Amazon Prime suspends delivery promises; future of fast shipping under scrutiny

“If retailers thought consumers were demanding before the coronavirus arrived, just wait until the virus is gone and consumers let their voices be heard.”

Amazon (AMZN) told consumers this past week that its paid-subscription Prime service is facing monthlong delays in shipping due to the coronavirus outbreak and that the company will focus on stocking and delivering higher-priority items.

“This has resulted in some of our delivery promises being longer than usual,” the company said in a statement.

The e-commerce giant also temporarily closed its Prime Pantry delivery service as it faces a surge in orders stemming from the pandemic.

A new dawn

Only two weeks ago, the e-retailing and logistics giant shutting down or suspending its same day or two-day delivery services would have been unthinkable.

In a battle that seemed to intensify weekly, Amazon and fellow retail behemoth Walmart (WMT) have been competing to see who can get stuff to consumers the fastest, announcing initiative after initiative to shave days and hours off delivery times.

But that was then, pre-coronavirus. This is now, when panic-buying has depleted grocery store shelves and hospitals face dire shortages of medical supplies, upending long-held beliefs about consumer purchasing and raising questions about institutional purchasing habits and supply chain practices.

Among those debates is whether the supply chain is overly infatuated with fast shipping, and whether there is a better way of managing e-commerce and retail to prevent shortages.

Too little, too late

Amazon did not immediately respond to FreightWaves’ request for comment.

But Brittain Ladd, a former Amazon executive who now runs his own consultancy, said the coronavirus had uncovered “a flaw in the supply chains of retailers.” In order to reduce costs, he explained, retailers carried less inventory, yielding efficient supply chains, not responsive supply chains.

“Most analysts have failed to understand that what consumers want isn’t speed, they want certainty or what I refer to as a repeatable and reproducible experience,” Ladd told FreightWaves.

Once the crisis ebbs, Ladd believes, consumers will expect retailers to carry more inventory and create logistics networks that eliminate the risk of store shelves being empty and ensure that online deliveries arrive as scheduled.

The subject of fast shipping and responsive inventory came up during a freight-tech roundtable discussion last week. “I think we do have a generation of MBAs who think inventory is evil and must be rooted out at all costs,” said Dan Lewis, CEO of Convoy, the Seattle-based digital freight network.

That perspective will likely undergo a rethink in light of the coronavirus outbreak, he believes. 

Ryan Petersen, the CEO of Flexport, a global freight-forwarding platform, defended fast delivery, arguing that “optimizing for one-hour delivery makes the supply chain more resilient.”

While he doesn’t think the move toward real-time fast delivery “hurts us,” Petersen does question optimizing for just-in-time manufacturing, a supply chain process that acquires and produces inventory as soon as it is needed or ready to be sold.

“The way you get fast delivery is by having lots more inventory all over the country,” Petersen said during the roundtable. “In order to achieve fast delivery, you have to have more delivery in stock.”

Michael Krakaris is the CEO of Deliverr, a software platform that aims to enable merchants to offer free two-day delivery anywhere they sell.

Delivery times are becoming more, not less important, as more Americans stay home due to the coronavirus outbreak, Krakaris told FreightWaves. “When physical retail goes away, which is what’s happened overnight, there is an increasing emphasis on delivery times.”

Deliverr’s next-day-enabled items are moving at “extremely high velocity,” he said. Art supplies are extremely popular right now, he added. So is shampoo.

The end of the tunnel

As the supply chain races to meet demand in a rapidly changing crisis environment, industry is turning its attention to the long-term impacts.

Ladd believes micro-fulfillment solutions — small-scale warehouse facilities in accessible urban locations — will need to be installed inside retail stores so they can operate 24/7, 365 days per year as long as they’re fed inventory.

Retailers will also need to “pre-position inventory” and automate their supply chains to maximize manufacturing and fulfillment speeds, Ladd predicted.

Regardless of solution, the pandemic will irrevocably shape the retail landscape, although power will remain, as always, in the hands of the purchasers.

“If retailers thought consumers were demanding before the coronavirus arrived,” Ladd said, “just wait until the virus is gone and consumers let their voices be heard.”