Amazon’s Efficient Processes Lead to Their Success
This section is all about learning how to analyze and improve business processes that will help a firm be more efficient and better satisfy their customers. There are a variety of methods that companies use in order to identify and resolve key issues within their core processes such as process improvement and process reengineering. Some companies do this better than others, but for this blog post, I am going to look at Amazon–by far one of the better companies at innovating and satisfying their customers’ needs. Therefore, this blog post will shed light on Amazon’s core processes that should answer the following questions: What strategies do they use to continually satisfy customers and what about Amazon makes their operations so efficient?
Continually Satisfying Customers
First, let’s discuss their ability to continually satisfy their customers. Amazon offers quick delivery, rewarding membership benefits, as well as an accurate delivery system. Everybody marvels at Amazon’s ability to provide the correct products within 1-2 days. In addition to this, being an Amazon Prime member gives a person many benefits such as free same-day shipping, discounts on family items, and access to music and video streaming platforms. Just two weeks ago, the campus bookstore was sold out of a book that I needed for the first day of classes. Conveniently, I log in to Amazon, type in the ISBN number, select next day shipping, and the book was in the post office when I woke up the next morning. Moreover, because I have an Amazon Prime account, there was no extra cost associated with the expedited shipping. These three characteristics of Amazon are highly sought after by consumers, which leads to increased consumer loyalty. Now, what about their operations gives them ability to consistently provide this quick, accurate, and beneficial service?
Efficient Operations
If you look at Amazon’s warehouse operations, you will see that the process is highly automated and efficient. In fact, this video explains it better than I ever could:
Basically, these robots bring shelves of inventory to the employee for them to get the specific product and place it in the customer’s shipment. Before this, the employee would of had to walk to a specific section of the warehouse, pick up the customer’s product, walk back to the loading dock, and place the product in the customer’s shipment. According to this video, these robots have increased efficiency in order fulfillment by 20%, allowing for some orders to be filled in 15 minutes instead of 90. In addition to this, Amazon has warehouses everywhere. According to an article I was reading, Amazon has a warehouse located at least 20 miles away from 60-65% of the total United States population. This gives Amazon the opportunity and ability to offer same day shipping because of their efficient warehouse operations and expansive warehouse locations. Lastly, Amazon is known for following the principles associated with Six Sigma. As we have learned in class, Six Sigma is a 5-step procedure that will eventually lead to a nearly perfect process. Therefore, because of their disciplined adherence to these principles, Amazon has benefited greatly by creating a process that will eliminate errors and maximize efficiency, leading to increased customer satisfaction.
References:
http://www.businessinsider.com/how-many-fulfillment-centers-does-amazon-have-in-the-us-2015-3
https://www.ft.com/content/916b93fc-8716-11e7-8bb1-5ba57d47eff7
Daniel,
Amazon always seems to amaze me. Obviously, their extensive options offered are crazy, but their processes and efficiency seem to be unbeatable. As such a large company, I would think that maintaining these processes would be very tough, but it always seems like other companies are just trying to catch up to what Amazon is doing.
One thing I found interesting from the video is a quote from towards the end. One of the Amazon employees talks about how the robots and automation are only there to assist human workers. Robots taking over the workplace and stealing people’s jobs is a big concern these days, but Amazon has an interesting approach to this. They have been able to find a way to mix human labor with robots to create an extremely efficient process. This is amazing to imagine because people seem to be keeping their jobs while robots and automation are they making processes, and in this case shipments, much more efficient. As far as analyzing and improving processes, Amazon seems to be many steps ahead of the game. I definitely think it will be interesting to see what Amazon’s next steps will be and how much more they can change their processes to become more efficient.
Daniel,
Like you, I have known that textbook situation to be the case far too many times. Yet, Amazon has always been there for me with their amazing two-day delivery and not once have they disappointed me. I have always wondered what lies behind the curtain at Amazon’s distribution and fulfillment centers. Naturally, I expected efficient processes that have been re-engineered and improved year after year. However, these little robot buddies of theirs blew my expectations away. If there was a ceiling on how efficient you can make the layout of a center, Amazon has busted through it. These robots allow the layout of the center to shift and rearrange nonstop in order to bring the necessary inventory to the worker, rather than vice versa. This breakthrough in efficiency really captures Amazon’s ability to innovate their core processes to the next level and how they have been able to grow their company at such a rapid pace.
Daniel,
Your response taught me some new facts about Amazon’s processes that I did not know about previously, so thank you. Amazon is constantly lauded as being the gold standard for process design, and their explosive growth reflects this commitment to designing and implementing efficient processes.
Yesterday, a cohort of corporate superstars (including Amazon’s Jeff Bezos), announced a partnership to tackle the country’s ballooning healthcare costs. More specifically, the cohort hopes to improve business profits by taking steps in the private sector to lower the cost of healthcare. This partnership has yet to announce any specific plans, but many believe that Amazon’s role in this partnership could be to apply their knowledge of supply chain efficiency to the pharma sectors to lower the costs of transporting and delivering drugs. Amazon’s expertise and efficiency in warehousing and delivery that you highlighted in your post strike me as two areas where they could quickly make a difference in the improving the efficiency of drug supply chains.
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Daniel, I wholeheartedly agree with you here. Amazon has been a corporate leader in innovation and technology. As such, the company has become a go-to platform for many consumer needs. I like that you brought up a point regarding textbooks and Amazon. My freshman year here at U of R, I spent nearly $1,000 on textbooks and related materials through the campus bookstore. I could not wrap my mind around how expensive those things were. After, I began using Amazon Prime as a means to purchase the items I needed. Then, I realized that textbooks and most of the other supplies I need can be purchased or rented on Amazon. This was HUGE for me because it saved me both time and money! It is cool to see how the behind the scenes processes at Amazon translate to my own perceptions of the company at the consumer level. Additionally, I am glad you mentioned Six Sigma in your article. This technique seems to be a popular way to analyze and structure processes. It was interesting to write about Six Sigma in my article I posted last week. Six Sigma is a means for a more efficient process. I especially enjoyed linking Amazon, a “future-ready” firm, to Six Sigma as this was a trend I discussed last week! Thanks for your post, Daniel.
Daniel and Nicholas,
I enjoyed reading both of your posts. I agree that Amazon must have assessed their biggest weaknesses in supply chain management as being their warehousing. In the video, it said that the particular warehouse we saw was the size of 59 football fields. Maintaining accuracy and efficiency on such a massive scale must have been a logistical nightmare before Amazon’s implementation of automatic retrieval systems. This process improvement has allowed them to handle a seemingly endless flow of order requests seamlessly and efficiently. It is clear that they used the Pareto principles that we learned in class to implement the 80/20 principle to improve their biggest weaknesses the most. Just another reason why Amazon is one of the world’s top companies in terms of process improvement and innovation.
Daniel, I can’t think of a more impressive and innovative company than Amazon. They are a model and world leader when it comes to process management and execution. One thing your post reminded me of is the Pareto chart that we recently went over in class. Before Amazon converted to robots in the warehouse, as you and the video both mentioned, orders could take up to 90 minutes to be filled manually. As the technology available to companies and users increased over time, there must have been a point where Amazon realized their inefficiency. At that time, Amazon could have and most likely did utilize a Pareto chart to identify their biggest weaknesses. Warehouse inefficiency was probably near the top, prompting the company to take a deeper look into how they could improve their in-house processes. As a result, Amazon introduced robots to the warehouse, increasing efficiency by a full 20 percent. Another thing you mentioned in your post is Amazon’s strong association to Six Sigma. Amazon has nearly perfected each step within Six Sigma, but the one that stands out the most has been their constant improvement. It seems like Amazon is never satisfied with their current operation, and they probably shouldn’t be. There is always so much room to grow, and Amazon proves that time and again. Some of the most recent examples include drone technology delivering packages to doorsteps and Amazon Go, their checkout free grocery store. These are concepts that I would have never thought of five years ago. These concepts are also continuously boosting efficiency, satisfaction, and for many, shock and awe. I am always excited to see what Amazon will roll out next, and that is due to their dedication to Six Sigma and improvement.
https://www.digitaltrends.com/cool-tech/amazon-prime-air-delivery-drones-history-progress/
https://psmag.com/news/the-downside-to-amazon-go-stores
Nick, I too am always impressed by Amazon and their continuous innovation efforts. Amazon is a leader in developing technology and processes to increase their efficiency and logistics. In addition to the examples that you mentioned in your reply (Prime Air which has the capability to deliver packages to customers in 30 minutes or less by using small unmanned aerial vehicles and Amazon Go, a checkout free grocery store), Amazon Lockers provide customers with access to thousands of products that will be delivered within one day. Amazon Lockers are self-service kiosks where customers can pick up Amazon packages when it’s convenient for them. In addition, Amazon Lockers accept all customer returns and there are over 2,000 locations in over 50 cities across the country. I’m excited to track the progress of Amazon Air, Amazon Go, and Amazon Lockers and see how they continue to evolve and develop.
https://www.amazon.com/p/feature/6grqshfrw4gz7tv
https://www.amazon.com/b?node=6442600011