APICS is the premier professional association for supply chain management.

Carefully Considering Your Business Opportunities

by APICS CEO Abe Eshkenazi, CSCP, CPA, CAE |   2013 | 0 | 0
Amazon is known for its fast delivery, wide selection, and low prices enabled by its scale. Now, Amazon is starting to partner directly with manufacturers, going directly into their facilities to manage logistics and fulfillment of online orders.As we speed toward the end of 2013, I’m struck by the speed of business change in the global economy. Take, for example, Amazon, a known industry game changer. Earlier this week, NPR aired the story “Moving in with Manufacturers, Amazon Delivers a New Approach.”

Of course, Amazon is known for its fast delivery, wide selection, and low prices. This premise depends on the company’s huge warehouses, where orders are retrieved mostly by robots. Now, Amazon is starting to partner directly with manufacturers, going directly into their facilities to manage logistics and fulfillment of online orders.

Marshal Cohen is the chief retail analyst for market research firm NPD Group. “It fits right into world domination for Amazon, because what this is doing is now allowing them to broaden even wider the scope of products that they are going to offer.” He adds that it benefits manufacturers because they can sell more products directly to customers and it enables Amazon to ship even more goods cheaper. “It’s kind of like a win-win-win.”

The story also quotes John Replogle, CEO of Seventh Generation (and APICS 2008 general session speaker), who says the notion of big-box retailing is being redefined. While direct online sales make up a small part of overall Seventh Generation sales, Replogle expects this sector to grow significantly.

“By partnering with manufacturers, Amazon is essentially trying to expand its geographic footprint quickly, to get closer to the customer,” says NPR’s Yuki Noguchi.

Strategy in Supply Chains

World domination may be a stretch, especially because what Amazon is doing, in this case, isn’t all that new. It’s a concept known as vendor-managed inventory (VMI), and it is defined by the APICS Dictionary, 14th edition, as follows: “A means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer.”

What’s new here is the increased attention new sales channels are getting. Customers can use their tablets, phones, or computers and get exactly what they want delivered to their doorsteps the next day. As more manufacturers seek to streamline paths to their end customers, the Amazon program might be a good solution.

Or it might not. Manufacturers have to evaluate multiple aspects of their business to know what’s the most beneficial to them: Should they partner with Amazon, another third-party logistics provider, or build their own delivery network?

That kind of analysis requires strategic supply chain thinking that can only be delivered by professionals in this field. Are you ready to help you company seize new opportunities? APICS offers a wide array of education—from the Principles of Operations Management series to courses that prepare you for the APICS Certified Supply Chain Professional (CSCP) and Certified in Production and Inventory Management (CPIM) exams. Visit apics.org to see how APICS can help you and your business.

How might Amazon’s logistics and distribution services differ from a standard third-party logistics (3PL) provider? What advantages or disadvantages might Amazon have over 3PLs, and vice versa?
How does the Amazon model and the company’s success affect traditional manufacturers?

  • Air Suppliers
    By John P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP
    November/December 2012, APICS magazine

All comments will be published pending approval. Read the APICS Comment Policy.


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