What is the “Amazon Effect” and how does it affect supply chain management? You will hear about it shortly if you haven’t already.
The Amazon Effect is the term used to describe how the digital marketplace has altered the traditional business model.
Naturally, it is named after the internet juggernaut Amazon.com and has implications for supply chain operations.
Amazon’s impact on supply chain strategy was unavoidable, given that it is the world’s largest online retailer. But how have Amazon and other online merchants changed the way supply chains are managed?
1. Continuous Fulfillment
Customers are fed up with a distribution business that accepts orders and fills them at the end of the day. People frequently desire overnight or next-day delivery, and online markets are available 24 hours a day.
That implies a system must be in place to promptly handle orders so that the delivery firm may pick up the item from the warehouse and dispatch it down the line.
2. More Intensive Management
More order fulfillment and speedier delivery will, of course, necessitate more management and inventory control.
To ensure that the fast supply chain continues to function successfully at all times, distributors must engage skilled management professionals, who typically use cutting-edge logistics software. Multi-tier inventory management can help businesses cut delivery times and stay competitive in the online market.
3. Better Automation
Most shipping supply chains already rely heavily on automation. Your automated operations must be speedier and more efficient to accommodate round-the-clock deliveries.
Robots will complete most warehouse tasks without human aid in the future of supply chain automation. To keep up with demand, suppliers must invest in cutting-edge machinery and automation technology.
4. Bigger Warehouses
Companies must have large enough warehouses or a large enough number of warehouses to hold all of their inventory, ensuring that there will always be enough products to fulfill any order at any time.
5. Last-Mile Logistics
Getting a product to the “last mile,” or the distance between the local receiving facility and the recipient, on time has always been difficult, but Amazon appears to have perfected it.
The use of third-party logistics typically extends the delivery time. To satisfy increasingly quick delivery promises, Amazon’s supply chain relies heavily on its fleet of cars. Today’s supply chain managers must come up with fresh and creative ways to get that last mile completed.
6. Reversing the Inventory and Logistics Dynamic
Many organizations have used the strategy of outsourcing logistics and insourcing inventories in the past. It entails using their own products but relying on other parties to distribute them across the supply chain.
Amazon’s fulfillment centers work in the opposite direction, offering a wide range of products that are stored in third-party warehouses while also running their own highly efficient logistics system to get those items to their destinations.
For products held in their usual warehouse, companies frequently utilize a pure push method. The company estimates demand for a given zone and stores products to meet that demand.
When outsourcing inventory to third-party merchants, they would instead utilize a pure pull technique. When selling outsourced products, especially infrequently bought ones, companies increasingly employ an order-by-order fulfillment strategy.
Consider a push-pull strategy that uses both styles of management depending on specific product demand for supply chain success. Amazon supply chain management relies significantly on inventory management outsourcing and logistics insourcing.
Read More : Which Return Policy Is Best? Amazon vs. Walmart vs. Best Buy
