Amazon announced last week that it is opening a machine learning R&D hub in Barcelona in early 2018 (Amazon Barcelona Hub). I get a lot of questions about Amazon from clients wanting to know of their intentions. Here are my top three reasons Amazon must get machine learning right.
- Predicting What Customers Want: Amazon has over 359 million SKUs available. No, that is not a typo—359 million. For comparison, Walmart has almost 17 million (less than 5 percent of what Amazon has). Without machine learning driven recommendations, shopping on Amazon would be painful. They MUST predict what you want to buy when you search and very carefully curate what shows up on that first search page. If they get that wrong, they lose the sale—it is that simple.
- Optimizing Fulfilment: There is great cost and speed efficiency (2x – 3x improvements) that can be found with the right robotics (watch this if you want an example Cainiao Logistics Center). Those solutions are all driven on artificial intelligence, which is further optimized by machine learning. In addition, Amazon needs to manage the placement of 359 million SKUs (i.e., put the SKUs where they are likely to be purchased). Again, those predictions are driven by machine learning. Machine learning holds the key to making Amazon’s fulfilment capabilities far more efficient than they are today.
- Optimizing Delivery: Here is where I think things get most interesting. Amazon is aggressively expanding their physical footprint, up from 59 facilities in 2011 to a projected 415 worldwide by end of 2017, to put items closer to the consumer. With that content, local they are now poised to deliver the last-mile for B2C, but to do it they will have to orchestrate a fleet of delivery vehicles. With the right machine learning capability, they can optimize those routes in coordination with their physical locations to radically lower the cost of last mile. And with that last piece they will own the entire supply chain from order to doorstep.
That leaves me with only one question about this latest announcement. What took them so long?
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See this post on LinkedIn: Three Reasons Amazon Must Invest In Machine Learning