By Tom French
Massive companies like Amazon.com have the capability to change the traditional ways in which supply chain operations trend. In an [article posted by Supplychain247], they discuss= a bold and possibly brilliant move the e-commerce giant made by securing space within manufacturer Procter & Gamble’s warehouse. Now when P&G has their popular everyday household goods like diapers, toilet paper & shampoo ready to send to Amazon, they simply move it over to a fenced off area within their own warehouse for Amazon employees to package and ship directly to consumers. By cutting additional transportation and warehousing expenses, this allows them to compete with Walmart and large discount warehouse retailers like Costco. According to the Wall Street Journal article “Soap Opera: Amazon Move In With P&G” an Internet stock analyst, Mark Mahaney projects that if consumer packaged goods could rise to the 6% share the Internet claims of retail overall, it could generate up to $10 billion in revenue for Amazon.
Partnerships like this between Amazon and P&G is something to watch closely. As businesses continue to attempt to figure out how to trim costs they are going to be more drawn to working with manufacturers who are not pushing their products out to distribution centers. Because technology has vastly improved and the cost to manage small orders is easier, the manufacturers cannot afford to have two to three profits on their products and remain competitive before the product is consumed. This is going to require the manufacturer to examine how to warehouse and process all orders, whether small and large. And the warehouse operations will have to drastically change in order to efficiently and cost-effectively handle all products.
Not all manufacturers will have enough volume to accomplish what Amazon.com is doing with P&G. However, with the right technology and proper operations within the staff, they could effectively manage all sizes of products from item to pallet pick. There will be a lot of opportunities for technology and material processing companies to step up and help these manufacturers. This will require different pick system that can easily be changed as the demand changes. Will your companies be one that steps up to this challenge?