With $104.7 Mn Investment And 30 Mn Cubic Feet Storage Space, Amazon India's Logistics Arm Now Caters To Rivals As Well
Raindrops spattered the cab window as I sat inside early one morning, dozy after a late night. The destination? A village in Haryana about 60 km away from South Delhi (according to Google Maps). So, I sat back and prepared myself for a long, bumpy ride. After nearly 2.5 hours of braving heavy traffic and navigating through the narrow lanes of Gurugram, Google’s friendly, automated voice assistant informed us that we had arrived.
As I stepped out of the cab, quite unceremoniously I might add, I was taken aback by the enormous size of the facility. Flanking the gates were multiple security personnels, one of whom guided me towards the entrance. I was told to walk along the left pavement, which I did out of trepidation if not anything else. At the other end, a smiling female attendant greeted me.
“Welcome to the largest Amazon fulfilment centre in all of North India,” she said.
Why all this unnecessary build-up, you ask? Let’s look at some of the things that make this facility stand out:
- It is the 41st Amazon fulfilment centre and the largest in all of North India.
- It is the 5th fulfilment centre in Haryana.
- It can store more than 1.2 Mn cubic feet of inventory.
- It boasts a 1.2 km long conveyor belt that moves items across the building’s three floors
- It houses over 60 km of fire hydrant piping
- All operations within the Amazon India fulfilment centre, even those handled manually, are directed by a complex system of algorithms.
41 Amazon Fulfilment Centres; 200K Sellers In India
The Jeff Bezos-led ecommerce giant recently unveiled its fifth fulfilment centre in Haryana, amidst great pomp and show. Located in the village of Jamalpur, the state-of-the-art facility boasts an area of over 250,000-square-feet, of which around 1.2 Mn cubic feet is dedicated to inventory storage. According to Akhil Saxena, VP – Amazon India Customer Fulfillment, this brings Haryana’s total storage capacity to over 3.3 Mn cubic feet.
Launched ahead of the festive season, the facility is the latest addition to the list of 41 Amazon fulfilment centres servicing more than 200K sellers across 13 states. In Haryana alone, the ecommerce giant has a seller base of nearly 11,000 – a figure that has undergone a near 100% growth in the last 12 months, as they claim. The company is currently gearing up to unveil two new sort centres and five delivery centres, in a bid to enhance its reach before Diwali.
At the inauguration ceremony, which was graced by dignitaries like Vipul Goel, Minister for Industries & Commerce, Environment & Industrial Training, and Sudhir Rajpal, Managing Director of HSIIDC, Saxena said with much pride, “In line with our vision to transform the way India buys and sells, we have been consistently investing in our infrastructure and delivery network, so we can increase our speed of delivery and provide a superior experience to both – customers and sellers. With more than 11,000 sellers in Haryana, the selection offered by sellers in the state for immediate delivery has grown more than 600% this year as compared to last year.”
So, What Is A Fulfilment Centre?
Before going ahead with the story, let’s take a look at what a fulfilment centre actually is. Ecommerce giant Amazon currently offers sellers three basic services: Merchant Fulfilment Network (MFN), Easy Shipping Model, and Fulfilment By Amazon (FBA). Not exactly a warehouse, Amazon’s fulfilment centres are part of the FBA programme, which allows sellers to store their inventory in Amazon’s fulfilment centres across the country. At present, around 60% of the vendors use this service.
As part of the programme, Amazon “picks, packs, and ships” orders to customers on behalf of the sellers. Additionally, it handles returns as well as customer service for sellers without proper access to these resources, in exchange for a stipulated fee. Furthermore, sellers can make use of Amazon’s “Go Local” programme to store inventories closer to their major customer hubs. This reportedly decreases shipping costs by nearly 35%.
From 100 sellers and one FC in June of 2013, Amazon India has massively expanded its infrastructure footprint to include more than 30 Mn cubic feet of storage space across 13 states. At present, it works with six pan-India courier partners to ensure swift deliveries.
Inside An Amazon Fulfilment Centre
Now, coming back to the story of my visit to the Amazon India fulfilment centre in Jamalpur, Haryana. While comparing it to a trip to the magical world of Narnia would be taking it a bit too far, the experience (at least in my frazzled mind) was just as exhilarating. Adding to the nervous excitement was the fact that the ecommerce player had previously shared an elaborate list of instructions that all invitees needed to obey in order to be allowed inside.
These “guidelines” included things like:
- restrictions on photography as well as all electronic gadgets.
- All attendees were instructed to wear “closed toed shoes with closed flat heels”.
- Furthermore, “loose hanging ornaments like chains” were strictly prohibited inside the fulfilment centre, the guidelines read.
After surrendering most of our possessions to the security personnels, few of us were ushered inside what is being touted as the largest Amazon FC in northern India. The facility is designed in accordance with the National Building Code of India (Fire and Life Safety), Saxena claimed. The building is designed in a way that it can be exited from all points in less than 30 seconds in case of emergencies. Additionally, the facility also features an expansive cafeteria and central air conditioning.
But, What Is So Special About An Amazon India Fulfilment Centre?
The floor layout of the Amazon Fulfilment Centre in Jamalpur has been recreated from memory. It is only meant to give the reader an idea and might not be entirely accurate.
Think of it as a well-oiled machine. Every nook and cranny have a purpose. Every equipment, every worker (or “associates” as Amazon calls them) functions in a perfectly synchronised fashion. Every tiny detail and operation is managed by algorithms that help eliminate human error to a great extent.
So, let me walk you through the entire setup. Once you pass the intimidating metal detectors and what appears to be a legion of security guards, you enter a hallway. On the left is a regular, run-off-the-mill cafeteria. Taking the right corridor, you make your way to the “Inbound” area. Along its perimeter are 48 receiving stations that rely on advanced hydraulic dock levelers for easy loading and unloading.
At any given time, around 40 to 50 trucks can be loaded and unloaded simultaneously. Once unloaded, the inventory is stacked in pre-specified locations, following which they are carefully unpacked and sent for prep scan. Prep scan, in case you are wondering, refers to the process of packaging fragile items that the sellers might otherwise not have done. The CubiScan is another specialised system that instantly measures the weight and dimensions of small items.
The unpacked inventory is then transferred onto mobile carts that are then moved towards the storage area. Amazon follows what Akhil calls a “random” classification model. To ensure efficient and swift pickups, the same inventory is stored in multiple locations within the fulfilment centre. When a pickup request is initiated, the worker closest to the inventory is instructed to complete the task.
The building houses three levels, all of which offers room for storage. The job of moving items from “Inbound” to “Outbound” is currently carried out by a 1.2 km long conveyor belt that extends across all three levels. Once a customer orders a product, the system’s built-in algorithm immediately assigns a worker for pickup.
Upon reaching the outbound section, the item is labelled with the specific details of the order. It then undergoes a process called SLAM (i.e. ship, label, apply, and manage), at the end of which it is ready to be shipped. While the entire journey from Inbound to Outbound seems quite elaborate, Akhil claims the movement from receiving to going live on inventory list takes less than 24 hours.
Why Jamalpur, You Must Be Wondering
A small village in the Bhiwani district of Haryana, Jamalpur seems an unlikely choice for Amazon’s largest fulfilment centre in North India. Home to around 3,352 people, Jamalpur’s strategic location, however, ensures easy and fast connectivity with different regions across the northern part of the country.
With warehouses of several big logistics players like TVS Logistics already present in Jamalpur, the village offers sellers the opportunity to scale their businesses through faster transportation and more efficient deliveries.
Although constituting only 2% of the country’s total area, Haryana has played a major role in facilitating ecommerce logistics growth. In the last two years, the state’s government has rolled out several startup-friendly policies that are aimed at bolstering economic growth. In the next two to three years, around $62 Bn-$ 78 Bn (INR 4 Lakh-INR 5 Lakh) worth of ecommerce business will take place in Haryana, Vipul Goel predicts.
Increased infrastructure investment on the part of the government has greatly improved Haryana’s road connectivity. At present, the state boasts a total of 29 national highways, that extend over a distance of 1,461 km.
On the occasion of the launch, Vipul Goel, Minister for Industries & Commerce, Environment & Industrial Training stated, “The FC will enable thousands of small & medium businesses selling locally created products such as apparels, handlooms & handicraft to service customers seamlessly across the country & the globe. It will also fuel the growth of ancillary businesses such as packaging, transportation, logistics, and hospitality across the state. We are committed to enabling the ease of doing business and enabling companies like Amazon.in to expand their presence in Haryana.”
Community Outreach: Doing More Than Just Business
The 41 FCs currently have a workforce of more than 5,000 employees across the country. As stated by Bimla Chaudhary, MLA Pataudi, at the inauguration ceremony, the newly-launched facility in Jamalpur has offered employment to 300 youths of Haryana. In addition to bolstering the country’s startup ecosystem and facilitating job creation, the ecommerce giant claims to be working towards community empowerment.
In Haryana, the company has set up three community centres. According to Akhil, the one in Jamalpur is currently working to enhance the lives of over 3,000 families. #IHaveSpace is another similar initiative by Amazon India that offers SMEs an additional source of income by letting out any extra space that they might have for inventory storage. The programme allows small merchants to supplement their income by handling deliveries for Amazon within a 2 km-4 km radius of their store. Around 17,500 small businesses around the country have availed this facility so far.
As part of its community outreach programme, Amazon India currently sources a large percentage of its packaging and gifting materials from local businesses, many of them run by women. Among the main focusses of its outreach initiative are education, healthcare, environment, and women empowerment.
Through its community centres, Amazon has offered career counselling to 1,000 people and has also helped educate more than 2,500 children. The company also provides vocational training to the youth of the state.
A Comparison With The Largest FC Of Amazon India
While all these numbers might look amazing to the impressionable mind, to better understand its size and magnitude, it’s best to take a stroll around Amazon’s largest fulfilment centre in India. Only a week after the inauguration of the Jamalpur facility, the ecommerce behemoth announced the launch of its biggest FC so far in Hyderabad.
Situated at Shamshabad in Hyderabad, the FC is the fifth of its kind in Telangana. It boasts a total area of 400,000-square-feet and a storage capacity of more than 2.1 Mn cubic feet. With the launch, Amazon’s total storage space in Telangana has touched 3.2 Mn cubic feet.
Operations in the facility are currently being managed by a workforce of nearly 1,000 people. The building’s “inbound” section houses 51 loading and unloading docks that can accommodate a total of 1,000 trucks every day. Extending across the building’s three storeys is a 1.6 km conveyor belt that moves packages from one point to another.
Amazon has big plans for Hyderabad, with the company gearing up to unveil a tech development centre in Hyderabad. The facility, according to sources, will be the largest tech development centre in the entire world, second only to Amazon’s Seattle-based headquarters.
Amazon: Dominating The Indian Market Through Logistics
Despite incurring multimillion dollar losses in the past, Amazon has been bullish about its expansion in India and shows no plans to back down. After getting into a tussle in the ecommerce space with Softbank-backed Flipkart, it is now placing its hopes on other emerging sectors. Since the start of 2017, Amazon India has doubled down on its efforts to conquer sectors like grocery and digital payments.
Logistics in another important growth vertical that Amazon India is aggressively trying to capture. According to Minister of State for Rural Development Ram Kripal Yadav, the Indian logistics sector is poised to grow into a $307 Bn industry by 2020. To capitalise on the domain’s huge potential, Amazon established its logistics arm, Amazon Transportation Services (ATS), in March 2015.
Later in February 2017, Amazon Development Center announced the launch of two new customer service facilities, in Noida and Coimbatore, respectively. In April 2017, it was also reported that Amazon India had secured a licence from the Reserve Bank of India (RBI) to operate a prepaid payment instrument (PPI).
This came at a time when Amazon CEO Jeff Bezos said that the ecommerce giant’s Indian arm Amazon India is India’s most popular marketplace, indicating the company’s intention to keep fuelling Indian investment.
In July, Amazon India announced plans to extend its logistics services to its sellers in India, even for orders placed through offline distribution as well as competitors Flipkart and Snapdeal. The logistics arm is currently running a pilot programme, in which it is reportedly working with 300 of its registered sellers.
Commenting on the development, a source stated at the time, “Amazon wants to build ATS into an independent logistic service which competes against Flipkart’s Ekart and other independent logistics services like Blue Dart and FedEx.”
Within two years of its entry into the country’s ecommerce market, the US-based company revealed plans to commit a staggering $5 Bn (INR 31,700 Cr) into Indian arm in 2015. With its $260 Mn (INR 1,680 Cr) investment in Amazon Seller Services in July 2017, the total amount poured into Amazon’s operations in India so far has already touched $2.4 Bn (INR 15,390 Cr).
At the launch of the 41st fulfilment centre, Akhil Saxena highlighted Amazon’s four main areas of investment: technology, infrastructure, logistics, and seller equipment.
Reiterating the company’s commitment to bolster its Indian arm, a spokesperson from Amazon India recently told Inc42, “We remain dedicated to our India business with a long-term perspective to make ecommerce a habit for Indian customers and to invest in the necessary technology and infrastructure to grow the entire ecosystem. We are delighted and humbled by the trust from our customers, to lead in India things that matter to our customers in just four years of our business, while continuing to launch innovative India-first initiatives as well as completely new offerings.”