THERE IS LIFE AFTER AMAZON

Several years ago, I wrote that the three major impacts on the supply chain during my career were technology, globalization, and Wal-Mart. Recently, a colleague asked me if I was ready to add a fourth, which of course would be Amazon. A good question, but at this point, I am not so sure. Let’s take a look at Wal-Mart. When Sam Walton opened the first Wal-Mart store in 1962, he probably had no inkling of the way he would be changing the retail landscape of the country. Building on the success of that first store, by the 1970’s, Wal-Mart had begun its march through small-town America, then not-so-small-town America, and the world. By 2015, the company had 2.3 million employees, serving 200 million customers weekly, in 11,000 stores in 27 countries. In its wake, it left thousands of casualties as neighborhood hardware, appliance, apparel, and other local businesses collapsed under the weight of the competition from Walmart’s selections and lower prices. Thousands of workers were displaced, but every new Wal-Mart brought new job opportunities; and to many, the lower prices justified the job losses.

But as Wal-Mart and the local competitors and customers settled into new relationships, the company was turning to its supply chain as a major factor in holding down prices, and has been a true pioneer in the supply chain industry. Automated warehouses, huge cross dock facilities, top notch technology, sustainability programs and modern truck fleets have not only improved Wal-Mart’s operations; but the techniques and processes they have introduced have made major impacts on the operations of others.

To state that Amazon has changed the face of on-line buying is unnecessary. Electronic commerce continues to grow.  Much of the increase has been going to Amazon, and their share of the pie is expected to expand. Just as Wal-Mart did in the 1970’s, Amazon is having a major impact on the competition and employment. In 2017, 7000 retail stores closed, and so far this year, 1770 have locked their doors. Toys ‘r Us recently announced the closing of 800 more. According to the recent issue of Forbes, Jeff Bezos, CEO of Amazon is now the richest man in the world. Still, Amazon’s annual sales of $180 billion are far behind Wal-Mart’s $500 billion. If Sam Walton were still alive, he would have the richest man distinction. As it is, he has three very rich kids.

It is important to keep things in perspective.What Amazon has done is speed up the entire selling and delivery process, and through their reselling of others products, are to some extent, helping their competition. Other competitors are scrambling to find ways to provide same and next day deliveries. Amazon has opened  over 150 distribution centers to shorten the “last mile”. Through its purchase of Kiva, a robotics company, most of these buildings are equipped with robots to assist in product movement. They also employ thousands of order pickers; and like Wal-Mart, they are not known for their high wages and sensitivity toward employees.

As far as real contribution to the body of supply chain knowledge, I do not see too much. They obviously employ some very smart minds but some of their innovations seem to be solutions looking for a problem. Drones certainly a part of our future, but I do not see delivering pizzas or Zappo’s shoes their highest and best use. Amazon’s patented distribution center in the sky is pretty exciting stuff and has Star Trek fans salivating as they await the assumption of command by Captain Kirk. But a practical contribution to the supply chain? I don’t think so.

It is a rapidly changing world for the supply chain manager. Consumer buying habits and expectations have changed dramatically. Amazon and others are not just accommodating these changes, but are part of them; and supply chain managers must reeducate themselves accordingly. At the same time, we must separate the hype from the reality. This is not the first seismic change we have seen in supply chain management, nor will it be the last.

Written By: Clifford F. Lynch