The secret to Amazon logistics is embracing chaos

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When Dave Alperson got his first job at an Amazon warehouse in 1997, as a temporary hourly employee, it involved walking around the warehouse with a list of where to find products—mostly books—that customers had ordered. Twenty years later, as a regional director of operations for Amazon in Indiana, he oversees 18 warehouses that barely resemble where he started. Amazon now sells millions of products; each of its 149 warehouses ship tens of thousands of them each day; and those warehouses now look like live-action games of Chutes and Ladders—whizzing with a meticulously coordinated system of conveyor belts, slides, and machines that do everything from attach labels to boxes to check weight for quality control. In the process of building this elaborate system, Amazon has completely redefined warehouse efficiency and customer convenience. Through its Prime membership, it has promised tens of millions of customers free two-day shipping on more than 100 million products, and, last year, it shipped 5 billion items to them. “That was the major innovation,” says Daniel Theobald, who cofounded a warehouse robotics company called Vecna in 1998 and counts major retailers and logistics companies as clients. “As soon as people realized, you can order something and get it tomorrow, that turned the industry upside down.” The core of this disruptive efficiency, though, is not Amazon’s automated shelf-moving warehouse robots, which is the innovation that gets the most attention. And it isn’t, on its surface, something that you would associate with a well-oiled machine. It’s not even a breakthrough technology. In fact, some version of it was already in place when Alperson worked in Amazon’s early warehouses. What makes Amazon’s warehouses work is the way they organize inventory: with complete randomness. At a traditionally organized warehouse, when a shipment of, say, toothpaste arrives, an employee looks up where the toothpaste shelf is located, and then moves the box to that shelf. When a box of toothpaste arrives at an Amazon warehouse, though, the process works differently. An employee removes each individual tube and stows it wherever he finds open space. Placement is completely random. Items aren’t organized by where they’re being shipped; they aren’t—aside from very big items—organized by size; and they aren’t organized by the type of customer who is likely to order them. A shipment of 50 tubes of toothpaste may ultimately be distributed to and stored in 50 different places. On a visit to an Amazon warehouse in New Jersey last year, I saw a box of Irish breakfast tea, next to a board game called “Quick Cups,” next to a Hamilton Beach Juicer. This random system has been in place since early on in Amazon’s 24-year history, and to a casual observer, the result appears chaotic. The reason it makes sense to group these random products together has everything to do with technology: the speed and frequency with which customers order online, and the tools that Amazon has developed to keep track of every item in its vast warehouses. First, random storage makes finding the toothpaste faster in an era of on-demand efficiency. If there were a dedicated “toothpaste shelf” and someone ordered toothpaste, a “picker”—how Amazon refers to employees who gather items—would need to travel there, whether he were 10 feet or 100 yards away from that location. But if the warehouse stores toothpaste in 50 different locations, there’s a much better chance that there’s a tube close to some picker. There’s also a greater chance that the second item the customer ordered is also nearby. “With the millions of items that we ship, every opportunity to improve a process by a second is relevant,” Alperson says. Randomness is also preferable when it comes to managing the wide range of items customers now order online—most practically by saving space. Amazon warehouses carry a huge variety of items that can be ordered at any moment, but they do not carry a huge number of each item. “They may only have one box of Cheerios,” says Tom Galluzzo, the founder of Iam Robotics, which makes warehouse robots. “If you were to have a space for every product, you would need a gigantic warehouse.” Amazon’s largest warehouse is already 1 million square feet, which is about 17 NFL football fields in size. Reserving empty space on the “toothpaste shelf” while waiting for the next shipment of toothpaste would mean its warehouses would need to be even bigger. It’s more efficient to use any free shelf space available. That Amazon and other ecommerce companies sell directly to customers (as opposed to retailers) is also a factor in making randomly stowing items efficient. They ship a single tube of toothpaste to a customer, not a box of 50 tubes to a store, so there’s no reason to keep all 50 tubes together in the warehouse. They’ll be unbundled before they’re shipped out, in any case. Amazon didn’t invent this strategy, but the company has employed it at a scale that ha...

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