Amazon Supply: Changing the Face of MRO?

- November 28, 2012 4:11 AM
Categories: Jason Busch, Sourcing | Tags:

Earlier this year, we covered the launch of Amazon Supply (see some of our analysis here and here). Industrial distribution and MRO is an area we’ll be covering on Spend Matters with much greater detail throughout 2013, including how new entrants like Amazon Supply complement (and threaten) incumbents including Grainger. Our hypothesis is that the market is ultimately Amazon’s to lose, in large part because of the investment they’re making in a state-of-the-art warehousing and distribution back-end. Witness not only their site build-outs but also their acquisition of robotics and software company Kiva Systems. As we’ve observed previously on the topic:

It’s Spend Matters’ view that Amazon appears to be playing for operational efficiency keeps. With its near $1B acquisition of Kiva (which incidentally paid out well for investors — 43X on series A, 26X on series B our sources suggest) Amazon is bulking up relative to incumbent players on an entirely different level in managing SKU inventory and warehouse efficiency through next generation technology investments.

Amazon’s ability to pick, pack and ship orders through their now proprietary dynamic Kiva robotics environment that adjusts the physical warehouse structure for changing volumes, frequency, etc. in a modular system — and likely their eventual ability to manage inventory, JIT and fulfillment programs on an outsourced basis for customers, should they opt to pursue this route — could change the MRO marketplace for good and stealthily suffocate second-tier industrial distributors that even an industrial Nook won’t be able to save. tweet

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In a recent post on MetalMiner, my colleague Taras Berezowsky observes that “what is interesting is that online shopping businesses such as Amazon are trying to shorten the supply chain and build even more warehouses closer to population centers this year … These types of moves will result in more efficient warehouse-and-distribution networks across the board, but companies like Amazon have an incentive to do so.”

Do check out our MetalMiner analysis. We would also encourage you, just as our colleagues have done, to try Amazon Supply for yourself even if you’re working with other MRO providers today. Trust us – they’ll be in your supply mix in some capacity in the future.

If your company sources any product that contains steel, stainless steel, non-ferrous metals, ferro alloys, precious metals, rare earth metals, or minor metals — or if you engage in global scrap trading and consume scrap as a significant cost input — you need MetalMiner IndX?.

- Jason Busch

Comments

  • bitter and twisted:

    I think youre looking at the wrong end. How exactly will AS connect to mid-size and large customers’ existing ERP systems?

    I tested AS by looking up some ball bearings. The search facility is rubbish and the prices are a rip-off.

  • Jason Busch:

    Our observations on AS fulfillment … not perfect yet:

    http://www.spendmatters.com/index.cfm/2012/5/4/The-AmazonSupply-Customer-Experience-First-Fulfillment-Impressions-with-MRO-and-Metals

    I see multiple scenarios from "no integration" to tight integration on either a punch-out or supplier hosted catalog basis (think how Grainger connects with the ASN today). Good fodder for a follow-up analysis indeed …

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