Unit Cost per Parcel
Former VP, Amazon Logistics Europe
inpractise.com/articles/amzn-cost-per-parcel
Why is this interview interesting?
- Why the cost per parcel to deliver hasn’t changed much in the last decade
Philippe Hemard
Former VP, Amazon Logistics Europe
Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at Amazon.com. He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to Amazon.co.uk (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university.
Interview Transcript
How have you seen the cost per parcel decline over the last two decades?
It will not. In delivery, it will not. I don’t believe the cost will decline, at all. I believe, today, the level that it will reach in many places, in Europe or in the US, the levels of ecommerce in general, are close to the optimal, for many carriers and for Amazon, as well. Therefore, this cost will only grow by fuel, wages and stuff like that. There are a few innovations that are coming to help, such as lockers and pick-up points. But I don’t believe it will decline. I think it will be capped, as far as possible and flat for a few years and, after that, slightly increase, over time.
So you think Amazon, particularly, will have to wear the increase in the cost, potentially, if they go to one-hour delivery?
Yes, absolutely. That’s a no-brainer. The one or two-hour delivery increases the cost of delivery. Even the evening delivery that we have, it’s just mathematical, but reducing the window of when you deliver, that decreases the density. The problem is, in a delivery network, you have to at least come from the place where you picked the parcels up. This is called the stem time, in this business, which is the time between the location where you pick up the parcels and the first delivery, has to be amortized in the round. The rest could be very dense, but this first part, you need to deal with. You don’t always deliver around your delivery station; you sometimes have to do 20 or 30 miles before you get to your first delivery. This could sometimes take an hour. In that hour, you don’t deliver any parcels, so therefore, the more you reduce this window, your productivity in delivering gets worse. I don’t believe that we will see decreasing costs in parcel delivery.
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