Amazon Is a Supply Chain Management Pioneer: 3 Ways You Can Stay Competitive

by:
on January 18, 2019

In the span of two decades, Amazon has become the most formidable and dominant force in retail. Amazon’s innovative approach to supply chain management has been key to its success, ensuring that it can get millions of items to customers at the right price and faster than anyone else.

This has changed consumers’ expectations for shipping costs and speed. Small to midsize businesses (SMBs) have limited resources and can struggle to offer what customers have now come to expect, such as two-day shipping and even same-day shipping.

But meeting these new delivery expectations isn’t out of reach for SMBs. As half of the items sold on Amazon are from SMBs, you have options to keep up with the new standards set by the online retail giant.

In this article we’ll cover three ways SMBs can adjust their supply chain strategies to better meet customer expectations while keeping costs under control.

2-Day Delivery Can Be Yours

Amazon’s 2005 launch of Amazon Prime—an annual membership that offers free two-day shipping on hundreds of thousands of items—was a game changer. In fact, the success has overwhelmed the traditional delivery companies and Amazon took a page from the “gig” working model and started Amazon Flex for last-mile and same-day deliveries.

While Amazon’s strategy of using every logistics option possibly available (delivery to your car, anyone?) may not be realistic for your business, you can partner with a third-party logistics (3PL) provider to offer your customers faster shipping times.

Companies such as Newegg and Selery offer cost-conscious options, and they typically don’t require that you sell on their website. And yes, Amazon has their hands in this pot too and can be your 3PL via Fulfillment by Amazon.

 What you can do:  Consider if moving your product to a fulfillment service where they store, pick, pack and ship would be beneficial for your business. Fulfillment centers can reduce or eliminate your self-managed storage and improve delivery times as they have the infrastructure already in place and can spread the costs across multiple clients.

Most logistics partners can integrate with your existing (or a new) shopping cart tool such as Shopify or Magento, but still be sure to ask!



Shopping cart in Shopify (source)
 

When 2-Day Delivery Isn’t an Option

Maybe you’re not ready to support a two-day shipping option and that’s OK. Not every shopper is itching to get their delivery ASAP—some are more concerned with price. This even works in your favor.

According to Gartner you can create a win-win by offering them an incentive to select a slower shipping time, providing you the extra time needed for fulfillment.

“The retailer would be presented with additional time to more efficiently orchestrate their pick, pack and dispatch processes,” says Gartner analyst Tom Enright. “They’d likely obtain the benefits of a more optimized warehouse and store operations, improved load optimization, lower emissions and more efficient routing scheduling.” (The full report is available to Gartner clients only.)

 What you can do:  An example incentive would be to calculate a shipping day (e.g., one day a week) where if your customer opts to be included in this shipment you provide them a 5 percent discount. Adjust your inventory replenishment, warehouse layout and staffing to optimize the pick, pack and ship process for this day.

This option won’t be completely foreign to many online shoppers. Amazon offers a “no-rush shipping” option at checkout where customers can opt to receive incentives such as a $1 credit for accepting a slower shipping time. They’re also rolling out a program where customers can select on what day their order arrives.

One 3PL Won’t Meet All Your Needs

Same-day and one-hour shipping aren’t options that traditional third-party logistics (3PL) providers such as UPS, USPS and FedEx are well equipped to handle. Bucking all conventional wisdom with regard to outsourcing distribution, Amazon has begun to more heavily rely on its own fleet of delivery vehicles to fulfill same-day deliveries.

But other companies don’t want to be left in the dust, so 3PLs large and small are changing their processes to accommodate delivery demands. SMBs benefit greatly from the new infrastructures being put in place at the demand of larger enterprises. Essentially, you can ride on the coattails of the larger retailers.

 What you can do:  Evaluate other options for shipping partners and maybe even logistics approaches, taking into consideration geographic location and the new expectations of your customers in that area.

For example, if your business is based on the East Coast and you’re struggling to keep shipping costs down for West Coast deliveries, consider using a fulfillment center with warehousing on the other side of the country. Splitting your inventory may not have been a realistic option for SMBs several decades ago, but it is now.

Key Takeaways

While low-cost and magically quick deliveries may seem out of grasp for businesses that lack Amazon’s scale and resources, the significant strides in improving and shortening delivery times they have made do in turn make these options more available to SMBs.

  • Be open to new 3PLs.
  • Don’t overlook your customers who value price over shipping speed.
  • Partner with a fulfillment service offering two-day shipping and let them do the heavy lifting.
  • And of course, small businesses need to ensure that they are also making appropriate investments in supply chain management technology.

What fulfillment options are you testing out? Email me your ideas at olivia@softwareadvice.com.

Note: The information contained in this article has been obtained from sources believed to be reliable. The applications selected are examples to show a feature in context, and are not intended as endorsements or recommendations.

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