Amazon's Europe Logistics Operations Evolution: The Last Mile

Could you make explicit the principles that govern the evolution of Amazon’s involvement in logistics operations?

That’s pretty easy, because it’s driven by only one thing. It’s driven by the customer experience and the ability of Amazon to be able to fulfil their job, at the same level of quality and cost, that they’ve always done. Therefore, Amazon is only driven by making sure that every time they could make a substantial impact on the business. They started to have larger volume, because the small start-up I mentioned at the beginning, had evolved drastically. Amazon really has the capacity and the size to make differences in whatever they do.

Amazon is a very operational driven company. People have seen Amazon, over time, as a technological company. Yes, indeed, but not only as a website or the cloud, which I’m going to put aside now, which is another part of Amazon that has developed, but really, technologically, an inventive operation. Amazon has considered logistics as being the key element in making e-commerce part of the business successful. Therefore, every time that Amazon thinks that it could influence the experience of the customer, getting his product on time, and the right product, as well as the cost of getting this product to the customer, Amazon has invested some money and time and people. That’s the key thing, as well. Each of the business phases, were just driven by the size of the Amazon business and the ability to influence it.

Just to take an example, if you are talking about the last mile, I’m going to give you a very concrete example of what happened in the UK. The first time Amazon stepped into the last mile, it was in the UK and I was in charge of the transportation, at that time. Back in 2007, 2008, I took over transportation in Europe, which meant dealing with all our carriers in Europe, in each of the countries where we were operating. During some of the negotiations, in 2008, one of the carriers in the UK told me, when you have 80 million parcels to deliver, a year, you may be able to deliver yourself. At that time, Amazon was not that big in the UK. That was it; that was the discussion during the negotiation. Someone said, yes, maybe you will be big enough to do it yourself.

A few years later, obviously, we reached that level. I had some people to look at that and say, was it just something that the guy said, that was just for fun, or was there some reality behind it and we could really think about doing it ourselves? Indeed, it was true. I don’t know if 80 million was the true number, because we passed that level in that period. But we did truly reach a point where the density of our delivery was making in a valuable option for us to look into this sphere, because this is the one part where density matters. It’s the distance between each of the deliveries that you make, which makes the economics of this business. Therefore, we were at the dawn of that era, where Amazon was, indeed, big enough, on a country level like the UK, to start making deliveries ourselves.

It’s the reason why we decided to invest and try it first. When, after the investment, we discovered that we were very successful with the first delivery service, and were very accurate, on the next-day service, particularly, which Amazon has developed everywhere. Over time, we knew that we would be cost effective, because it was just the mathematical aspect of the density increase. It took years, but we proved, over time, that we were able to lower the cost of these next-day deliveries, just because of the technology we put in and the increase of the business of Amazon.