Amazon Shakes Up the Omni-Channel Supply Chain – Again

AlexaCheater

Woman utlizes omni-channel retailing by buying via her tablet.It seems like these days everyone in the retail space is playing a game of catch up to Amazon. The online retail giant has had an overwhelmingly strong impact on the way in which businesses sell their goods to the end consumer. Practically defining the very concept of omni-channel, they were early adopters of online and mobile sales. The switch they helped flip in consumer purchasing trends caused companies worldwide to scramble, desperate to play in these emerging and evolving new spaces. The result was a lot of stress on the supply chain, and the emergence of omni-channel strategies. Supply chain managers utilize a central stock pool to control a number of functions such as pricing, fulfillment, sales, stock management, and ordering. These orders are then fulfilled through numerous retail channels including physical stores, online, and now increasingly on mobile devices.

This shift to an omni-channel world has caused new concerns about supply chain efficiency, on-time delivery rates, customer satisfaction levels, and visibility. Flexibility and the ability to respond quickly are now paramount. Retailers have to worry about not only meeting demand, but ensuring they have the right amount of the right product available at the right location – whether that’s in a specific retail store, or a distribution center feeding online and mobile sales. Add in the fact they have to be able to deliver those goods in record time – in some cases same day – and the challenges for supply chain mangers in this omni-channel environment have skyrocketed.

With their domination in online sales, retailers had one final safe haven where Amazon wasn’t constantly a threat knocking on the door – the world of brick and mortar stores, still very much surviving in this digital age despite early predictions. Now that last bastion may have been breached.

Credited with starting the shift away from traditional retail outlets, Amazon is now beginning to buck the very trend they created. They opened their first physical location in November. An homage to their roots, Amazon Books in Seattle, Washington appears to be very much like your average bookstore. And while one location in itself may not be enough to cause widespread concern, the fact another 400 locations may be on the horizon, could be.

The Wall Street Journal was the first to report on Amazon’s purported plans to open several hundred more retail locations. Subsequent reports from other media outlets, including one from The New York Times, seem to indicate that while expansion plans are in the works, these new physical sites aren’t about to spring up overnight.

Jason Del Ray of Re/code, who also recently published an article about Amazon’s expansion, cites “two sources familiar with plans” who say more bookstores will be coming, but so are “other types of retail stores.” Del Ray’s story also makes note of a recently filed patent application by Amazon, which could add additional insight into what these stores may look like. Here’s where you supply chain managers really need to take note.

Re/code’s summary of that patent application centers on a concept where customers would be able to pick up an item from the shelf and automatically be charged for it when they leave the store. All without the need to stop at a checkout counter or kiosk to physically pay for it.

So how does that impact the supply chain? Simple, they’ll have to interface with that technology in a way that allows further streamlining. That means having a supply chain smart enough to sense when an item has left the store, updating inventory in real-time, processing return data instantaneously, and providing the ability to alert you within seconds if any action is needed to properly optimize inventory.

Now take that idea one step further. What if your supply chain was intelligent enough to sense everything down to the part level? Imagine how quickly you’d be alerted to any abnormality in the supply chain. How easy it would be to take a quick look at your phone and see exactly how your KPIs are measuring up. The detailed visibility you’d gain into your operations and the speed at which you’d be able to effect change would be phenomenal. Exciting times are ahead!

As a consumer, I can’t say I’m unhappy with the changes Amazon is making to the retail landscape. I can now shop when, where, and how I want. I can have my purchases delivered faster than ever. And I can even return items more easily thanks to a variety of options. Their drive to make shopping a more enjoyable, more convenient, and more immersive experience has been a positive one.

But I’m still left wondering about the implications these changes will have on the supply chains of my favorite stores and brands. How many more businesses are we going to see crumble because they can’t keep pace? How many supply chains, many already ill equipped to deal with an omni-channel marketplace, are going to fail under this future reality where speed, visibility, and the ability to evolve are the only way to survive?

How do you see Amazon’s idea for a new retail experience changing current omni-channel supply chain practices? I’d love to hear your thoughts, so let me know in the comments area.

AlexaCheater

As the Product Marketing Manager at Kinaxis, Alexa helps develop and deliver informative, engaging and entertaining supply chain content that also works to promote how Kinaxis RapidResponse is revolutionizing supply chain planning. She joined Kinaxis in 2015 with more than a decade of communications experience. Alexa holds a Bachelor of Journalism (Honors) from the University of King’s College in Halifax, Nova Scotia.

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Discussions

  1. Interesting perspective, but I think the long story is technology is moving much faster than any retailer can possible keep up with, including Amazon; and it extends further than the customer, as it requires the business to embrace and adjust within their structure…that’s not so easy when you take into consideration organizational structures, cross business conflicts, and the reality of what plays out well on paper doesn’t always translate to reality. I understand the satisfaction you feel based on the business model Amazon has built, but you also raise a very important question, what will happen to the brands and stores you enjoy? Will they survive? If you’re focus on satisfaction is centered on only price and convenience, the answer is no. There’s an old saying I learned in my early years of product development, “price, quality, delivery…pick two” – meaning there is a cost for every decision, and if you decide the speed, automation and convenience you noted are the priorities, then you may also be deciding you don’t want to support your favorite brands and stores. Just something to consider.

  2. Hi Arthur, Thanks for the great comment! I agree there are trade-offs to be made if consumers want lower prices and more convenience, and that any retailer would be hard pressed to keep up with the speed at which technology is moving — even the mighty Amazon. As you also pointed out, there needs to be changes to the structure of businesses as well if they want to have any hope of meeting the growing list of consumer demands. It will be very interesting to see if the smart store concept Amazon has patented ever does become reality.

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