Amazon Using Logistics for FBA Orders, Pushing Ahead on Drones

An Amazon executive said the company at this point is just using its recent investments in logistics and transportation to handle internal capacity, including servicing sellers using its Fulfilled by Amazon (FBA) program where it handles third-party orders.

“That capacity is going to be available to third parties,” Paul Misener, vice president of global innovation policy and communications for Amazon, said recently at Home Delivery World. “If you’re an FBA seller with inventory in our fulfillment centers, that needs to be moved. All that logistics infrastructure is going to be moving third-party products as well as retail products.”

Misener said the disastrous holiday season in 2013, when a perfect storm of issues led to about 1 million late deliveries, many from Amazon itself, as the impetus for the logistics push. He added Amazon continues to work closely with all three major carriers, especially the U.S. Postal Service. “We’ve testified before Congress when the USPS was considering cutting Saturday delivery,” Misener said. “We told them, don’t do that, add Sunday. That infrastructure was sitting idle, and it allows us to better serve our customers.”

[Related content: Amazon Planning a $1.5B Air Hub in Kentucky]

Misener wouldn’t comment on whether Amazon planned to use its recent investments – including the purchase of cargo jets, tractor trailers and a major investment in ocean freight forwarding from China – to sell logistics as a service outside of its own volume or FBA customers. This model has proven extremely lucrative in the case of Amazon Web Services.

Many observers have speculated that “logistics as a service” is the company’s ultimate goal, given all of these moves.

Misener also gave an update on Amazon’s drone delivery program, Prime Air.

“I think it’s finally to the point where people don’t come up to me and ask, is it real?” he said, adding he was on the team that wrote the drone PR and FAQ years in advance, part of the company’s innovation DNA. “It’s very easy to get distracted by how cool the technology is. This is a means to an end, meeting the dilemma of how to accommodate a customer who needs an item delivered within 30 minutes of their order. We’ve tackled two-day and same-day delivery; now it’s that 30-minute barrier. Customers ask themselves, ‘Do I do without it or jump in my car?’ That’s not a good choice.”

[Related content: Drone Delivery Closer to Reality with New Eased FAA Rules]

Misener said Amazon is working closely with the Federal Aviation Administration (FAA) on the best use of airspace, and has incorporated “sense and avoid” systems to make drone use safe. “This is something requiring a lot of regulatory approval and public acceptance. We won’t deploy them until we can guarantee public safety. We’ve hired former military pilots and a former astronaut.”

He also said Amazon innovations like drone propeller design have been used by others. The drones themselves weigh less than 55 lbs., can travel up to 15 miles and carry items weighing up to 5 lbs., representing a “vast majority of items” in Amazon’s inventory.

“This is very real – it’s not just batteries and toothpaste, but a whole host of things,” he said.

Mike O’Brien is Senior Content Manager of Multichannel Merchant

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