How Amazon is streamlining fulfillment

Using home-grown software and business processes to build efficiency into its fulfillment operation, Amazon.com Inc. has increased the operating capacity of its 19 fulfillment centers by 25% while cutting nearly in half its fulfillment costs as a percent of revenue, vice president Cayce Roy said at the Retail Systems Conference & Exposition in Chicago today.

“We see our fulfillment network as a whole,” Roy said. By sharing best practices across its centers, which are located across North America, Europe and Asia, Amazon has reduced idle time in its fulfillment centers by 70% while increasing fulfillment center space utilization by 43%, he said.

Amazon, which handles fulfillment for retail partners such as Bombay Co. and Toys “R” Us in addition to Amazon.com, uses home-grown software built on open-source architecture to devise optimal inventory levels at each of its fulfillment centers, Roy said. For example, the software uses algorithms that factor in real-time order data and ship dates to develop optimal pick, pack and ship processes for Amazon and its retail partners.

Amazon expects to add three to five fulfillment centers in the near term, but fewer than it would have needed without its increased efficiency in fulfillment operations, Roy said.