How Amazon is Changing Fulfillment and Inventory Management

People are becoming increasingly aware of the impact that Amazon and e-commerce are having on society today. When we think about this, most of us tend to view this as a phenomenon that’s occurring strictly in retail. However, this “Amazon Effect” has a significant impact that reaches all levels of inventory and supply chain management. The reality is that manufacturing industry is experiencing a lot of change that requires manufacturers to speed up order turnaround times to remain competitive. There is a lot of pressure for goods to reach the market faster, and this has led to changes in the business strategies of manufacturing companies, as the definition of an acceptable order fulfillment time continuously changes. At some point, 10-12 days was the standard. However, it’s no longer unusual for a customer to expect orders to be fulfilled in 1-3 days.

Amazon’s has had a very innovative approach to inventory management, and this has been very crucial to their success. They ensure that they are able to get millions of orders shipped to customers at a reasonable price and faster than their competitors. As Amazon is a behemoth in the retail and e-commerce industry, it is important for small to midsize businesses(SMBs) to keep track of what the company is doing. While it could take a while for these innovations to reach the average SMB, they do highlight potential opportunities and challenges on the horizon.

Free Two-Day Delivery

When Amazon launched Amazon Prime in 2005, it was considered to be a game changer in retail. The service offered free two-day shipping on thousands of items and helped the company dominate the world of online retail.

Other retail companies began to catch up and offer free two-day shipping on many of their items, following Amazon’s lead. However, Amazon decided to take delivery services a step further and started offering one-hour deliveries with a new service called Amazon Prime Now.

Using a mobile app, Amazon’s customers can arrange for deliveries to be made during specific hours of the day that are most convenient. In some cities, customers are able to order groceries from local stores and take out meals from local restaurants. This expands Amazon’s competition to delivery services such as Instacart and DoorDash.

While Prime Now is still limited in its inventory, and only available in select markets, it has experienced steady growth and availability since its introduction 2014.

Internet of Things

Retailers are increasingly experimenting with Internet of Things (IoT) technologies. Consumers are expecting their shopping experiences to be seamless across channels. From mobile apps to physical stores and even phone calls to customer service representatives. IoT technology has a lot of potential to transform consumer experience in retail and Amazon has also taken notice.

Recently, the company introduced new IoT devices called Dash Buttons. These devices make it easy for users to get household necessities delivered to them quickly. All the users have to do is just press a button to make an order for a household staple such as coffee or bleach. Just like the one-click purchases on their e-commerce platform, Dash buttons show that Amazon is continuously making progress towards its goal of making shopping as easy as possible. Even if the Dash buttons are unsuccessful, making purchases through IoT devices would eventually become the norm. You can also expect IoT technology to be integrated with storage structures and equipment, to streamline the inventory management process as well.

Drone Technology

Amazon made headlines in 2013 when their CEO Jeff Bezos announced that the company was working to develop a drone-based delivery system called Amazon Prime Air. Customers that lived within 10 miles of an Amazon warehouse or fulfillment center would eventually be able to receive small packages (under 5 pounds) in 30 minutes or less, using drones.

While the service is still in development and still faces a wide array of obstacles that may delay its introduction to the market, Amazon is still confident about the potential that drone-based delivery could have on their inventory management process. The service does face regulatory obstacles, but there are expectations for a debut as early as this year. For SMBs this is good news as a behemoth like Amazon has the financial and political resources necessary to pave the way for more businesses to operate commercial delivery drones.

Low Prices

Amazon has come a long way from being a tiny online bookstore and is now giant in the manufacturing and retail industries. The company’s technological capabilities and resources allow them not only to sell items at lower prices than their competitors: but also manufacture items at a much lower price as well. The AmazonBasics line of household items is an example of this. Items include batteries, chargers, waste bags and much more. With a streamlined process to manufacture, distribute and sell these products, Amazon has gained a significant competitive advantage because of the scale of its operations. Thus, you shouldn’t be too surprised when you see them expand further into consumer products in the future.

Efficient Warehouses

Not too long ago, Amazon received some very negative publicity that stemmed from reported working conditions in its’ fulfillment centers. The company has since made efforts to improve working conditions for its workers, and also integrate technology into its fulfillment centers to make worker’s jobs easier.

Kiva Systems, a company that provided robotic and automated warehouse solutions was acquired by Amazon in 2012. The company was eventually rebranded as Amazon Robotics. This allowed Amazon to introduce automated robots that can retrieve, package and sort order shipments without the need for human assistance. This has saved the company millions of dollars annually and reduced the role of warehouse workers to handling order confirmations.

Small to mid-sized businesses should look to Amazon as a trendsetter when it comes to the future of inventory management. As an SMB owner, you should also ensure that you are making the adequate investments in technology and quality warehouse equipment that enhances your supply-chain management process – just like Amazon does.

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