Your Business and the Amazon Effect


Amazon earns 37 percent of all ecommerce sales and its market share is growing. In 2016, Amazon accounted for 53 percent of all ecommerce growth and its distribution business model is quickly evolving to serve industrial markets.

Consider these trends:
• What used to move in pallet quantities now moves as single unit parcels.
• What used to require seven days leadtime is now often required in 2 hours.
• Return percentages that once averaged below 10 percent are now nearly 30 percent.
• More manufacturing is “make-to-stock” so customer order fulfillment can ship in two
days or less.
• Supply chains are getting more complicated.
• Customers are requiring more and getting used to better performance.

This is either remarkable or frightening. The good news is there are things your business can do to adjust to this new normal, but it requires awareness, acceptance and an openness to change. Where does your business stand in this new paradigm?

If you think you can be a manufacturer with an inefficient warehousing operation, it is time to think again and realize you are more likely a distributor with your manufacturing operations serving like a dedicated supplier

If you are not augmenting your wholesale business sales with direct-to-consumer sales, you risk being cut out of the supply chain in the future.

Few companies think of their inventory as a strategic weapon, and the days of having “six weeks inventory on hand” are over. Today, to maximize customer service at the lowest cost, you must be smarter and truly optimize your inventory by using A/B/C/D/F SKU classification to drive buying decisions of what items are stocked, in which location, and at what optimal inventory level.

The Amazon effect is changing how business is done but, if we pay attention, learn from it and are open to change, it can make our businesses better.

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Ray Davis is a training instructor at the Manufacturer & Business Association and managing partner of Supply Velocity, a leader in highly effective execution, Lean process improvement and supply chain management.