Amazon copies logistic experts’ last-mile delivery model with network of 225 hubs

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Various factors go into providing a good consumer experience. The quality of product delivery is a key factor affects consumer happiness. Snapdeal is in the lead when it comes to online marketplace delivery speed. But, Amazon is making major efforts to improve its logistics network to improve the quality of delivery.

Before the start of the festival period the etailer:

Amazon logistics has now created a network of 225 hubs for last mile delivery.

How does the mega network function?

The etailer’s ATS division (Amazon Transportation Services) has managed to increase the number of logistic hubs under it with the help of delivery service partners. These partners oversee last-mile delivery hubs in tier 2 and 3 cities and metros. They also take care of peak season loads.

In 2013, Amazon India introduced the Service Partner network. Today, this network looks after 15-20% of the etailer’s last-mile deliveries to consumers in large metros and tier 2 and 3 cities, say experts tracking the progress in this sector.

Amazon’s copycat model for delivery expansion

This move by the foreign ecommerce player is a duplication of the expansion strategy followed by express delivery companies DTDC and BlueDart. These experts in package delivery have expanded their networks into small towns, small cities and rural areas with the help of a franchisee model.

Consulting firm Avarez & Marsal India’s Managing Director, Manish Saigal believes, “Ecommerce marketplaces look at this model in regions where there are low threshold volumes and local partner has good reach and delivery productivity in the region. This model converts the fixed last-mile cost into a variable cost model and it becomes easier to scale up or wind down the centres”

Amazon service partners are paid according to the number of packages they deliver, mentions Akhil Saxena, the Vice-President of Amazon India’s Customer Fulfilment. The program offers minimum guarantee of volume to service partners.

Were the results significant?

Before the sales season, a hundred new delivery hubs were added to the network to increase last-mile delivery capabilities.

Sandeep Yadav earlier managed ATS as a senior manager. but became a service manager four months ago. He says, “The volume of deliveries increased to four times during the sale period over the daily volumes of 200 shipments per day. We processed close to 8,000 packages per day across the 14 delivery hubs.”

Yadav now manages 14 hubs that deliver to 20 different pin codes across Delhi-NCR, Rajasthan, Gurugram and Haryana.

Avarez & Marsal India’s Saigal says, According to our estimates, for a last-mile delivery centre to be viable in a small town, the daily shipment volumes should be close to 400-500 per day while for larger cities, the viable number would be close to 900 deliveries per day.”

Industry estimates show that 50% of the cost of delivering each package is the fixed cost of last-mile delivery.

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