HIGHLIGHTS
- Lack of human resources is a problem that gives Amazon managers a headache.
- Insufficient labor forces them to ship inventory to fully staffed centres. This can lead to increased costs incurred during shipping.
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Labor restrictions
In the context of the pandemic, warehouses no longer have enough workers to sort goods and serve transportation, which forces Amazon to ship packages to fully staffed warehouses.
In 2019, Amazon announced it was rolling out one-day shipping for Prime subscribers. Amazon has spent a lot of money for it, estimated at $ 800 million in the second quarter of 2019.
However, according to Brian Olsavsky, Amazon’s CFO, labor restrictions have prevented Amazon from meeting the default one-day shipping for Prime customers, but they hope to see improvement next year.
In May 2021, Amazon has plans to add 150,000 seasonal jobs in the United States, with an average starting salary of more than $18 per hour and bonuses at login up to $3,000. Amazon in Seattle is likely to spend $4 billion on additional labor and related costs in the fourth quarter. However, this is not enough to improve the existing human resources, forcing them to move goods to other centres.
The cost of moving inventory can be high
Moving inventory to fulfilment centres with enough staff to process products will cause disruptions to sales and delivery services. Shipping routes became longer and more costly for Amazon. The company will face additional costs of $2 billion in labor inflation and $2 billion in operational disruption in the next quarter.
Other aspects of Amazon’s supply chain beyond labor are in better shape. Amazon’s network to better handle swings in product volume. Investments to keep peak season service levels high in the face of global supply chain challenges.
“We increased ports of entry across our network by 50%, doubled our container handling capacity, and expanded our ocean freight network to secure committed capacity at key ports in our network.” said John Felton, Amazon Senior Vice President.
The company also invested in technology to better forecast product demand and is expanding its Amazon Air Cargo fleet to more than 85 aircraft, ensuring enough capacity to transport customer packages across longer distances in shorter time frames all season long.
Thanh Thao
FROM CLOSE PARTNER TO DIRECT COMPETITORS AMAZON – AMBITION TO COMPETE WITH UPS AND FEDEX
