Amazon has taken the eCommerce industry by storm, becoming the leading online marketplace in the world. And what’s not to love? From fast, affordable shipping to great customer service, consumers can find pretty much anything they need on Amazon.
The company has become one of the fastest growing in history, thanks in large part to its complete restructuring of the supply chain. Amazon customers know their products will arrive on time, with some arriving within just a few hours or less. If anything goes wrong along the way, the customer can easily get the help they need by contacting the company via phone or email. It’s all part of a winning supply chain strategy that’s revolutionized the eCommerce business and heightened customer expectations.
Become the next Amazon and learn how to create and implement a winning supply chain strategy.
Amazon has been enjoying a period of rapid growth over the last few years. Amazon marketplace sales totaled $118.57 billion in 2017, up 25.2 percent from $94.67 billion in 2016. The company keeps sending more and more products through the supply chain, meeting the needs of its customers at every turn. Their website currently features 1,761,784 sellers, which means customers can find virtually everything they need.
If you want to create a supply chain like Amazon’s, you need to “wow” your customers with great customer service. Amazon wouldn’t be the company it is today without great customer service, including fast, affordable shipping, 24/7 customer support, seemingly endless variety and product recommendations that encourage customers to add more items to their cart. The better you serve your customers, the faster your supply chain will grow.
Amazon is known for its Prime service, offering free, two-day shipping to its most loyal customers. The company has also unveiled Amazon Now, which can deliver certain products to consumers in just a few hours or less. And, now Amazon has introduced Counter they’re recent effort to provide a “Buy-Online, Pickup In-Store” (BOPIS) strategy since Amazon doesn’t have many physical locations, and as a way to combat against Walmart and Target, as evidenced by this tweet from Cathy Roberson of Logistics TI:
So, how does this eCommerce behemoth deliver so many products on such a tight turnaround?
Amazon has 75 fulfillment centers across the country. It is now believed that the company has warehouses within 20 miles of half the U.S. population. This allows Amazon to quickly ship products around the country. While you may not need hundreds of thousands of square feet in warehousing space, adding more distribution centers to your supply chain can help you speed up the delivery process, especially in or near urban areas where lots of potential customers tend to reside.
Instead of managing dozens of warehouses yourself, try investing in shared distribution centers to keep your products closer to your consumers.
Amazon doesn’t wait for its customers to click the “checkout” button before sending out their products. The company uses data analytics to predict their customers’ future buying habits. They send the products their consumers are most likely to buy to local distribution centers so they can be delivered as quickly as possible once the customer decides to make a purchase.
Amazon collects all kinds of data on its users, including their purchase history, what items they tend to view or keep in their shopping cart and what kinds of products tend to be most popular with consumers in a given geographic location.
If you collect these kinds of data on your customers, you’ll be better prepared to meet their needs when they finally decide to make a purchase. Keep your distribution centers stocked with popular products and figure out which products your customers are most likely to buy.
If you want to compete with the best of the best when it comes to logistics, you need to invest in automation. These sophisticated machines will make your entire supply chain more efficient. From stocking, picking and package fulfillment, you can get orders out the door as fast as possible. These machines can also work 24/7 without taking a break, so you can maximize efficiency without overworking your employees.
Distribution center automation can be a steep investment for many emerging eCommerce players, but it will reduce your overhead over the long term and help you better meet the needs of your customers so you continue growing at lightning speed.
If you’re just getting started with warehouse automation, look for small ways to automate certain aspects of your business, such as automatic label printers and pickers and stockers. If these new additions serve your business well, you can always add more machines down the line. Don’t forget to regularly maintain this equipment and plan for some scheduled downtime so these machines can be inspected and repaired. Slowly automate certain processes until your warehouses look more and more like Amazon’s.
Despite all the upgrades we just mentioned, nothing will prevent you from competing with Amazon like a disorganized warehouse. Your employees can’t do their jobs and get orders out the door if they can’t find what they’re looking for on the shelf.
Keep your warehouse organized with industrial storage bins, stack racks and other storage equipment. Make sure all your items are easily accessible and keep the most popular items close to the loading dock. Use shipping containers that keep your products safe and sound and package each container properly or your customers will take their business elsewhere.
If you’re manufacturing and distributing all your own products, certain aspects of your business may suffer as a result. To increase efficiency, consider outsourcing your inventory management using third-party sellers so you can focus on mastering the supply chain. You can pool your resources to invest in automation, more distribution centers and expert customer service. Follow in Amazon’s footsteps to take your business to new heights.
From fast shipping to effective warehouse management, every aspect of your supply chain needs to run like a well-oiled machine. Focus on pleasing your customers and offer them the features they care about most. Use these tips to become the next king of eCommerce.
If you’re looking for logistics solutions to compete with Amazon and master an omnimodal, omnichannel shipping environment, inquire about Cerasis transportation management solutions by contacting us today.
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Like anything in life, having a vision or a strategy is key to success. Then you must execute and measure that strategy and be willing to take the data and then pivot after analysis to always be trending towards your goals. This is no different in supply chain strategy. Many consumer goods companies today are wasting too much time and resources trying to figure how to consolidate orders manually or with their transportation management systems (TMS). The order management process requirements from big-box retailers such as Wal-Mart, Target and others is critical, particularly since they can make up more than 50 to 60 percent of a CPG company’s revenue. Freight costs and the ever-increasing demands from retailers on inventory levels continue to put pressure on consumer goods manufacturers to consolidate orders to fully maximize both store shelves and truck load levels.
Today, some supply chain strategy occurs like the following scenario: The consumer goods customer service rep manages consolidated orders using spreadsheets, emails and traditional Transportation Management Systems (TMS) order consolidation capabilities. Here is an overview of the typical process:
Other policies include:
This process can be tedious and time consuming. In addition, the customer service rep may receive emails from their own internal buyer specifying additional orders to be sent to consolidate into one delivery.
All of these activities cause inefficiencies throughout the supply chain and in the order management process and are manually intensive in today’s fast-moving, demand-driven world. More importantly, the opportunity to ensure optimal full truck loads is lost. A supply chain strategy is required to optimize better.
Customer service processes and your supply chain strategy in today’s market should be as automated as possible to ensure customer service levels are being met and are able to respond to the fast pace of retailer replenishment demands. TMS solutions have always been good at matching less-than-truckload (LTL) shipments either for multi-stop deliveries or even to the same delivery point. But, best-in-class order consolidation requires in-depth detail about the characteristics of the SKU, the quantity and the customer’s “ship to” location, which is why customer service reps spend more time than necessary building the shipment.
Therefore, the ideal time to solve this predicament is further upstream, at the time orders are received, preferably in your Enterprise Resource Planning (ERP) system.
In this methodology, the advanced order building capability identifies the freight savings for order consolidation at the point of order entry, rather than using spreadsheets to group orders and then execute capabilities downstream where the decision-making is too late. Companies can use optimization technology in their supply chain strategy to identify the optimal orders that provide the best utilization of the shipment. This capability looks at each SKU’s dimensions, stack ability rules, compatibility rules, TI-HI, pallet sizes, trailer dimensions, axle constraints, top loading rules, customer specific constraints and delivery date min/max window. The automatic consolidations can even auto backfill if the truck is not full.
The outcome is automatic generation of the orders into one or more shipments respecting the retailer’s purchase order consolidation rules.
Optimization technology has traditionally been thought of as an enabler for strategic decisions such as network design, route planning, master planning scheduling and transportation carrier selection. Real-time “Perfect Shipment” decision-making requires fast performance given the amount of daily orders sent from a retailer. The optimization process, therefore, has to occur in seconds, not minutes to determine optimal combination of sales orders into a shipment.
The benefits are very large and easily quantifiable. First and foremost, by using optimization to perform order sizing at the time the order is received, the manufacturer can identify freight utilization savings by optimally combining orders shipping to the same location. Consumer goods manufacturers using this optimization approach have generated savings from 5 to 15 percent. Streamlining the order consolidation process reduces the time required to manually match orders using only tribal knowledge. And it allows customer service to spend more time servicing the customer, helping them manage inventory availability issues rather than trying to fix line items on orders in an effort to move, mix and match them in hopes of creating a good shipment with the time constraints laid out by the retailer.
Next generation optimization technology is available to capitalize on this opportunity. Further, this technology adoption is most commonly embedded, not just integrated, with an ERP system. IT resources are scarcer than ever, and the CIO and his team always prefer any solution that can leverage IT resources in this manner.
A few examples where leading consumer goods companies have innovated with this approach include:
Retailers are expected to continue to push consumer goods companies in terms of service level expectations, supply chain strategy, and demand responsiveness. The large cost savings await manufacturers using optimization technology that resides directly into the lifeblood of the company, order management. This technology enabler (embedded within ERP) shifts the paradigm by providing decision making upstream where there is advance time to deliver full truck loads. . Customer service also benefits through greater automation and significant increases in data intelligence and graphical order management/load visualization.
The best approach is to include a Quarterly Business Review (QBR) in the Transportation contract stating that you want to share the optimization Cost Reduction out of the Transportation Management System (TMS) after 90 days of optimizing your freight. Also include a fuel surcharge cap, points or negotiation. Never let the fuel surcharge be automatic. After the fuel surcharge negotiation, watch that the freight rates are not increased instead of the fuel surcharge.
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