Amazon's 'sortation' centers speed delivery

KENT, Wash. — As Mike Roth steps into Amazon.com's newest warehouse here, he spreads his arms wide and asks what is different about this facility from the 96 other warehouses the Web giant operates around the world.

To anyone who has ever set foot in one of those 1 million-square-foot buildings, known in Amazon parlance as fulfillment centers, the answer is obvious. There is not a product in sight. No books. No toasters. No toothpaste. There aren't the rows and rows of shelves on which those products are shelved.

Instead, the newly opened warehouse near Seattle is teeming with sealed parcels, full of items Amazon customers have ordered. Those packages zip along a maze of conveyor belts where computers and workers sort them for delivery to individual post offices in Seattle; Portland, Ore.; Spokane, Wash., and points in between.

By controlling the delivery process right up to the last mile, Amazon can get packages to customers on Sunday, a service it announced with the U.S. Postal Service last November. And with the opening of the Kent facility, Sunday delivery has begun in the Pacific Northwest.

"When you see us announcing Sunday delivery, you can assume a sortation center is close by," Roth said.

The sortation center also lets Seattle members of its $99-a-year Prime subscription service order as late as 11:59 p.m. to get two-day shipping at no extra charge. That's nine hours later than the previous cutoff time for two-day delivery. Non-Prime customers in Seattle also can use the later cutoff order times for two-day delivery if they are willing to pay for the service, which starts at $1.99 an item and climbs depending on size and weight.

In addition to the Kent facility, adjacent to a site where Amazon is building a fulfillment center, the company has opened sortation centers in Atlanta; Dallas; Houston; Phoenix; Avenel, N.J.; Hebron, Ky., and San Bernardino, Calif., in recent weeks.

The sortation centers make sense only because Amazon has grown so large. The company won't disclose how many packages it ships daily, nor will it say how many go through the new Kent facility, except that it will be "tens of thousands" a day. It's that massive volume that makes it financially feasible to control the shipping right up to the last mile. It's unlikely that any other online retailer has enough volume to even try this method.

Increasing the speed of delivery is a top priority for Amazon. The retail titan can offer many advantages over brick-and-mortar rivals. But the one glaring disadvantage is that the local bookstore, electronics chain or toy store can offer instant gratification, letting customers walk away with their product.

Sortation centers move Amazon a step closer to erasing that key barrier to online shopping. Ultimately, Amazon would like to handle next-day delivery from each of the sortation centers, something a company spokeswoman said is possible from some of them.

The facilities enable Amazon to hold on to packages much further down the delivery chain. In the past, Amazon might have shipped a DVD ordered by a Seattle shopper, for example, from its fulfillment center in Sumner, Wash. There, workers would have boxed the item and handed the package off to one of several carriers, such as UPS or FedEx.

Now, Amazon will put that DVD onto a truck that will bring it, along with tens of thousands of other packages on other trucks, to this Kent site, generally within a day or so for items that are shipped two-day delivery.

"We can control the packages much longer," Roth said.

And control is key for Amazon. Last holiday season, Amazon was singed by UPS shipping delays that left some customers without gifts under their Christmas trees. UPS acknowledged that it was unprepared for the volume of packages it received. Those delays led Amazon to refund shipping charges and offer customers $20 gift cards.

"A lot of e-commerce companies are pretty nervous about this holiday," said Robert W. Baird & Co. analyst Colin Sebastian. "Amazon being in more control over deliveries means there is less chance of one of its partners causing problems."

Controlling packages longer is clearly important to Amazon. Roth wouldn't disclose the cost of building the 300,000-square-foot sortation centers, except to say that it's "quite an investment."

Holding those packages longer could also help reduce Amazon's shipping costs, which climbed 31 percent in the first quarter to $1.8 billion. Although Amazon won't disclose the financial arrangements of its deal with the Postal Service, it presumably pays less when it bypasses postal sorting operations.

While the sortation centers should make delivery even more efficient, it adds another layer of algorithmic intricacy to the process.

Roth said developing the sortation centers has taken "a couple of years."