Living in the Shadow of Amazon: Learn the Lessons

amazon2

Photo courtesy: Amazon

Amazon is the elephant in the room where any supply chain conversation is happening. Everyone is chasing that Amazon effect. Everyone is trying to figure out how to deliver on the expectations of customers that Amazon and its business models have created.

Retrofitting Amazon’s strategies or tactics for another business is tough. In terms of order volume and order profile, Amazon is its own kind of beast. At the same time, it makes sense to look at some of Amazon’s most groundbreaking tactics to see what lessons can be learned by electronics distributors. Trying to be Amazon won’t work, of course. However, there are ways to improve operations in ways that take into account your operating environment, merchandise profiles, and business realities.

1. Amazon Prime

Amazon Prime, the annual subscription offering from Amazon, is a master stroke. You could argue that they copied the Costco model with a yearly membership fee, but added a wealth of value in addition to two-day shipping.

The closest thing that a retailer or distributor can offer would be some kind of a subscription service. The secret would be identifying an essential item that customers would want delivered automatically at certain intervals. It would be important to consider products that are the right combination of being regularly used and where brand loyalty can be built with the customer.

2. Lightning fast fulfillment

In the past few years, the availability of warehouse execution systems (WES) set the bar for immediate order fulfilment. These systems fulfil an order in 20 minutes to an hour after an order has dropped into the distribution center. Amazon’s benchmark is 20 minutes. It’s fulfilment systems are so optimized that it can regularly meet that target.  Further, Amazon’s Prime Now service delivers products to some areas in as little as two hours.

Originally, typical WMS used a “waving process,” which batched orders optimal allocation, picking and fulfilment. Today’s waveless order fulfilment down loads each order as it comes in to optimize processing. Further, today’s WMS optimize visibility into the warehouse. Technology adoption is the road that gives distributors and retailers a similar edge compared to Amazon.

3. Robots in Amazon DCs

Plenty has been said about Amazon’s use of robots in its distribution centers.

  • In areas where real-estate is prohibitively expensive, items can be stored in tightly packed small bins and moved easily by robots.
  • In organizations selling very small items, such as electronic components, items can be located in even smaller movable bins.
  • With organizations that hire veterans (who are perhaps disabled), robots can move the bin to the worker, who stays in one place and fills customer-bound boxes.’
  • Robotics offer flexibility that is far greater than fixed conveyors, allowing for quick reprogramming of functionality, travel paths and more.

kivarobotamazon

Photo courtesy: Amazon

There are some downsides to the use of robots, though:

  • Robots are expensive, so return on investment (ROI) takes time.
  • Robots require charging infrastructure, and fast charging is still being developed, so charging time must be built into operations.
  • Finding talented individuals who know how to program robotics can be difficult. This bar is being lowered every day as programming is made easier.

Carefully weigh both sides before deciding that robots are the right answer for the organization. 

4. Standardization of DC design

If a distributor or retailer is considering a major supply chain infrastructure overhaul, standardizing the design of the distribution should top the list of priorities. Otherwise, it can be difficult to do. By having standardized processes, systems, layouts, and roles and responsibilities, creating multiple DC’s gets easier. Building and deploying new capabilities is also made simpler.  The work and expense, though, rarely makes sense as a separate exercise after distribution centers already are up and running.

5. Geographical proximity

Amazon has more than 70 distribution centers that have been built recently. These boast modern infrastructure and technology. They are scattered across the United States.  It makes sense to download orders to a distribution center located closest to a customer’s delivery zip code.  The system needs to recognize the zip code and match it to the nearest DC that has the appropriate inventory on the shelf. Distributed Order Systems (DOM) are available from various WMS vendors, and can be can added on to an existing WMS or in a new deployment.

Which of Amazon’s strategies have inspired change in your business? What lessons can be learned from the retail giant? Let us know what you think in the comments section below.

28
Feb 2018
By Puga Sankara159 Comments
Author:
Puga Sankara
About:
Puga Sankara is the Founder, CEO of Smart Gladiator LLC. Smart Gladiator designs, builds, and delivers market-leading mobile technology for retailers, distributors, and 3PL service providers. So far, Smart Gladiator LoadProof has been used to ship, receive, and scan more than 100 million boxes. SG LoadProof is a patent pending Centralized Enterprise Photo/Video Document System on Cloud for Supply Chain. SG LP is built on the fact that photos & videos are vital docs as important as POs/SOs/Legal Contracts/Fulfillment Orders that reside in ERP/WMS/TMS systems, that serve as compelling, conclusive, unequivocal proof of crucial, critical, vital operations executed in Supply Chain within/across orgs when fulfilling customer orders as well as meeting contractual obligations between orgs as merchandise is transferred between different parties that partake in Supply Chain functions & operations. And these photos/videos data should not be stored in someone’s Smartphone or Email Inbox or in their personal/work Computer, but should be stored in a Centralized Enterprise system, where such data can be pushed into super-fast, stored securely, accessible to all stake holders (CFO/Sales Reps/Customer Support/AR/AP) in an org, as well as facilitates super-fast retrieval/sharing. LP is an Enterprise System of record for Photo/Video docs & is as important as an ERP which is an enterprise system of record for POs, SOs, Legal Contracts between parties etc. that have huge legal ramifications, also as important as a WMS (Warehouse Management System) that hold indispensable shipment & fulfillment data on orders. Like how Instagram, Facebook, Snapchat etc. have evolved into social media platforms/systems that enable individuals to showcase their beauty/pretty clothes/lovely cosmetics/hep coolness etc., LoadProof is an Enterprise system that holds similar photos/videos, but for a different reason, not for show off, but to serve as compelling, conclusive, unequivocal & indisputable system of record and proof that can be presented even in the court of law, when there is a dispute between parties while they execute many facets of the Supply Chain functions & operations. SG LoadProof is also an Enterprise System of Record for Photos, videos and any other digital documents for your Supply Chain Network. A system of record (SOR) or source system of record (SSoR) is a data management term for an information storage system (commonly implemented on a computer system running a database management system) that is the authoritative data source for a given data element or piece of information. The need to identify systems of record can become acute in organizations where management information systems have been built by taking output data from multiple source systems, re-processing this data, and then re-presenting the result for new business use. In these cases, multiple information systems may disagree about the same piece of information. These disagreements may stem from semantic differences, differences in opinion, use of different sources, and differences in the timing of the extract, transform, and load processes that create the data they report against, or may simply be the result of bugs. The integrity and validity of any data set is open to question when there is no traceable connection to a good source, such as a known System of Record. Where the integrity of the data is vital, if there is an agreed system of record, the data element must either be linked to, or extracted directly from it. In other cases, the provenance and estimated data quality should be documented. The “system of record” approach is a good fit for environments where both: 1. there is a single authority over all data consumers, and 2. all consumers have similar needs Here, LoadProof is the System of Record for pictures and videos for all the entities in Supply chain who uses pictures and videos to track using any Supply Chain System infrastructure. 1. LoadProof provides accurate, thorough, complete, and latest information in pictures and videos related to any entity in the Supply chain that is tracked. 2. LoadProof is the single authority on pictures and videos related to any entity in the Supply Chain that is tracked 3. LoadProof doesn’t let any external system to copy the records being stored in it, which eliminates the data being duplicated in multiple places to preserve the data integrity and credibility. 4. LoadProof has a secured login procedure which lets only users with select level access to view the data and modify the records which helps in maintaining LoadProof is becoming the Industry Standard System for Photo & Video Docs for Supply Chain Smart Gladiator is located in ATDC - Advanced Tech Dev Center (tech Incubator) in Georgia Institute of Tech. Click for a demo - https://loadproof.com/apply Puga is a supply chain technology professional with more than 25 years of experience in deploying capabilities in the logistics and supply chain domain. His prior roles involved managing complicated mission-critical programs driving revenue numbers, rolling out a multitude of capabilities involving more than a dozen systems, and managing a team of 30 to 50 personnel across multiple disciplines and departments in large corporations such as Hewlett Packard. He has deployed WMS for more than 30 distribution centers in his role as a senior manager with Manhattan Associates. He has also performed process analysis walk-throughs for more than 50 distribution centers for WMS process design and performance analysis review, optimizing processes for better productivity and visibility through the supply chain. Size of these DCs varied from 150,000 to 1.2 million SQFT. Puga Sankara has an MBA from Georgia Tech. He can be reached at puga@smartgladiator.com or visit the company at www.smartgladiator.com. Also follow him at www.pugasankara.com. [Read More]
More articles by: Puga Sankara

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