By the time someine clicks “buy” on Amazon, Jenny Freshwater’s team has probably expected it.
Freshwater is a software director in Amazon’s Supply Chain Optimization Technologies group. Her team forecasts demand for everything sold by Amazon worldwide.
This task, into which NPR got exclusive insight, underlies the entire Amazon retail operation. And it’s central to Amazon’s wooing of some 100 million people who shell out up to $119 a year for a Prime subscription, which guarantees two-day shipping.
Inside Amazon, corporate executives like to evoke magic when they talk about fast delivery. For months, they used the code name Houdini before launching their fastest service, Prime Now, which delivers household basics within hours.
But a lot of it is thanks to artificial intelligence. With AI, computers analyze reams of data, making decisions and performing tasks that typically require human intelligence. AI is key to Amazon’s retail forecasting on steroids and its push to shave off minutes and seconds in the rush to prepare, pack and deliver.
“It goes beyond just being able to forecast we need a hundred blouses,” Freshwater says. “We need to be able to determine how many do we expect our customers to buy across the sizes, and the colors. And then … where do we actually put the product so that our customers can get it when they click ‘buy.’ ”
That’s a key element to how Amazon speeds up deliveries: The team predicts exactly where those blouses should be stocked so that they are as close as possible to the people who will buy them.
(Note: Amazon is one of NPR’s financial supporters.)
This process is even more essential now that the race is on for same-day and even same-hour delivery. Few other retailers have ventured into these speeds, because they’re very expensive. And few rely quite so much on AI to control costs while expanding.
Both AI and forecasting are not unique to Amazon. All retail stores work hard to prepare, for example, for seasonal or weather-related demand. And all major retail companies have their own algorithms, automated warehouses and delivery tricks.
But it was Amazon Prime that got Americans hooked on two-day shipping, which shoppers now take for granted. Walmart, Target and many others now offer two-day deliveries even without membership fees.
While all large online retailers rely on AI, “Amazon definitely has the most powerful tools for all the little computational processes involved in moving the packages through many suppliers, routes of transit and all the steps that a package goes through,” says Mike Liebhold, a senior tech researcher at the Institute for the Future.
Indeed, AI is woven through every part of an Amazon purchase, from the website to the warehouses to the actual delivery to your doorstep. In corporate lingo, Amazon calls that the “first mile,” “middle mile” and “last mile.”