Gregor Ulitzka, Director EU Supply Chain Programs, Amazon Europe
What all businesses can learn from Amazon’s supply chain
WHILE SHELF SPACE IN OFFLINE STORES IS RESTRICTED, ONLINE STORES CAN CARRY MILLIONS OF ITEMS AND OFFER THOSE TO CUSTOMERS ACROSS THE WORLD.
In order to grasp the phenomenal success of Amazon, one needs to understand its supply chain and the company’s relentless drive to always deliver faster. We asked Gregor Ulitzka, Director EU Supply Chain Programs, Amazon Europe, why speed matters so much for the Seattle-based multinational technology company.
Amazon strives to be Earth’s most customer-centric company. In line with this philosophy, we formulate some fundamental tenets. For example, we believe that our customers will never say, “Please, deliver it more slowly”. Working backwards from this idea, Amazon has been investing in the delivery speed and experience for more than two decades now. We reduced delivery speed from two days, to next day, to same day to Prime Now in 2014 where we offer delivery in less than two hours in many metropolitan areas across the US and EU. Meanwhile, Amazon’s fulfilment network has more than 175 fulfilment centres worldwide enabling us to deliver this constant improvement. We love that our customers keep us on our toes.
Why does Amazon call fulfilment centres “fulfilment” centres? Aren’t they just warehouses?
This was my first thought when I started at Amazon. Arriving from a brick and mortar retail experience I wrongly assumed that fulfilment centres were large warehouses. The answer is no. Those are not warehouses. We design our fulfilment centres working backwards from our core customer promise. This means that we do not optimise for storing goods, we optimise for delivering against our customer promise. For example, we store in single units to optimise the access and speed to those items, once our customer orders.
That is the only way to keep our customer promise of a speedy delivery. I recommend everyone signs up for a tour of one of our Amazon fulfilment centres and to truly understand how this is done. Just don’t show up in the last quarter of the year, then you’ll likely end up at a packing station, helping us during our peak season.
What role does technology/automation play in this journey?
A big one. We are excited about the possibilities technology gives us to innovate in the supply chain. These are small and big innovations. Amazon started using robotics in fulfilment centres after its 2012 acquisition of Boston-based Kiva Systems, which has since been renamed Amazon Robotics. Amazon Robotics automates fulfilment centre operations using various methods of robotic technology, including autonomous mobile robots, sophisticated control software, language perception, power management, computer vision, depth sensing, machine learning, object recognition, and semantic understanding of commands.
Automation also helps to support our colleagues in the fulfilment centres, by relieving them from heavy lifting or receptive tasks, allowing them to focus on tasks that need judgement. Robotic innovations do not stop at the fulfilment centre. For example, with Amazon Scout, we launched a pilot in 2019 with autonomous delivery vehicles. Amazon Scout can provide even more sustainability and convenience to customer deliveries. You could almost call it a little drone on wheels.
What are the differences in serving a supply chain for online and offline stores?
The main difference is an almost infinite possibility in the offer and selection to customers. While shelf-space in off-line stores is restricted, online stores can carry millions of items and offer them to customers around the world. This has many implications throughout the supply chain that we had to learn and that often drove our vendors and sellers crazy.
While offline stores normally order in cases or pallet sizes, with online stores, customers can start ordering in single units and have more flexibility to decide what they want to buy. Nevertheless, manufacturers need economies of scale when producing items. How we best bridge this difference is by using the possibilities of the internet to distribute information globally. This is the challenge of modern, collaborative supply chains.
How can Amazon and manufacturers cooperate in their supply chains to better serve customers?
While we will always start with the customer, we believe that there are tons of innovative possibilities throughout the supply chain from production to customer. Supply chain is an area where we try to learn from and with our vendors. The biggest asset we have is the information regarding customer demand. We use machine learning to predict where and when a customer will likely demand an item and work backwards from there.
Based on this information, with support from our vendors, we try to find the most efficient supply route from the vendor’s production to the customer. We have developed various programs like Direct Imports, where we channel this information right through to the production origin of our vendors.
Another initiative is VendorFlex, where we use Amazon’s fulfilment technology to fulfil right from the location of the vendor and hence reduce touch points in the supply chain, be more efficient and of course fulfil our customer promise of delivering faster. Amazon’s growing fulfilment network will require us to further collaborate with our vendors to find the best combination of know-how, allowing us to jointly design a supply chain that is able to serve the future needs of our customers.
WE ARE EXCITED ABOUT THE POSSIBILITIES TECHNOLOGY GIVES US TO INNOVATE IN THE SUPPLY CHAIN.