6 Lessons Learned from Studying Amazon Supply Chain Management

The Customer/Client Is Everything

Amazon has adopted a customer-centric approach to their supply chain management for several years now. This means providing customers with the delivery options they need and doing their best to make sure the recipient at the end of the chain walks away happy.

Traditionally, delivery and logistics has not been the most customer-friendly industry, with unreliable delivery predictions and “whole-day” delivery slots tarnishing the experience for the end-user. Amazon has set out to do things a little differently, offering a range of specific delivery slots and specific delivery options to their customers.

Supply chain and logistics firms can seek to build this into their own business practices and nurture stronger relationships with their customers.

Dynamic Fulfillment Models Allow for Diverse Revenue Channels

You may have noticed that when shopping on Amazon, you often find yourself with more than one purchase option open to you. This is because Amazon fulfills orders not just from within their own warehouses but also from outsourced third-party suppliers.

By staying on top of customer demand and needs and by making sure the supply chain infrastructure is robust enough to take the strain, Amazon is able to provide a massive array of products to customers. In this sense, a diverse approach to fulfillment — i.e., fulfilling orders from centralized warehouses as well as from third-party partners — leads directly to a diverse set of revenue channels.

Outsourcing Requires the Right Approach

So, outsourcing is a key element of the Amazon supply chain management model, but it is crucial that this outsourcing is handled in the right way. For instance, Amazon needs to make sure that it only works with outsourced warehousers and distributors that meet health and safety standards and have the right measures in place to keep their warehouses and their employees safe.

Next, Amazon needs to ensure that product quality remains high, even when the product comes from a third-party stockist. Amazon has a strong brand to maintain, and they need to be proactive when it comes to protecting this.

Finally, Amazon needs to keep its logistics in-house. This is exactly what Amazon’s supply chain management model relies upon — even when warehousing and product sourcing comes from a third-party location, all of the logistics are handled by Amazon itself so that they remain in complete control of timekeeping and punctuality. When you order something on standard delivery, sure, it might just arrive with the rest of the mail, but for those specific delivery slots, it’s going to be an Amazon driver.

Automation and ‘Just In Time’ Are the Future

Robotics and automated systems have become something of a trademark within the Amazon supply chain. While Amazon was among the first to embrace smart systems within their supply chain, they certainly will not be the last, and this is what everyone in the supply and logistics industry needs to be ready to embrace.

While employing fleets of robots to pick orders and replenish stock in your warehouses may be beyond your reach at the moment, you can still adopt automated systems that make life easier and more straightforward for your personnel. The idea is to make automation and artificial intelligence a key part of your operations, as this will benefit you in the future.

Another way in which Amazon’s supply chain management model is pushing the boundaries of best practice is in the “just in time” fulfillment approach. For many of the products that Amazon supplies, the stock is there, ready and waiting to be delivered. But for many other products, orders are fulfilled on a “just in time” basis, with products ordered in to reflect immediate customer demand.

This might seem risky, but with the right relationships with third parties and the right predictive systems in place to stay on top of demand, it is a very cost-effective option for distribution businesses.

Cost-efficiency Equals Profit-efficiency

This one is a bit of a no-brainer, but it is worth taking into account. Amazon is all about cost-efficiency and strives to achieve the best results possible with the lowest expenditure. This means that everything from fleet maintenance to wastewater management is carried out with a focus on reducing costs without harming quality and effectiveness.

It’s important to note that this is not simply about slashing costs but is instead about examining where costs can be reduced and where the supply chain can be made more efficient. This leads to boosted profits.

Supply Chain Models Should Be Studied, But Not Copied

At the end of the day, Amazon is the biggest distributor on the planet, and, as such, they work with one of the most developed and sophisticated supply chain management models in the industry. For the average business, reaching the heights that Amazon has reached is simply not on the cards.

But does this mean that businesses should give up the chase and stick to more manageable goals? Well, not exactly. We may never become Jeff Bezos, but that’s not to say that we can’t take inspiration from what Amazon has achieved and that we can’t learn from what they are doing to the market.

The lesson here is to study, but not to copy. Copying Amazon’s supply chain model requires vast resources and the kind of brand visibility that only the top 0.001% of businesses enjoy. Taking inspiration from them and adopting some of these lessons within our own organizations — well, this is something all businesses in this industry can do.

—

Applying These Lessons to Your Business

We may not be able to adopt Amazon’s supply chain management model completely, but there is certainly much to be learned from it. The best way to do this is to examine your own current supply chain model. How is it serving the needs of your business? Where is it falling short? Answer these questions and gain better insight into what you need to do to improve your supply chain.

With this insight, you can begin to apply Amazon’s supply chain management lessons at scale. Perhaps not all of these lessons will fit your unique business model, but it’s likely that you can gain the inspiration you need to improve and optimize your own model.