Quality Progress - June 2014 - (Page 10)

KEEPINGCURRE SUPPLY CHAIN MANAGEMENT Amazon's Going the 'Last Mile' I Could online retailer's delivery service change e-commerce expectations? In 1994, Amazon.com was launched as Race for the last mile ment centers (adding 50 new facilities since an online bookstore operated out of the According to the Network Effect, a blog that 2010) could position Amazon to eventually Bellevue, WA, garage of founder and CEO analyzes supply chain trends, the supply offer same-day delivery throughout the Jeff Bezos. It's since grown to become the chain used to be a relative backwater for re- United States.7 largest online retailer in the world, selling tailers. Historically, retailers only needed to everything from beauty products to lawn- keep pace with industry averages. But the Amazon detailed its plan to eventually use mowers.1 status quo might not be enough in today's pilotless flying drones to deliver packages increasingly competitive marketplace.5 to customers within a half hour of placing Technological innovation has powered In a widely publicized announcement, much of Amazon's growth-from one-click an order. Even if delivery by drone turns out purchases, which dramatically speed up to be a pipe dream, Amazon's recent moves the ordering process, to recommendations could be a game changer.8 Taking control based on previous purchases and rated of delivery could allow Amazon to better items. Its grocery service ships 45 pounds of control consumer experiences. Over time, nonperishable items to customers' homes online shoppers may become accustomed at a flat shipping rate of $5.99.2 Recently, to accelerated delivery options without a lot the retail giant unveiled a new service in the of extra expense.9 form of a delivery method that could change "Retail is at a crossroads," said Jim Tomp- the online shopping experience and influ- kins, president of Tompkins International. ence consumer expectations. "The reality is that Amazon is so big that After rolling out the service in the United they are now mandating what the customer Kingdom earlier this year, Amazon is piloting satisfaction requirements are for everyone, its own private fleet of delivery trucks oper- even if you don't think that you compete ated by contract drivers in three U.S. mar- with Amazon."10 kets-New York City, Los Angeles and San Other retailers are using similar delivery Francisco. Amazon also built its own parcel strategies. EBay offers local delivery in less tracking system, similar to those used by the than two hours for $5 in several urban re- United Parcel Service (UPS) and FedEx.3 gions: Chicago, Dallas, Manhattan, Brooklyn How exactly this works isn't yet clear. It focuses on the "last mile" of deliveries, how- and Queens in New York, and San Francisco. A recent large-scale consumer survey Google Shopping Express, available in San ever-the part that ends at your doorstep and by Ernst and Young found that the top in- Francisco and San Jose, delivers packages is typically handled by large carriers such as fluencer in consumer purchasing decisions the same day for $4.99 per order.11 UPS, FedEx or the U.S. Postal Service. was delivery terms, trumping the power of promotional offers, physical store design Logistics cessfully is they've owned the entire value and website strength. Almost a third of con- For now, Amazon will still rely on FedEx, chain," said Sucharita Mulpuru, a retail ana- sumers surveyed said they were willing to UPS and the U.S. Postal Service to move lyst at Forrester Research. "They've owned pay a premium for instant or swift product goods elsewhere in its supply chain. Ship- the last mile, the moment that matters. That availability. ping costs are a major line item in Amazon's "One thing Amazon has done very suc- moment is when the package arrives. Once 6 Greater demand for convenience helps cost structure and are rising.12 In its first you can own the moment that matters, you explain the strategy that Amazon is follow- quarter earnings report, Amazon's sales build a loyal customer base."4 ing. Its massive expansion of building fulfill- were up 23%, but shipping costs were up 10 QP * www.qualityprogress.com http://www.Amazon.com http://www.qualityprogress.com

Table of Contents for the Digital Edition of Quality Progress - June 2014

Up Front
LogOn
Expert Answers
Keeping Current
Mr. Pareto Head
No Weak Links
Need for Speed
Solid Base
Insurance Policy
3.4 per Million
Quality in the First Person
Career Corner
Statistics Roundtable
2014 Software Showcase and Directory
QP Toolbox
QP Reviews
Back to Basics

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