Amazon to change up supply chain with new distribution center

on Wednesday, January 9, 2013

Amazon to change up supply chain with new distribution centerOnline retailer Amazon recently announced it has plans to open a new distribution center in New Jersey, giving it the potential to significantly increase its supply chain efficiency and help it better serve customers. The 1 million-square-foot center will be up and running in early 2014, according to reports. The operation, Amazon's first in New Jersey, is expected to create hundred of local jobs upon its completion and could provide large benefits for the company as it expands.

Amazon enters New Jersey
The online giant may have been lured to the state by promises of economic assistance. A report from The Associated Press revealed the state government offered Amazon millions in financial incentives, as it believes the company will provide between $30 and $40 million per year in additional tax revenue.

"Phase one of Amazon's new state-of-the-art fulfillment center in Robbinsville will spur growth and investment for the Garden State and our local economies while bringing meaningful job creation opportunities for New Jersey's families," said New Jersey Governor Chris Christie. "Amazon's multi-million dollar investment in this one facility alone is expected to result in the creation of hundreds of full-time jobs in addition to temporary, seasonal and construction jobs."

Amazon is one retailer that has done particularly well in the era of "showrooming," a practice that occurs when shoppers enter a brick-and-mortar store to test out and look over products, then seek better prices and product reviews on their smartphones. Consumers engaging in the practice are often swayed to purchase their merchandise from Amazon rather than a physical store, a huge benefit for the online shopping center, allowing it to continue its growth.

New center could be vital to efficient delivery
Amazon has been testing a same-day delivery service, a project an additional distribution center in New Jersey could help to advance. While some customers may not be willing to pay an additional fee for delivery within several hours, those ordering last-minute gifts or eager to receive their purchases could make the project a successful component of Amazon's business. If the company manages to implement its plan smoothly, it may gain more customers who are currently relying on other online retailers but seeking quicker shipping options.

However, in order to roll out the plan without many problems, Amazon needs to ensure proper supply chain optimization and guarantee it has enough distribution centers and couriers to make such a move possible. Without warehouses strategically placed throughout the country, the company may be unable to ensure same-day delivery, making new warehouse locations of the utmost importance.

The potential to save
Although the company is expected to invest more than $200 million in its New Jersey facility, this seemingly large sum could bring the business even greater benefits and savings in the long run.

Even if Amazon abandons or scales back its plan for same-day delivery, having an additional distribution center could be enormously helpful to its massive supply chain. The added facility could serve to improve the company's traditional shipping options, increasing efficiency, customer satisfaction and, possibly, return processing time. A rise in client approval could mean even more business for the Amazon in the future.

The expansion will also give the company room in which to store additional products, which could mean cargo shipments arriving from the East Coast could be housed there. Having a facility in which to store these shipments could cut down on logistical expenses necessary to transport shipments to the Midwest or West Coast, resulting in a significant business cost reduction.

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