Tuesday, February 18, 2014

Amazon’s Anticipatory Shipping – Collaborative Filtering, Predictive Analytics, and Supply Chain Mastery


Amazon is raising the bar once again in regards to the way in which it delivers its products. No, this isn’t about the super awesome drones that could possibly be delivering your next box of diapers to your front porch. This is potentially even bigger and it relies heavily on the ecommerce juggernaut’s ability to use predictive analytics in conjunction with its supply chain fulfillment.

Online retail is growing every day, it has a low overhead and is easily accessible. However, one disadvantage that Amazon, and other online retailers face, is the ability to get the product in the customer’s hands as quick as a traditional brick-and-mortar store would. If you’re online and need something shipped same day or next day you’ll have to pay an exorbitant amount of money which practically negates the savings found by going online. And that’s why Amazon is trying to solve this disadvantage with its patented ‘Anticipatory Shipping’.

Anticipatory Shipping


Amazon filed for a patent in August 2012 which was granted December 24th of last year (Merry Christmas, Amazon) for a shipping system designed to dramatically cut delivery time of its products by predicting what buyers are going to buy – even before they buy it. Amazon describes one of the methods of accomplishing this:
“…a method may include 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, and shipping the package to the destination geographical area without completely specifying the delivery address at time of shipment. The method may further include completely specifying the delivery address for the package while the package is in transit.” [1]
Amazon’s method of selecting closest proximity speculatively shipped packages
Basically, Amazon plans on generating a predictive shipping model and speculatively shipping packages to corresponding destinations/geographical areas without completely specifying the delivery address. Then as soon as you or I go online and order that new 3TB hard drive or Call of Duty video game, Amazon will be able to select the order in closest proximity, convey the specific address, and deliver the items in record time to our front porch. An article on techcrunch.com said “…the language of the patent sounds as if Amazon is thinking of physical item delivery in the way a utility might approach supplying water or electricity to homes — by forecasting demand spikes and lulls, and tweaking its pipeline accordingly, but above all by keeping the stuff flowing (ergo having trucks constantly filled with packages in continuous perpetual motion).” [2] Either way, if successful, this new shipping method could revolutionize the way in which consumers interact with online retailers and receive their products.

Data / Communication flow of fulfillment system configured to support speculative shipping

So how does collaborative filtering play into all of this? 


In short, collaborative filtering is a method of making automatic predictions about the interests of a user by collecting preferences or taste information from similar other users. Have you ever wondered how Netflix recommends a new movie or how Pandora / Spotify can recommend unique artists based on your taste in music? There are algorithms in the background that predict what you would like based on what other users similar to you like. It is all about detecting the interests of the consumer and recommending items based on those interests. 

Likewise, the success of ‘Anticipatory Shipping’ revolves around Amazon’s ability to detect the potential interest in a product from a customer in that region and then weigh it against the costs of returning or re-routing the package. Amazon plans to detect the customer interest in a product based on many variables including: purchase history, browsing patterns, wish-lists, and demographic information of you and others similar to you. As soon as this level of interest is determined, a potential ‘cost to return or redirect’ is calculated and the package could be offered at a discounted price. [3]

Amazon’s method of speculative shipping with late address selection
Amazon has a history of paving the way with how online retail interacts with customers. They patented the ‘one-click’ buying mechanism back in 1999 and they’re hoping that anticipatory shipping will have similar success. Determined to revolutionize the industry, ‘anticipatory shipping’ could be the next ‘big thing’ in online retail.    

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References

[1]  "United States Patent No. US 8,615,473 B2 | United States Patent and Trademark Office." 2013. 18 Feb. 2014 <http://pdfpiw.uspto.gov/.piw?PageNum=0&docid=08615473&IDKey=2809ACB12F05&HomeUrl=http%3A%2F%2Fpatft.uspto.gov%2Fnetacgi%2Fnph-Parser%3FSect1%3DPTO2%2526Sect2%3DHITOFF%2526p%3D1%2526u%3D%25252Fnetahtml%25252FPTO%25252Fsearch-bool.html%2526r%3D1%2526f%3DG%2526l%3D50%2526co1%3DAND%2526d%3DPTXT%2526s1%3D%252522anticipatory%252Bpackage%252522%2526OS%3D%252522anticipatory%252Bpackage%252522%2526RS%3D%252522anticipatory%252Bpackage%252522>

[2] Natasha Lomas. "Amazon Patents “Anticipatory” Shipping — To Start ... - TechCrunch." 2014. 18 Feb. 2014 <http://techcrunch.com/2014/01/18/amazon-pre-ships/>

[3] Taylor Soper. "'Anticipatory shipping': Amazon wants to ship purchases ... - GeekWire." 2014. 18 Feb. 2014 <http://www.geekwire.com/2014/anticipatory-shipping-amazon-wants-package-purchases-even-buy/>