SEVERAL YEARS AGO, I WROTE THAT OF ALL THE TRENDS
I’d followed during my career, the three with the biggest impact
on supply chain management were technology, globalization,
and Walmart (see “For LSPs, opportunity is knocking,” FastLane,
November 2013). Recently, a colleague asked me if I was ready to
add a fourth, which of course would be Amazon. A good question,
but at this point, I’m not so sure.
Let’s look at Walmart. When Sam Walton opened the first
Walmart store in 1962, he probably had no idea he’d be changing
the nation’s retail landscape. By the 1970s, Walmart had begun
its march through small-town America, then not-so-small-town
America, and finally the world. By 2015, the company had 2. 3 million employees and was serving 200 million customers weekly in 11,000 stores in 27 countries.
Its rapidly expanding business—fueled by vast
product selection and low prices—left thousands
of casualties in its wake, as neighborhood hardware, appliance, apparel, and other businesses
collapsed under the weight of the competition.
A big factor in Walmart’s rapid ascent to the
top of the retail heap was its hyperefficient supply
chain. Unlike many of its competitors, Walmart
spent decades honing its supply chain operations
to help hold down costs and by extension, prices. It developed logistics/distribution techniques
that elevated efficiency to new levels and led
the way in the adoption of automated warehouses, huge cross-dock facilities, top-notch technology, and sustainability programs.
Although designed to enhance Walmart’s own operations, these
moves had a much more far-reaching effect. They also served as
models for others, and ultimately, changed the supply chain game.
Is Amazon in the same league? Let’s look at its record to
date. Certainly, Amazon has changed the face of online retailing.
E-commerce sales were up 19 percent in 2016, while traditional
retailers experienced a 10-percent decline. Much of that increase
went to Amazon, and its share of the pie is expected to grow. Just
as happened with Walmart in the 1970s, Amazon’s rise is having a
devastating effect on the competition. Through September 2016, 14
major U.S. retailers, including Macy’s and Sears, had each closed
100 or more stores.
As for supply chain impact, what Amazon has done is speed
up the entire selling and delivery cycle. It has set a new standard
where order delivery is concerned, creating a climate in which
consumers have come to expect next-day or even same-day deliv-
BY CLIFFORD F. LYNCH fastlane
There is life after Amazon
eries (and leaving its competitors scrambling
to provide the same level of service). Among
other innovations, Amazon has opened well
over 100 distribution centers to shorten the
“last mile”—and these aren’t run-of-the-mill
DCs. Thanks to its 2012 purchase of robotics
innovator Kiva, most of these buildings are
equipped with high-tech ’bots to boost order
fulfillment efficiency.
As far as its contribution to the body of
supply chain knowledge, I do not see much.
Amazon obviously employs some very sharp
minds, but some of its innovations seem to be solutions looking for a problem.
Drones are certainly a part of
our future, but I do not see
delivering pizzas or shoes as
their highest and best use. As
for its latest innovation—a
plan to use blimps as airborne warehouses equipped
with drones to make speedy
deliveries—the notion of a
DC in the sky is pretty exciting stuff and has Star Trek
fans salivating as they await Captain Kirk’s
assumption of command. But a practical contribution to the supply chain field? I don’t
think so.
These are uncertain times for the supply
chain manager. Amazon and others are not just
accommodating change but are part of it, and
supply chain managers must re-educate themselves accordingly. At the same time, we must
separate the hype from the reality. This is not
the first seismic change we’ve seen in supply
chain management, and it won’t be the last.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author of
Logistics Outsourcing – A Management Guide and co-author of The
Role of Transportation in the Supply Chain. He can be reached at
cliff@cflynch.com.
