How Amazon Is Transforming The Supply Chain Landscape

By: Chase Maser

If numbers alone can capture Amazon's success, then it's worth mentioning the retail giant skyrocketed from an annual revenue of $7 billion in 2004 to $233 billion in 2018.

It’s the fastest company to have $100 billion in sales revenue within a 20-year period. However, this success isn’t just a stroke of luck. With a philosophy rooted in getting products to consumers in the shortest amount of time, Amazon has completely transformed the supply chain landscape. 

Here’s how they continue to lead the pack: 

Innovative Supply Chain Management Strategies

The first industry disruption was the launch of Amazon Prime in 2005 where customers can pay an annual/monthly membership fee to gain access to free two-day shipping on a variety of products. Not only did it brand Amazon as a quick, reliable retail provider, but it instantly thwarted their competitors, forcing them to play catch-up for years to come. Then shortly after Prime, Amazon made another impact with Amazon Prime Now, a two-hour delivery service for everyday essentials like groceries, cleaning products, beauty products, and medications. 

Interestingly enough, Amazon achieves this success with third-party sellers driving 82% of their total sales. Although for quick turnaround orders within a couple of hours or within the same day, they rely on their own delivery trucks and facilities to accommodate demand. So, Amazon uses a multifaceted supply chain strategy to offer fast service at an affordable cost. 

Amazon’s innovate supply chain management strategy includes…

             Outsourcing inventory management and storing frequently-ordered items at Amazon warehouses for direct delivery

             Relying on third-party sellers to fulfill orders on products that are bought less frequently

             Offering delivery options for customers to meet their needs and preferences

             Strategic placement of Amazon warehouses to plan/accomodate the demand for certain areas and keeping popular/seasonal items from third-party sellers on demand

             Using different classes of fulfilment centers to easily cater to urban markets, such as retail stores for books and gadgets, pallet prime stores for products with constant demand, storage facilities for products with high demand in smaller amounts, facilities for special items with low demand, and versatile storage warehouses for random items with steady demand

             Leveraging automation with Amazon Robotics that can select and package products without manual assistance 

             Maintaining low supply chain costs by offering a diverse supply chain strategy, rather than operating their sales volume with their own warehouses

             Planning for the future with drone deliveries within a 10-mile radius of Amazon fulfilment centers under--completing the process under 30 minutes (still under development)

             By having so many outlets for fulfilment and product storage, Amazon launched their own version of products to compete with third-party sellers, offering lower prices and keeping their own inventory on-hand

Amazon's Move Into Health Care

With such successful strategies in place, it's no surprise that Amazon has also infiltrated the health care sector, hoping to shake up a $3 trillion industry. Since 2018, Amazon has not only been selling medical supplies and equipment to hospitals and clinics all over the country, but they've also been partnering with major U.S. distributors, such as Cardinal Health, to strengthen their outreach and supply chains. 

Some other key moves in the health care sector include...

             Gaining wholesale pharmacy licenses in many states around the country

             Launching a partnership with J.P. Morgan and Berkshire Hathaway to retool health care needs for their combined workforce of 1.2 million people

             Developing voice technologies in hospitals and clinics for those with illnesses to better cope and manger their conditions—many hospitals are even using Amazon's Alexa for surgery checklists or sharing important information with patients after they leave the hospital

             Hiring experts in primary care to help advise them on decisions related to health care industries and what pain points to solve

Needless to say, the shift into health care is an ongoing process for Amazon and will certainly take time for them to develop an impactful strategy. However, the real merit lies in their tenacious drive to gain progress. They see opportunities for growth and then make decisions that allow them to move in that direction. By bringing the right people on board and piggybacking on major distributors who know and thrive in a specific supply chain model, they can infuse their own ideas and streamline the experience for consumers in more ways than just retail items. 

What You Can Do to Stay Competitive

Of course, you may not have the same luxuries as Amazon to scale your supply chain operations, but you can implement a few ideas to stay competitive. 

Essentially, cutting down on delivery times and scaling supply chain automation is the overall goal. To accomplish this, you must research what cities you can service the quickest and investigate which aspects of your supply chain you can upgrade from manual tasks. In return, you can focus on increasing your number of warehouses to new locations and develop your own products to gain valuable market share. 

Amazon's move into healthcare is set to be a hot topic at LogiMed 2019, taking place in March at the Rancho Bernardo Inn, San Diego, CA.

Download the agenda today for more information and insights.

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