In recent news and on a recent class blog post (https://blog.richmond.edu/mgmt340-05/2018/02/04/269/), Amazon along with JP Morgan Chase and Berkshire Hathaway plan on entering the healthcare industry. In order for these companies to successfully reshape the healthcare industry including the health insurance sector, they need to gain a complete understanding of medicine and healthcare. Amazon is starting small. It is focusing on the medical supply chain in hopes that it will pave the way for the company’s larger goal, which involves the project venture with JP Morgan Chase and Berkshire Hathaway. This small entrance into the healthcare industry can hopefully set up Amazon for the long-term.
Amazon wants to become the main source for basic medical supplies. These basic medical supplies would include latex gloves, bandages, and sutures. If Amazon can successfully make restocking the supply room at hospitals and doctors’ offices simpler with their fast shipping, Amazon can establish an important presence in the healthcare industry. This could eventually lead to Amazon being a distributor of prescription drugs and medical devices.
Amazon has noticed that the medical market is an attractive market for Amazon to expand into. Hospitals and doctor’s offices need a majority of the same supplies; so, Amazon would be able to use its buying power to save costs and cut out the middlemen. However, there is a challenge Amazon would have to overcome in order to enter the medical market. Amazon would need to develop standardized vendors for their supplies. Standardized vendors would provide hospital administrators the knowledge on knowing exactly what they are getting each time they order supplies.
In class we discussed, capacity as being the maximum rate of output of a process or a system. Managers are responsible for guaranteeing the firm has the capacity to meet current and future demand. Additionally, capacity decisions related to a process need to take into consideration the process’s role within the organization and the supply chain. Changing the capacity of a process could affect other processes within the organization or the supply chain.
In order to enter the medical market and expand their company by offering medical supplies, Amazon needs to have a long-term capacity plan in order to be successful. By starting with basic medical supplies that are not highly regulated, not costly, and can be easily distributed; Amazon can establish their place in the medical supply chain by measuring their outputs. They would measure their sales of latex gloves, bandages, and sutures. It appears Amazon is taking the wait-and-see approach when expanding into the medical supplies market. The wait-and-see strategy allows Amazon the ability to expand in smaller increments starting with medical supplies in physician offices with the hopes of eventually expanding to prescription drugs and medical devices in hospitals.
Currently, Amazon has started supplying supplies to smaller physician offices. This would allow them to understand the capacity requirement for medical supplies in physician offices. Amazon could use this data as a basis for estimating the capacity requirements of medical supplies in hospitals. Estimating capacity requirements is the first step in the systematic approach to long-term capacity decisions outlined in the textbook. In addition, to estimating the future capacity requirements Amazon is going to need to identify capacity gaps, develop alternatives to manage projected gaps, and evaluate the alternatives.
Amazon’s small step into the medical market and medical supply chain shows the connection between the supply chain and capacity planning. Firms needs to understand how the supply chain works if they want to successful expand their firm into a new market or industry.
Here, is a link to Amazon’s medical marketplace: http://www.amazonbusiness.com/healthcare-join-now-b?utm_medium=cpc&utm_source=google&utm_campaign=913101093&utm_term=51212064368&gclid=Cj0KCQiAiKrUBRD6ARIsADS2OLmbvF0-SgcxuC6PSq6tBWo6pslqeRnxqwMsJ58iXZ2fSaGqV1l4D1AaAsnZEALw_wcB. The website emphasizes that Amazon’s medical marketplace offers simple, efficient, cost-effective medical supplies. In addition, Amazon outlines the benefits of choosing Amazon as for your medical supplies.
Here is the link to the article: https://www.bloomberg.com/news/articles/2018-02-15/amazon-bets-on-band-aids-as-health-industry-braces-for-shakeup