Transforming the Product Delivery Process (The Amazon Effect)

Large manufacturers and giant retailers were caught off-guard by Amazon in their now famous same day or next day delivery process.

For years, supply chains in many industries were dominated by a structure consisting of distributors and wholesalers sector, in which some veteran managers has labeled as dull and boring - as growth has often been modest, if not sometimes negative. Except for the technology players like Apple and Samsung, new product introductions were few and infrequent.

Then came Amazon.

Amazon’s introduction of e-commerce and same-day delivery not only disrupted the traditional brick-and-mortar of retailing but also radically shifted distribution structures by directly delivering merchandise to any customer preferred location.

The challenge now for firms is to offer the same level of delivery performance that Amazon provides. This will require adopting new technologies to enable the organization to deliver to customers at a more sustainable cost.

Warehouse Management System (WMS)

Conventionally, warehouses are managed as one big box to receive, store, and retrieve products. Today, best-in-class warehouses are typically equipped with a warehouse management system (WMS), which would facilitate efficient assignment of locations for items and optimal picking or retrieving. Real-time inventory data would provide for high inventory record accuracy (IRA). Lead times in warehouse operations would be reduced to shorten delivery times to customers.

Transportation Management System (TMS)

A state-of-the-art Warehouse Management System would not be enough without a properly implemented Transportation Management System (TMS). In a scenario where there are numerous customer orders for various delivery points to be handled by different truck types and sizes, a well in-placed TMS would provide the support to manage all transportation-related complexities. An effective TMS can provide data for daily and hourly transportation requirements and recommend transportation routes with adjustments for abrupt customer order cancellations or changes in delivery addresses.

Predictive Analysis

Systems are now available and being used to predict when and where customers would place their next orders based on historical sales. Thus, inventories are sent to locations where customers have a high probability of placing orders. Other products, which the customer will probably buy, are predicted as well.

Amazon’s success is not limited to its logistics excellence. Many small businesses sell their wares through the Fulfillment by Amazon service, which allows Amazon to sell and deliver for firms for a nominal fee. The results have been stupendous for many small firms. Because their products are advertised and can be easily delivered through Amazon’s information infrastructure, some small businesses have seen significant growth in sales. Small businesses can bypass traditional distribution networks and no longer need to contend with retailers who in the past would normally reject their merchandise for whatever reason. Entrepreneurs can introduce items instantly through Amazon and immediately see the results of their creativity via the volume of orders they would directly receive. Amazon has indeed become a godsend for small business start-ups but a bearer of bad tidings for big box retailers.

As competition intensifies, companies would have to introduce more products that will excite the consumers or create a level of service (e.g. next day or same day delivery) to continue to be in business. Other companies are at a crossroads whether to maintain their traditional distribution and sales channels or establish an Amazon-like network with capabilities to serve the immediate delivery expectations of customers. In any case, waiting is not an option because customers no longer want to wait.

About the author 

Jovy Jader

Mr. Jovy Jader is a Management Consultant and Regional Speaker on Supply Chain Management. He has directed and implemented Supply Chain Management projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and service levels. Mr. Jader was formerly with Procter & Gamble Philippines and Coopers & Lybrand/PricewaterhouseCoopers.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Use this Bottom Section to Promote Your Offer

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim