The AmazonSupply Customer Experience: First Fulfillment Impressions with MRO and Metals

Last week, Spend Matters and MetalMiner spent quite a bit of time covering the news and implications of Amazon's announcement of AmazonSupply:

Amazon Supply Launches -- New Competition for Industrial Distributors, Ariba, SciQuest and Others
AmazonSupply: Competitive Implications (Quick Take -- Part 1)

AmazonSupply: Competitive Implications (Quick Take -- Part 2)

Will Amazon Disrupt MRO and Industrial Supply Markets?

Earlier this week, we had the chance to speak with a friend who placed an order on the Amazon site for a range of MRO and metals items. His impression was positive (but mixed).

In short, industrial distributors focused on standard MRO items where value-added services (JIT, VMI, etc.) are not required should really pay close to attention to what Amazon is up to. We predicted this last week. The MRO orders placed on AmazonSupply arrived in the time specified. Moreover, our colleague received an advanced ship notice (ASN) within the first 24 hours of their order. The items that arrived (janitorial suppliers, degreasers, etc.) came perfectly, picked, packed and shipped like an Amazon consumer item. In fact, they came in the familiar Amazon box and arrived as promised with no surprises.

The negative aspect of the experience came for the metals area. This company also purchased stainless steel from AmazonSupply and the metal arrived slightly damaged (on the corners). In other words, it is likely that if Amazon cannot get basic quality and packing right with its Supply offering, then it is unlikely to take on the metals service centers anytime soon (unlike industrial distributors focused on basic MRO areas).

Lisa Reisman, Managing Director, MetalMiner, suggests "I think it would still be some time before Amazon will be a threat to the metals services centers that do handling, slitting, processing, de-coiling, flattening, cut to length, sheering, punching, drilling, fabricating, quality inspection, etc. but the threat appears very real."

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.

That is, if they don't change quickly enough, which might involve figuring out a way to work with Amazon. As to the big industrial guys (e.g., Grainger) and specialists (e.g., Avnet), Amazon still has a lot to learn. Yet they seem to want to go to distribution school.

In addition, if Amazon ever goes after purchase-to-pay (P2P) capabilities more seriously as we've analyzed in our previous posts from last week, well, then all the usual eProcurement, e-invoicing and supply chain finance suspects should pay close attention as well -- or should figure out how to operate in an ecosystem that Amazon could very well dictate the rules for.

- Jason Busch

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