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What All Businesses Can Learn from Amazon’s Supply Chain Effect

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While Amazon may not have intended to set the pace of business when it began, today the company determines consumer expectations around shipping and fulfillment. The Amazon effect is real, it’s relevant, and it’s reshaping standards in a way that business owners must understand to succeed.

Even online shoppers at a customer service powerhouse like Nordstrom now expect shipments to arrive as quickly as Amazon Prime. The battle for faster delivery includes not only the retailer, but the entire supply chain. Where should they cut time, without cutting corners or adding cost? Mills, manufacturers and other suppliers aspire to build a sourcing matrix that provides the flexibility that is needed in today’s fast-paced marketplace with ever-growing demand.

A new survey from consulting firm AlixPartners finds the new maximum acceptable time to wait for a package to arrive is now an average of 4.1 days, down from 5.5 days only six years ago. That’s a swift change in customer demand over a short period of time.

The speedy delivery time also impacts the overall supply chain, including B2B, illustrating Amazon’s pace-setting influence across industries. Customers have enthusiastically adopted that two-day shipping mentality, bringing it from their own consumer experience into the workplace. They now want to know why they can’t get a sample in two days, why they can’t get fabric choices within the same amount of time, and why shipping in general is taking so long. This represents a marked change from the longer turnaround times previously considered standard.

Rising to meet the supply chain challenge

Unfortunately, some aspects of the supply chain can be difficult to speed up. Without adequate time and proper management, there is a risk of service redundancy, wasted labor, and costly missed deadlines. For instance, if a delay from one vendor on a particular fabric means losing your spot on the manufacturing line, which causes a missed delivery date to your biggest client, it’s going to have an impact on your bottom line moving forward.

A one-off mentality provides cost savings, but at the same time takes the focus off longer-term opportunities such as consolidation and efficiency improvements. The immediacy of a get-it-done approach supersedes more long-range goals.

Amazon works hard to balance fast shipping with customer satisfaction and even environmental impacts. For instance, Amazon has implemented a policy of not individually delivering smaller, low-cost items such as pens or razors; instead, a customer must buy $25 worth of additional merchandise before that box will be shipped. This helps from a cost perspective on the fulfillment side, but also indicates responsiveness to the very real environmental issues generated when customers order small-ticket items and have them shipped out one at a time. Customers are also rewarded with savings if they are willing to wait for all of their purchases to be shipped together.

Thus, today’s rapidly shifting retail and e-commerce landscape is pushing companies at each stage of the supply chain to develop new strategies for balancing expectations of speed with the necessary constraints that ensure quality and high ethical standards.

Suppliers can be the key to your success

As a creative, client-focused organization, Amazon has found unique ways of doing business and reaching its corporate goals. To emulate the Amazon effect, think about how you as a company can also be creative and client-focused—and realize that part of this has to do with Amazon’s way of working with suppliers.

The Amazon supply chain strategy has four parts: warehousing, delivery, technology, and manufacturing. The warehouse strategy is particularly key to its supply success: all warehouses are adjacent to large metropolitan areas for easy access to customers.

If you don’t have a warehouse, though, here’s some good news: your suppliers themselves can store items. Developing a closer relationship with them enables you to have these types of conversations and craft working strategies. A strong supplier acts as an intermediary that helps things take place more quickly. Their attitude is: what can we do on the business side to help you ship faster?

Harnessing the Amazon effect

How can another company match Amazon’s success? It’s deceptively simple: play by the rules, but not the ones you might expect.

While most articles on the Amazon effect focus exclusively on fulfillment, product recommendation algorithms, and other public-facing strategies that the firm uses to achieve market dominance, a peek behind the curtain shows even more crucial lessons embedded in Amazon’s company culture. Amazon stores produce locally in warehouses, making its fulfillment strategies highly relevant to the supply chain and conferring speed-to-market advantages.

Moreover, as of 2018, nearly 1,000 Glassdoor reviews point to fellow employees’ creativity and intelligence as a major perk of working at Amazon. I feel this from personal experience: I came from a slow-moving company keen on tradition that was hesitant to try new ways of doing things. In my position as a senior brand manager there, Amazon streamlined and upleveled my thought process. I was expected to come up with creative solutions and take them and run. I began to think quicker and smarter. By encouraging data-driven experimentation and testing methods, other companies across the supply chain can also benefit from emulating the Amazon culture.

Additionally, Amazon ensures continuous internal innovation by encouraging employees to push back against management decisions with which they disagree. For example, this spring Amazon employees pressed their management to adopt a climate-change plan in an open letter to the board of directors and CEO Jeff Bezos.

Amazon’s company culture is getting more than a few things right—take note.

Work fast—but take time to connect

In the era of two-day shipping, relationship-building is vital. As Amazon continues to shape consumer expectations, even experienced designers and product developers run the risk of feeling impatient if manufacturing takes too long. That said, some steps can’t be rushed without sacrificing either quality or ethics.

The solution: provide excellent customer support and solve for obstacles before they arise. Bezos cites Amazon’s “customer-obsessed” approach as a key element of success.

Deep relationships help companies weather the storm and find solutions. For example, the United States has strict rules about importing textiles and apparel. Mislabeled shipments can be held up at customs, snowballing into a loss of both time and money. However, trusted partners within the supply chain can help avoid this type of situation.

Within these trusting relationships, companies can maintain an open dialogue, educating clients and partners on how certain processes are growing more efficient and how others are benefitting from an intentional, measured pace.

Viewed in this light, Amazon’s new standard-setting can spur innovation and creativity.

For instance, NILIT has acted upon many of the innovations Amazon has brought to enterprise. Our manufacturing plants include warehouse space strategically placed around the world to facilitate collaborating quickly with supply chain partners.

The creation of the new NILIT brand Sensil® is demonstrating a new way for yarn producers, mills and brands to work together. Working directly with brands creates greater transparency and trust in the manufacturing process, it also allows brands that may have been priced out of premium fibers in the past to find partners willing to provide cost-effective means for bringing their collections to life.

If companies take the opportunity to re-examine their own processes and rise to the challenge of making them stronger, they will find that the new measuring stick yields more robust business models and happier customers.

Kirsten K. Harris is VP of Marketing for North America at Nilit, creator of Sensil®.

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