Transportation was never really supposed to be Amazon’s domain. But today FedEx, UPS, and the United States Postal Services are threatened by the ecommerce juggernaut’s gradual expansion into their territory. Gartner’s 2016 report states that Amazon has made vast investments in its distribution and delivery network and is poised to disrupt both the 3PL and the last mile delivery agents. Agreed, that Amazon can afford to pour millions of dollars into an industry it wishes to dominate. However, there’s a lot more to it than meets the eye. Let’s take a look at the factors that you could take inspiration from.
First: Focusing on customer experience
Amazon’s approach is completely geared towards meeting or surpassing their customers’ expectations. As per a McKinsey report, Amazon scores 13% higher than the top 5 US retailers combined in customer experience rating. The point to be noted is that even though Amazon specializes in B2C, now B2B clients are expecting Amazon-like responsiveness from their transportation and logistics partners.
Amazon first ensured customer satisfaction by providing customers with previously unheard of services such as same-day-delivery, product guarantee, and easy returns. Then, it ensured their loyalty through the Amazon Prime membership. As per the same McKinsey report, Prime customers spend 2.5-4.0X as compared to non-prime members. That’s a long game well played.
What can you take away from it? Well, to begin with, place customer experience above everything else. Design your transportation policies in a manner that assures the customer that their interests are your priority. Reach out to them often. Find out what their priorities are, what are their fears, and what is on their wishlist. By being proactively inquisitive, you may be able to fulfill some of their requirements when others aren’t.
Second: Becoming Lean
If you want to be truly customer centric, Lean is the way to go. Marc Onetto, Amazon’s former head of global operations states: “Since the day he created Amazon, Jeff Bezos has been totally customer-centric. He knew that customers would not pay for waste—and that focus on waste prevention is a fundamental concept of lean.”
For instance, he explains, the delivery mode at Amazon is chosen on the basis of the promised date to the customer. Cost is the second priority; not first. He further elucidates that Amazon wasn’t always this agile. Initially, the ‘technology’ company believed that automation was the answer to all challenges. Soon however, they discovered that a strong front line was non-negotiable. That’s the concept of gemba workers in Lean. Gradually, Amazon developed the ‘autonomation’ system wherein humans would engage in high value and complex work, while machines would support those tasks. Kaizen – or continuous improvement – is also at the heart of Amazon’s core business model, something that even the sellers on Amazon must adhere to.
When you adopt Lean for your organization, ensure that your partners and the rest of the network understands what this means for them. If they do not follow Lean processes, your endeavor may not succeed.
Third: Embracing Control Towers
For those who are not aware, a logistics control tower provides visibility across business divisions, countries, and channels, including products that are not only in stock, but enroute to the customers and those being manufactured. This wide ranging tracking of goods enables logistics companies to identify trends and respond to them in a timely manner.
As opposed to the more pervasive Distributed Order Management (DOM), which mainly deals with products in stock, Control Tower approach is event-based. Nucleus Research, in a 2015 report, predicted that Amazon will put any retailer that doesn’t deploy supply chain control tower solutions, out of business in the next five years. While that prophecy is yet to be tested, it has its merits.
Ian Campbell, CEO of Nucleus Research explains: “Capturing the early adopters and the middle of the bell curve before the trend fizzles can add significantly to the bottom line… Nimble retailers that identify trends and act quickly can take the lion’s share of sales before Amazon even sees it coming.” And logistics control towers make that possible.
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Fourth: Being data driven
At Amazon, customer centricity and lean aren’t subject to opinions. They, along with a host of other factors, are driven by data. Data Selinger, Founder & CEO of RichRelevance, started his career with Amazon. While working directly with Bezos, he was tasked with studying Amazon’s data to find new ways of growing the business. He states, “While conventional wisdom has held that customer service is Amazon’s secret sauce, Bezos’s core innovation was to place data at the center of his corporate culture.”
Selinger further explains that simply betting on Big Data won’t be helpful. Instead, one should first look for metrics that define their company’s corporate culture. Second, a data driven culture can thrive only with support from the leadership. Third, data must be democratized so that everyone across the organizations is empowered to take informed decisions.
At Amazon, everything – not just logistics – is measured. From product reviews and website performance to HR and accounts, everything is converted into data to be analysed. This approach helps the company plan and execute on the basis of the ‘big picture’, as opposed to a logistics company that measures only those metrics that are directly related to their business. The insights that are drawn from this Big Data are naturally much more effective at evolving policies in line with customer expectation and market sentiment.
You too can participate in this data-driven game by adopting a Transportation Management Solution (TMS) – if you aren’t already. See if your TMS integrates completely with your Enterprise solutions, and provides you with a holistic and real-time view of not just your organization’s operations, but those of your ecosystem, including your logistics providers, partners, truckers, and 3PL providers. Remember, better data leads to better decisions.
Fifth: Being technologically oriented
Amazon has always been at the forefront of tech-adoption. The organization has never been at ease with the prevailing methods of doing business, all the while seeking better and smarter technological alternatives. Now, with radical new technologies such as Internet of Things (IoT) and Artificial Intelligence (AI) out in the market, Amazon is expected to exploit them to customers’ benefit.
As per Supply Chain Quarterly, Gartner in their 2018 report has predicted that new technologies such as AI, B2B marketplaces, and chatbots, “are poised to radically change procurement and sourcing processes over the next five years.” The report adds that half of all legacy spend analysis software will be retired, replaced by AI driven and cloud based solutions.
Amazon, being foremost a technology company, is highly likely to lead this trend and use it for its own benefit. And I dare say, that you should dedicate time and effort to figuring out how you can exploit emerging technologies to your benefit. The trick is to ride the way and not be swept away by it. By becoming technologically savvy, you could discover niches where big players can’t make much difference, but you can. That could buoy your organization into a strategically important position in a highly competitive market.
Conclusion: Fueling growth through data & technology
If there is one thing that Amazon has consistently done right, that would be directing business decisions based on data. Whether delivering books and then introducing the Kindle, or introducing retail shopping and then managing logistics, all decisions have been based on the trends and insights provided by numbers. While we can’t, and shouldn’t, mimic Amazon, we can certainly be inspired by its approach. Data surrounds us at all times. It is just that some of us choose to measure it, while some choose to prioritize other factors while making decisions. What about you? Do you feel businesses have much to learn from Amazon’s approach? How are you using data to direct your decisions?
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