What is “the Amazon Effect” on supply chain management? If you haven’t heard of it yet, you will soon. The Amazon Effect refers to how the digital marketplace has changed the traditional business model. It is named, of course, after the online behemoth Amazon.com, and has specific ramifications for supply chain operations. As the world’s leading online retailer, the impact of Amazon on supply chain management was inevitable. But how exactly have Amazon and other online retailers transformed supply chain management?
1. Continuous Fulfillment
No longer can a distribution company just collect orders and fill them at the end of the day. Online marketplaces are open around the clock and people often want overnight or next-day delivery. That means a system has to be in place to process orders immediately, so the item can be picked up from the warehouse and sent down the line right away.
2. More Intensive Management
Naturally, more order fulfillment and faster distribution will require more management and better inventory control. Distributors must hire competent management personnel, often using state-of-the-art logistics software, to make sure the accelerated supply chain continues to function effectively at all times.
3. Better Automation
Automation is already a critical part of most shipping supply chains. With faster, around-the-clock deliveries, your automated processes need to be faster and more efficient. Suppliers must invest in state-of-the-art machines and automation technology to keep up with demand.
4. Bigger Warehouses
Companies that find themselves having to search for or manufacture new product when it is ordered are going to fall behind. Companies need to make sure they have big enough warehouses or a large enough number of warehouses to contain as much inventory as they need to make sure they will always be able to fulfill any order at any time.
5. Last-Mile Logistics
Getting a product that “last mile” — that bit of distance from the local receiving center to the recipient on time — has always been a challenge, but it is one that Amazon seems to have mastered. Today’s supply chain managers must find new and innovative ways to cross that last mile.
6. Reversing the Inventory and Logistics Dynamic
In the past, many companies have had a strategy of outsourcing logistics and insourcing inventory. It means using their own in-house products but taking advantage of third parties all along the supply chain to deliver them. Amazon does the opposite, offering many products that sit in the warehouses of other parties, but managing their own extremely efficient logistics system to get those products and get them to their locations.
Companies looking to compete in the online retail space will have to consider just how much of this model they want to, and are able to, follow.
Polymer Solutions International Inc. can help companies streamline and accelerate their supply chains with consistent, durable plastic pallets and other packing, storage and shipping solutions. To find out how, visit our website, call us at 610-325-7500 or get in touch online.