Amazon Supply Chain Innovation – Just Help Yourself!

Back in early December, Amazon announced it was launching Amazon Business in Germany. We covered it briefly; our colleagues in the US also produced this somewhat more detailed article.

Among the interesting angles are the ability of buyers to pay via an invoice rather than immediately by card; and the option for VAT exclusive pricing. As our US colleagues said, “Yet the sweet spot for many larger enterprises with Amazon Business has been as a tail spend supplier — a new type of marketplace consolidator, of sorts. Amazon has succeeding at penetrating SMB organizations as well and is now serving “more than 400,000 businesses.” The marketplace approach remains central to its model, “with third-party sellers fulfilling over half of the orders,” representing some 45,000 third-party suppliers”.

Amazon also hit the headlines at the end of the year with their first retail supermarket in Seattle.  Pierre Mitchell covered this for Spend Matters US and produced two excellent articles here and here. Anyone interested in supply chain (as opposed to “just” procurement) really should read them. If you haven’t heard about this initiative,  Amazon is experimenting with some highly automated small format grocery stores, with a pilot store in Seattle. Amazon employees are beta testing it and rollout plans will be communicated in early 2017. As Pierre says,

“The best analogy for the smaller format Amazon Go store is a supersized hotel minibar. But the sensors don’t just monitor when you grab the $9 bag of nuts, they use your smartphone’s Amazon app to identify you upon entry (it quite literally becomes a walled garden) and then actively monitor your every movement with AI-based vision systems. Such visual sensors are then combined with RFID … or NFC to “fuse” these sensor systems, which is why Amazon calls the technology approach “Sensor Fusion” … It all adds up to a promised near-frictionless experience for consumers to just swipe into the store, grab what they want and walk out without waiting in line or self-scanning items at a checkout counter”.

Wouldn’t that be great? What could possibly go wrong? Well, quite a lot as Pierre points out. (there is a very funny spoof video here too).  But it seems clear that this is a direction retail business - and more - is moving. In his second article, Pierre takes a look at the patent application Amazon has made around these ideas. As he points out, it potentially covers  a lot more than just retail, and Amazon’s ideas are pretty fundamental to the way supply chain management is going to develop.

For instance, the application talks about “material handling locations”, not “stores” and the patent “describes for tracking and identifying the removal of items from inventory locations and the transition of items from a materials handling facility.” And the scope of these facilities includes “warehouses, distribution centres, cross-docking … rental facilities, libraries, retail stores, wholesales stores, museums” and more.

So we can start to imagine all those occasions and processes where the administration of stuff being handled, moved, bought, consumed could be made “touchless” – no need for the humans involved to do” anything consciously in order for the parties involved to know that the activity has taken place.

It’s all a bit science-fiction at first sight, but you can start to see how it might change our lives and businesses pretty dramatically, and as Pierre says it shows the strategic importance of supply chain in  enabling new consumer facing value to be created.

Do read his articles, and we will be back with more on Amazon tomorrow.

First Voice

  1. Aman Deep:

    Excellent innovation. pls share more insight on the topic. Thubs up.

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