The pandemic has had a significant
impact on businesses and the economy. And
the longer CoViD continues without being contained, the greater will be the
change in how businesses operate.
E-commerce has been one segment
that has seen growth, given lockdowns, and concerns about social
distancing. The surge in online sales
will likely continue. Coronavirus is an
e-commerce accelerator. And with the
extended pandemic, customers may continue to shop online.
Supply chain management, the driver
of order delivery velocity that made e-commerce successful, should face
significant transformation. From
e-commerce to the global pandemic, the strategic importance and criticality have
been validated.
With e-commerce being strong, many
retailers have been selling online. E-commerce
is a customer demand for buying and order delivery service. To put that into a competitive context, let's
talk about the big dog in the e-commerce fight—Amazon.
Amazon created order-delivery velocity that made them successful
with, pre-CoViD, an almost 40% market share, and made e-commerce viable. They crafted
customer convenience. Delivery to customers. No going out to stores in hot or bad weather. Buy from your home.
They built a new supply chain management with end-to-end velocity—one
that is disruptive innovation. This
supply chain gives them control of the movement of products from origin factory
to customer delivery. Part of this
supply chain is its transportation and logistics infrastructure. They did reverse outsourcing and brought
service in-house. Generally, in-house logistics/transportation services are
lower cost than using outside providers.
· Freight forwarding. Amazon does its own forwarding from
China. Think about that. There they are upstream at the start of the
supply chain.
· Cargo airplanes. They will have
80 planes by 2021. These increase the
speed at which they can move products.
· Warehouses. Amazon has very large distribution
centers. More than 175 of them worldwide
with 150 million square feet. Over 100
are in the US. Now they are increasing their warehouse footprint by 50% in
2020. A sign they see the pandemic
business surge will hold. Think of the proximity these warehouses give them to deliver orders quickly. It also aids
with a likely Black Friday online buying instead of consumers going to stores
and with Christmas buying.
· Delivery service. For the last
mile, they have 60.00 trucks with another
100,000 ordered. They are estimated to
be the fourth largest delivery service in the US. Bank of America says their delivery service
could be worth up to $230 billion by 2025. Note, that value was set before the CoViD e-commerce surge. So that value could go higher. Think of what this delivery capability means as USP, UPS, and FedEx struggle with the e-commerce volume surge and the holidays. A delivery buffer and more. In
July, Amazon delivered nearly 2/3 of its online packages. That is up from 54% the July before. And, given the order swell, is even more
significant. It also provides a buffer
from the price increases of UPS and FedEx—a competitive advantage.
· Drones. They have been authorized
to fly commercial delivery drones. Think of it. Faster delivery of orders, such
as same day. And do it beyond the visual
line of sight. It also provides supply chain
resilience. Last year, they debuted an electric delivery drone that can fly 15
miles and carry shipments/parcels of 5 pounds.
· Technology. Having so much of their own warehousing,
delivery, and related infrastructure provides a foundation for the important
end-to-end supply chain visibility.
Plus, Amazon has its web service, aka, the cloud.
· People. They have 1 million employees.
This
is some serious scale and supply chain competition. All this framework positions them to handle
more volume and to move inventory faster for improved order delivery
speed. In other words, it ups their
competitive position.
Some retailers and CPG/FMCG manufacturers with stores are using
their store network as micro-fulfillment centers. These provide location, location, location
for their customer base. The location
helps with the move toward same-day order delivery. It also makes stores dual-purpose
facilities—retail and e-commerce.
The trade-off to the location is stores are not as efficient, and
hence cost more than warehouses, for order-picking and preparation. The dual-purpose also comes into play with
inventory. If store sales remain soft as
the coronavirus continues and are used for online orders, then inventory
planning and moving through the end-to-end supply chains become more
complicated with their dual usage of store and online--and differing inventory
requirements for each. The next question
for stores as e-commerce fulfillment is how they position them as to delivery
to customers—and customer convenience—or for customers going to stores for
curbside pickup.
Amazon has been aggressively
creating its end-to-end supply chain that delivers orders quickly. They have
not stopped during the pandemic. All
this adds to what is required to compete in the online reality of the new
normal.
For
those that have been slow getting your e-commerce supply chain, ask yourself
what your plan is to be competitive in the e-commerce business with order
speed. How do you plan to compete—either
against Amazon or just for your business?
Either way, customers look at order delivery speed. If it helps, think of order delivery velocity
as customer retention.
Amazon has done its supply chain differently. What if you do yours that way—not the same
old? And this does not mean trying to
replicate what they have done. For
example, design
your supply chain from the customers back through to your suppliers. That makes
sense since e-commerce is about order delivery.
A takeaway from the pandemic will
likely be the strong use of online buying for both B2C and B2B. For manufacturers, that can become about your
manufacturing to delivery order speed.
Perhaps more so with Build to Order firms.
Resilience is the buzzword thrown
around with CoViD—so you will be ready for the next global crisis. I also see fluidity as a need. It is more than flexibility. Dealing with the changes and challenges that
will come as CoViD continues and the transforming as the new reality
evolves. Plan A could become Plan
D.
Amazon came to dominate e-commerce
because other firms were slow to see what was happening and to change their
supply chains and step up to be a serious player. A few have stepped up to the challenge. Still more need to. The pandemic has made it essential.
No comments:
Post a Comment