition to our last mile, and a positive experience for our customers. We have innovated and built a network that creates magical experiences for our customers every day.

Optimizing Through Technology

The crux of our growth lies with technology. Our freight, air and sort networks all use it, and especially for more established industries such as freight, it’s exciting to see the adoption of new technology happen first-hand. We’ve always thought of ourselves as a technology company that manages logistics, so when we think of IT and the products we want to create, we do as we always do – start with the customer and work backwards. That, in turn, drives our technology investment.

Amazon Relay is a great example. We saw a need for the trucking industry to have a more streamlined connection point between small and medium-sized carriers, their drivers and shippers. We developed Amazon Relay, a suite of technology services that would otherwise be proprietary to a company or come at a cost, which help businesses compete in the trucking industry. Relay for Carriers is an offering within that technology that gives small freight carriers the flexibility to book and haul available Amazon loads utilizing their free capacity. We have also adapted our tech to keep up with the new realities of COVID-19, including automated/ touch-free arrivals and the ability to send driver safety alerts through the app to help keep our people and our partners safe.

Other examples of where we’ve made technology advancements within our freight business include:

• Machine learning for planning and routing algorithms to increase route efficiency.
• Tracking every load and automatically surfacing disruptions when things don’t go as planned (e.g. weather, traffic, etc.).
• GPS on our network of more than 30,000 trailers to ensure drivers are using the safest and most efficient routes.
• Geo-coding and auto check-in at our facilities for more efficient pick up and drop off.
• Safety mechanisms on our tractors, including the latest collision avoidance, automated emergency braking, lane keeping, fatigue management and blind spot warning technologies.

For Amazon Air, it all comes down to performance and planning. We use technology to optimize our network design, meaning we are finding the most efficient routes to reduce unneeded time our aircraft are in the air. We also utilize robotics technology at our Amazon Air and sort center sites, which help safely process, sort and move packages around our facilities.

 Scaling Through Partnership Our tech resources have allowed us to forge strong partnerships, which has been critical to scaling our network. Small businesses are a growth engine for Amazon, and our partnerships have helped small businesses grow and compete in the logistics industry. That’s because traditionally, smaller carriers haven’t had access to tools and technology to be successful. Today, 80 percent of Amazon’s current line haul network is made up of small businesses.

As we look to the future, partnerships that drive sustainable solutions are a priority for us. Transportation is a major component of Amazon’s business operations and a key part of our plan to meet our goal of becoming net zero carbon by 2040. We are committed to optimizing and transforming our transportation network through innovations in electrification, efficiency enhancements, and alternative delivery methods. This work depends on us working with partners across transportation and logistics to find solutions and alternatives to decarbonize our transportation operations.

I am so proud of the work the Amazon Transportation Services team has put into the incredible growth of our middle mile network. We have created the technology that enables tens of thousands of small and medium sized businesses to grow, improved the speed and performance of our delivery network and delivered magic to our customers – more than ten billion times to-date. We can’t wait to share what’s next.