There has been a good deal of breathless coverage about Amazon creating a patent that will allow them to ship packages “before you’ve even realized you want them.” This sounds crazy. And it would be if it was what Amazon was likely to really put into practice.
If you go to the patent, the process and supporting technology allows for “packaging one or more items as a package for eventual shipment to a delivery address, selecting a destination geographical area to which to ship the package, shipping the package to the destination geographical area without completely specifying the delivery address at time of shipment, and while the package is in transit, completely specifying the delivery address for the package.”
The idea of pre-shipping to an intermediate location, based upon a forecast but before the absolute demand is known, is not new. Retail apparel manufacturers have been practicing DC Bypass for years. One version of this involves a retailer shipping goods (often apparel) from Asia to cross docks in California. At the time of shipment, it is not known how the inventory will be allocated among the retailer’s stores. However, while the goods are in transit, the retailer continues to monitor what is being bought at their stores and by the time the goods hit the cross dock they are able to divvy up the goods and route them to their stores far more optimally.
Figure from Anticipatory Shipping Patent
In this diagram, the process starts at a distribution center (DC). This could be an Amazon DC or one of their supplier’s DCs. I think it more likely this would a partner’s DC or an Amazon DC that is used for central stocking of selected SKUs (Amazon does not store all their SKUs in all their warehouses; It makes more sense to store lower velocity items in a centrally located DC). The advantage of doing anticipatory shipping from a central location is the longer transit time gives the local demand time to firm up. This would also allow Amazon to make greater use of slower modes of delivery that save money on freight.
Following the diagram we see that the pre-shipped items are delivered to a hub. Amazon depends upon parcel carriers (FedEx, UPS, and now the USPS for Sunday deliveries) to deliver their goods. So the hubs will most often be the parcel shipper’s sorting center. These sort centers will need to do a scan of a pre-shipped package, read the unique identifying code on the package, and download the final ship to address from the anticipatory shipping application.
The other part of the hyped coverage of this patent was focused on forecasting what a unique customer would buy before he bought it. Data such as specific web pages viewed and the duration of the views, overall length of the visit to the site, how long a cursor hovers over a product image, shopping cart and wish list activity could be used to predict buying behavior. This really would be amazing. And I’m highly doubtful it will ever be put into practice.
Rather, it is far more likely that standard demand forecasting will be used that generate a forecast for a high volume product for a particular area based on historical shipments; or for new products the behavior of a past product with very similar product attributes can be used. These forecasts could be enhanced by knowing the web behavior of consumers in a particular area. These web factors, however, are apt to have much smaller predictive value than the core parameters that have long been used to predict demand.
Further, Amazon would not have to use a one number forecast, for example “100 of this book will be sold in the Boston area on Friday the 13th.” One number forecasts will rarely be accurate. What Amazon can do is a forecast that says “it is almost certain that at least 20 of this book will be sold on the 13th in the Boston area” and then do anticipatory shipping on only that portion of the forecast that is a sure bet.
My view is that what Amazon is proposing is clever, but not new, and they probably should not have been granted a patent. And when I say the patent should not have been granted, let me be the first to assure you that I am not a patent attorney, I am basing this on my belief that what they are proposing is not sufficiently novel.