There is life after Amazon

Several years ago, I wrote that of all the trends I'd followed during my career, the three with the biggest impact on supply chain management were technology, globalization, and Walmart. Recently, a colleague asked me if I was ready to add a fourth, which of course would be Amazon. A good question, but at this point, I'm not so sure.

Let's look at Walmart. When Sam Walton opened the first Walmart store in 1962, he probably had no idea he'd be changing the nation's retail landscape. By the 1970s, Walmart had begun its march through small-town America, then not-so-small-town America, and finally the world. By 2015, the company had 2.3 million employees and was serving 200 million customers weekly in 11,000 stores in 27 countries. Its rapidly expanding business—fueled by vast product selection and low prices—left thousands of casualties in its wake, as neighborhood hardware, appliance, apparel, and other businesses collapsed under the weight of the competition.

A big factor in Walmart's rapid ascent to the top of the retail heap was its hyperefficient supply chain. Unlike many of its competitors, Walmart spent decades honing its supply chain operations to help hold down costs and by extension, prices. It developed logistics/distribution techniques that elevated efficiency to new levels and led the way in the adoption of automated warehouses, huge cross-dock facilities, top-notch technology, and sustainability programs. Although designed to enhance Walmart's own operations, these moves had a much more far-reaching effect. They also served as models for others, and ultimately, changed the supply chain game.

Is Amazon in the same league? Let's look at its record to date. Certainly, Amazon has changed the face of online retailing. E-commerce sales were up 19 percent in 2016, while traditional retailers experienced a 10-percent decline. Much of that increase went to Amazon, and its share of the pie is expected to grow. Just as happened with Walmart in the 1970s, Amazon's rise is having a devastating effect on the competition. Through September 2016, 14 major U.S. retailers, including Macy's and Sears, had each closed 100 or more stores.

As for supply chain impact, what Amazon has done is speed up the entire selling and delivery cycle. It has set a new standard where order delivery is concerned, creating a climate in which consumers have come to expect next-day or even same-day deliveries (and leaving its competitors scrambling to provide the same level of service). Among other innovations, Amazon has opened well over 100 distribution centers to shorten the "last mile"—and these aren't run-of-the-mill DCs. Thanks to its 2012 purchase of robotics innovator Kiva, most of these buildings are equipped with high-tech 'bots to boost order fulfillment efficiency.

As far as its contribution to the body of supply chain knowledge, I do not see much. Amazon obviously employs some very sharp minds, but some of its innovations seem to be solutions looking for a problem. Drones are certainly a part of our future, but I do not see delivering pizzas or shoes as their highest and best use. As for its latest innovation—a plan to use blimps as airborne warehouses equipped with drones to make speedy deliveries—the notion of a DC in the sky is pretty exciting stuff and has Star Trek fans salivating as they await Captain Kirk's assumption of command. But a practical contribution to the supply chain field? I don't think so.

These are uncertain times for the supply chain manager. Amazon and others are not just accommodating change but are part of it, and supply chain managers must re-educate themselves accordingly. At the same time, we must separate the hype from the reality. This is not the first seismic change we've seen in supply chain management, and it won't be the last.