From E-Commerce to Supply Chain Excellence
As the global business landscape continues to evolve towards the fourth industrial revolution of cyber-physical systems, so do its challenges. New competitors are entering markets and creating alternative solutions to produce market shifts. With technology progressing at light speeds, product life cycles are getting shorter. Customers are more demanding, and their expectations now extend beyond cost and service to include guidance This fast changing environment puts new demands on supply chains, as companies seek ways not just to manage the change. Those that succeed are thinking far beyond their organizational boundaries. They are optimizing their supply chains from end to end, and are finding new ways to collaborate with both suppliers and customers. One of the customers who is getting more and more influence is Amazon. Amazon started as an E-Commerce company, providing a simple solution to buy a product online. It then more and more became a company striving for the quickest way to provide their inventory to the customers. They introduced Prime shipping, then Prime Now with a two hour window, and all of the sudden they were eating into the revenue of Brick and Mortars who were counting on proximity to there customers. But it would not be Amazon if they would not strive for even better processes and user experiences for their customers.
One new experience just started a few weeks back. But has its roots in something Amazon announced last year. April 1st 2015 they showcased their Dash Buttons, deemed to be an Aprils fools joke (I was very certain it only can be a joke), but launched mid last year. Not only did Amazon create a button to reorder your general household supplies, but it also created a different brand awareness for manufacturers of replenishment goods. Pressing a button once you use your last roll of kitchen paper and not worrying that you will need to go to Target and buy some more was a game changer for e-commerce. It took away the app, the website or your explaining to Alexa (Amazon personal assistant). Looked at is as gimmick, amazon had greater plans for the Dash button. How about an ecosystem?
From Gimmick to Ecosystem
Amazon announced the new integration of Dash, an API for your manufactures of appliances which need from time to time a maintenance product. From a button to a fully automated supply chain, Amazon Dash Replenishment Service (DRS). This ecosystem enables connected devices to order physical goods from Amazon when supplies are running low — like a Brita Water Pitcher that orders more filters. By using Amazon Dash Replenishment, device makers are able to leverage Amazon’s authentication and payment systems, customer service, and fulfillment network — giving their customers access to Amazon’s low prices, great selection, and reliable delivery.
For example, in the case of the Brother connected printers that measure toner or ink levels, customers are instructed to sign up for automatic re-ordering through the Brother website. For those buying these printers new, that sign-up will be part of the printer’s setup instructions. Of course, ink replenishment programs aren’t novel — competitors have been running their own variations on this before, like HP does with HP’s “Instant Ink” replacement service, for example. Meanwhile, Epson addressed the problem by selling printers with their own refillable ink tanks instead of cartridges (“EcoTank” branded printers). However, instead of buying inks from the manufacturer directly, Brother’s new connected printers are placing Amazon orders on your behalf. Brother says it has over 45 models immediately compatible with Amazon’s service. Brother takes one step aside by not owning the consumer and their transaction but thinks ahead, by providing the consumer a channel which they anyway use and therefor they will sell their cartridges anyways.
Supply Chain Excellence
If you are in Brick and Mortar, it is time to react and use your geographical footprint as your advantage. Because people will abandon you the second they don’t have to choose. Consumers will not run out for any ink, water filters, etc. anymore. There is more to it than just a quicker shopping solution. With this system Amazon can exceed on their logistics excellence and intelligence. There is no better way than a fully automated supply chain to the consumer, than through connecting with their needs directly at the product. Amazon will be able to control inventory levels and shipping flows, which will increase it’s inventory turnover ratio. Looking at their past financial statements, they reported below industry standard inventory turnover ration, this is mostly due to the fact that Amazon’s highest competitive advantage is the fast shipping. To be a fast shipper you have to have the inventory on hand, which means that you have to stock every single item to hold your 2 day shipping promise. The DRS will help Amazon control the demand of good which are could be ordered on a periodic basis (but most people forget about it or do not take advantage of the Amazon subscription service) and therefore steer the inventory levels with a higher accuracy.
Amazon DRS is the intelligent backbone into any manufacturer selling to amazon. This ecosystem will help Amazon with their core business; fulfillment of goods. I truly believe that this is just the start for them and in the future we will see many more products and services being connected through the DRS. Just think about the times you had to run out to do buy something you forgot to purchase last time you went to the grocery store or to a mass merchant. Or maybe the time your oil change light turned on and you still need to schedule an appointment. I am excited to see whats ahead, are you?