Why does Amazon store snowblowers in Florida?
Yahoo Finance's Allie Garfinkle caught up with Amazon supply chain executive Melissa Nick for more insight into Amazon's cost cutting efforts.
Yahoo Finance’s Allie Garfinkle joins the Live show to discuss news that Amazon will continue to cut jobs in an effort to fulfill cost-cutting measures for the company.
Video Transcript
RACHELLE AKUFFO: Amazon's 2023 has come to be defined by cost cuts. As the e-commerce giant looks to navigate economic headwinds, it's focused on increasing efficiencies in every area of its business, from cloud services to retail. Yahoo Finance's Allie Garfinkle caught up with Amazon supply chain executive Melissa Nick for more insight into Amazon's cost cutting efforts. So, Allie, what's the big takeaway?
ALLIE GARFINKLE: Amazon's cost cutting dates back to the pandemic three years ago. That's the big takeaway. This story started a while back. And the pandemic really changed how Amazon operated, right? You had this massive demand shock, and what you ended up with was an Amazon that needed to grow fast and just get into whatever it takes mode to get packages from one place to another.
And I really, with Nick, I really delved into how cost cutting is actually going to work at these facilities. Because, right, Melissa Nick, for context, she manages 300 Amazon facilities thereabouts, and she has a network responsible for producing revenue greater than the GDP of Finland. So this is a huge undertaking, right?
So there are three sort of key components to consider here, Rachelle. If you're Melissa Nick and you're looking at these almost 300 sites, this massive revenue, what do you do? And the answer is actually pretty simple. First, it comes down to something like called getting inventory, right, which sounds simple, but for a company like Amazon, actually, is incredibly complicated. Think about it. You have-- it's Amazon is a place where you can buy a pot and a pan and a leaf blower, right?
She told me stories about how she walked through Amazon warehouses and really reassessed what needs to be there and what doesn't. For instance, snowblowers don't need to be in Florida is something she told me. All about. Makes sense, right? The other thing, too, is the famous case she gave me was that she went to her warehouse in Kansas City, and there were a bunch of Raiders hats there, Raiders like the Los Vegas Raiders. And she was like, wait, there are 12 Raiders fans in Kansas City.
So for instance, that's the sort of thing that she's really looking at. What does it mean for Amazon inventory to really be where it's supposed to be when it's supposed to be there? So there's that. And then the other thing is Amazon is changing packaging. Now, you've received-- have you received one of those boxes that's just too big for whatever it is you bought on Amazon?
RACHELLE AKUFFO: [INAUDIBLE] unnecessarily so.
ALLIE GARFINKLE: Yes, and it's like this, and the thing is like this.
RACHELLE AKUFFO: Yes.
ALLIE GARFINKLE: Yes, whatever it is, like, if it's a-- for instance, if it's like a package of pencils or something, and the box is yay big, that's going to be no more at Amazon. The goal is to have more efficient packaging. Now what that means is if I order this laptop right here, it's going to be packaged exactly specifically to that laptop. They're investing in automation that's going to change that.
Now, how does this all shake out to efficiency? And that actually ties back to the last thing, which is how the trucks fill. This is called fill rate. Basically, the goal for Amazon moving forward is that not only are these packages smaller, they can fit more of them in trucks and the trucks are fuller. And Amazon has a customer promise to deliver quickly.
So during the pandemic, it was a lot of, OK, we've got to do this. We've got to do it now. We're going to ship from LA to Kansas City to Texas if we have to, whereas now it's, OK, where does everything need to be? Are the trucks full? It's a much slower approach, which she described to me was a-- was almost a-- was thoughtful. It was-- the thing about it that was really interesting is for her, it was very clear that this was key to Amazon moving forward. But listening to her describe it, it also sounds like it was really possible to make a lot of these changes.
RACHELLE AKUFFO: And it's interesting because we're seeing a lot of retailers who were battling with inventory. Amazon isn't really one of the ones we think of, just because they deal with so many, obviously, third party retailers as well. How much of a game changer do you think this could be to really have this streamlined year of efficiency, as Mark Zuckerberg also puts it?
ALLIE GARFINKLE: Well, it's a big theme in tech across the board right now, Rachelle. But I think it could be a really big game changer because the reality for Amazon is, let's-- like, let's take everything else out of it. The most visible part of Amazon to me, to most consumers, is that box you get with the arrow, right? And if those boxes can start delivering faster more efficiently, costing less, it's a big deal for the company.
And I think in the end, if you're Melissa Nick, you're looking at this and saying, OK, what are the small changes we can make, getting from point A to point B? And I think that for Amazon, it will absolutely matter. Yes, of course, they're doing all these layoffs, so there are going to be cost cut in the other parts of the business. To date, they've laid off, I believe, 27,000 corporate workers. But they are still hiring in these warehouses. So, you know, I think it is a priority for Amazon, getting these warehouses right, but I think it's certainly not the only thing, looking ahead that they're looking at.
RACHELLE AKUFFO: So certainly strategic cost cutting, not just sort of cutting across the board. Great stuff as always. Our very own Allie Garfinkle.
