Amazon: A Supply Chain Look Beyond the Numbers Jason Busch - February 5, 2013 7:23 AM | Categories: Commentary | Tags: Amazon, L1, supply chain Bob Ferrari recently penned an insightful, insider look at Amazon’s recent quarterly performance and what it means for the company – and for the broader supplier, supply-chain and logistics community at large. This is the type of stuff you used to have to pay for in private investor newsletters. If you’re curious about Amazon (even if you’re not in our supply chain, procurement and supplier management world), it’s a great read. I’ll spare you all the details but I want to call your attention to a few items, including an observation that Bob makes based on analysis from a CSCMP presentation given by Jim Tompkins. Bob paraphrases Jim, noting that “every company and its associated supply chain arm needs to have a strategy regarding Amazon, and I totally concur with that statement. We may well view more corporate casualties in the coming months as a result of the ‘Amazon effect.’” In reading the Amazon tea-leaves, Bob suggests looking at some of Amazon’s supply chain KPIs and their implications for different business lines, such as Amazon Supply. As an example, Bob observes that Year over year inventory investment increased 21 percent while inventory turns decreased by a full turn to 9.3 turns. That reflects an increased burden of on-hand inventories most likely from taking on new fulfillment business models such as Amazon Supply in the industrial supplies sector. Accounts payable, the determinant of how quickly Amazon pays its suppliers was 76 days, an increase of 2 days during the year. Thus, being an Amazon supplier comes with a financial working capital burden. This is the type of calculation and observation that is essential to put Amazon’s B2B potential in context of corporate buying in an Ariba network world. Whereas suppliers might complain about Ariba network fees being based on a percentage of the transaction, I’m sure if you got a bunch in a room, they would sooner favor prompt 30 or 45 day terms and some network fee structure with prompt payment than the 76 day slippage that is happening at Amazon. Food for thought. Check back later today as we offer some other observations more broadly on Amazon and their prospects in the procurement world. First Voice Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.