As the Christmas shopping season approaches, Amazon is adjusting its extensive delivery network to ensure customer orders arrive on time. To that end, the company is testing a new inventory storage service to help meet holiday demand and next-day delivery commitments without overcrowding or product out-of-stock.
The new service, called Amazon Storage and Replenishment, allows merchants to store inventory near Amazon’s distribution points to quickly replenish products. Amazon is currently testing the service in Ontario, California. In addition, Amazon plans to expand the program to other outlets across the country.
After spending billions of dollars to build a network of highly automated warehouses that use robots, conveyor belts and thousands of workers to quickly pack and transport products, Analysts say, Amazon is now turning to an absolute 20th-century innovation: cheap warehouse space.
Amazon’s warehouse capacity is a huge challenge during the Christmas shopping season. Amazon shares warehouse space with merchants who sell products on its marketplace, and every time it goes shopping, it raises storage fees to stop these partners from piling up too many products in their warehouses. But the problem is that this can lead to over-cautious merchants and the risk of amazon sales losses. It also frustrates Amazon’s merchant partners, who pay a large fee to store products they can’t sell.
The new service is trying to address both issues: cleaning up expensive warehouse space while having back-up stock nearby. Analysts say the service is the latest effort by Amazon to further extend upstream of its supply chain to control the flow of goods from factories that make products to customers’ homes.
By taking more control over logistics, Amazon believes it will no longer be hit by the costly disruptions it faced in the US and 2015.