By Lisa Graham, EMEA Head of Industrial & Logistics Research & Insight
Known for being secretive about anything to do with its business or strategy, Amazon surprised me when they made tours of their eFulfilment centre in Hemel Hempstead available to the public. Having often referenced the eFulfilment link in e-commerce supply chains in my publications – particularly the Urban Logistics report launched this week, I seized this opportunity to see from the inside, what an Amazon eFulfilment centre is.
From the Outside
From the outside, I learned that Amazon has set up three eFulfilment centres in this area (Hemel Hempstead, Milton Keynes, and Dunstable) that serve London and southern England. These facilities range in size between 450,000-475,000 square feet. Located on the edge of Hemel Hempstead, near the Junction 8/M1 motorway, Amazon’s facility is less than 30 minutes by truck to the M25 ring road and Luton Airport. The facility is accessible by public transport in addition to nearly 400 car parking spaces.
My visit confirmed that Amazon is indeed now leasing existing space rather than continuing with its former purpose-built strategy.1 This decision gives Amazon more flexibility in terms of lease terms and breaks than would be possible through a purpose-built facility. Amazon is growing at such lightning speed, picking up additional product lines (e.g. Amazon Fresh) and customer service channels (e.g. Prime Now), that its warehouse space contracts need to be as flexible as possible to keep pace with the company’s constant streamlining to maximize cost and speed efficiencies. Our tour guide made reference to several algorithms used in Amazon’s day-to-day operations (i.e. product stocking, sorting, and picking), so in all likelihood, it uses algorithms to optimize the number, types, size, and locations of its warehouses.
Flexible Space Inside
From the inside, I was able to see how Amazon maintains flexibility, adapting its product selection and stacking to differences in warehouse footprint sizes and ceiling heights while still making room for conveyor belts and sorting equipment that spans the space between dock doors on both sides of the building. The Hemel Hempstead facility has unusually high ceiling heights of 49 feet!2 To maximize this “air” space, Amazon cleverly uses three levels of mezzanines to stack products while building their conveyor belt system both horizontally and vertically.
Although maybe not the highly publicized drones and robots Amazon has patented, technology is woven into each stage of efulfilment at Hemel Hempstead to minimize errors and ensure fast movement of goods. Technology assists one thousand workers in tasks such as initial product sorting, picking, packing, labelling, weighing, and package sorting by transporter. Small product stacking is intentionally low to facilitate accessibility by humans. Bulkier goods are stored at ground level and are moved on colour coded carts. Despite the technology and references to algorithms, our guide highlighted the facility’s workforce. Amazon invests and supports its staff through a subsidised canteen, events around peak periods like Christmas and education/training programmes.
The Future of Distribution
As Amazon continues to build its network of eFulfilment centres and other facilities across the UK, new product lines and customer service channels will dictate real estate requirements. Last year’s partnership with supermarket chain Morrisons provided Amazon with distribution sites near to customers, as well as the first step to entering the eFood business. Meanwhile, Prime Now centres located closer to customers focus on last mile deliveries. In the future, we expect that Amazon will continue to develop these two distribution channels as the company finds ways to better connect real estate to delivery methods and customer expectations.