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.