This Week in SCDigest

Amazon and Supply Chain Innovation

This may be a strange thought, but I believe we all owe a debt of supply chain gratitude to Amazon.com, Google and a few others.

Why?

For reminding us of the potential for supply chain innovation. For challenging us to think outside the box.

I am aware that Amazon, for example, did not necessarily invent by itself any of its many ideas, but they sure are running with them. The list would include:

Use of drones for package delivery – Amazon says it will be ready to go if and when the FAA ever releases regulations relative to commercial drones, which it is expected to do sometime in 2015.

Roll-out of a delivery locker concept in which orders are placed in secure storage units, often in Staples or 7-11 stores but elsewhere as well, in urban markets where parcels can't be left on a front porch or an apartment hallway, often enabling round the clock consumer pick-up.

New "Dash" device that enables consumers to order groceries and other items by scanning UPC codes or speaking the item names into the wand-like device.

Setting up co-located, mini-fulfillment centers in large customers DCs, such as it is doing with Procter & Gamble and a few others.

eFulfillment, of course, is spawning lots of new ideas. Walmart is now jumping all over a concept pioneered by some French and German grocers called "click and collect," in which on-line orders are loaded into a customer's car at designated areas outside a retail store or distribution center. Walmart is also piloting a version of this idea in the UK in which the orders would be placed in temperature controlled lockers inside the store. UK retailer TESCO and others are looking at putting such lockers outside office buildings, in parking lots for the London Tube, and other high traffic areas.

It looks like click and connect will wind up being the eFulfillment "killer app," by the way, and certainly add some big value back to brick and mortar.

eFulfillment is relatively new and now coming into its own, so maybe it's natural we see lots of innovation there. But I would still argue that Amazon simply had a different, more innovative mindset here than everyone else, and that this has simply propelled innovation by others forward, out of necessity. Would we have Walmart Labs, its ecommerce think tank in Silicon Valley, if there hadn't been Amazon? Maybe not.

Speaking of Walmart, in the past year or so, it has released two concept truck designs. One, called SuperCube, may be able to handle as much as 30% additional volume, in part by use of an additional storage module that sits between the main trailer and the truck cab.

Just recently, we got a look at Walmart's new WAVE (Walmart Advanced Vehicle Experience) truck concept. It is some 20% more aerodynamic, which will result in improved gas mileage, though Walmart hasn't said how much.

Now in fairness, there have been some similar type designs coming out of Europe, but not much from US truck and trailer manufacturers – until driven by Walmart. It takes Walmart to bring the parties together for an integrated design? The Dept. of Energy has also been able to do it with its sponsorship of "Supertruck" program, by the way.

We've not seen much yet, but I fully expect Google to soon produce a revolutionary line of industrial robots, many of them targeted at supply chain and logistics applications. Rodney Brooks and the folks at Rethink Robotics have certainly made a start with Baxter, the robot that is taught how to perform tasks by operations personnel rather than through programming, but I expect Google to advance the field far and fast.

Google has acquired at least seven robotic companies in the past year. What are its plans? No one knows for sure, but the New York Times wrote that: "A realistic case, according to several specialists, would be automating portions of an existing supply chain that stretches from a factory floor to the companies that ship and deliver goods to a consumer's doorstep."

"The opportunity is massive," said Andrew McAfee, a principal research scientist at the MIT Center for Digital Business. "There are still people who walk around in factories and pick things up in distribution centers and work in the back rooms of grocery stores."

There are also tremendous supply chain opportunities with Google Glasses, a subject we will save for another day.

In fairness, Amazon seems to be able to spend and invest almost without limit and not get crushed in the stock market due to poor earnings. Walmart is the world's largest company by sales and is driven to improve sustainability as a top imperative. Google has bazillions of dollars and seems to be able to fund just about anything it wants.

That said, I think we should all appreciate that right now that we are in a historic period of supply chain innovation, much but not all of it, driven by ecommerce.

Just as importantly, Amazon, Google and now Walmart and a few others are aggressively innovating in areas and ways that might serve to shock some of us out of our limited paths, and look for opportunities to innovate in processes and technology where we have simply been stuck in our mental boxes.

Hat's off to Jeff Bezos.

Any reaction to Gilmore's Amazon and Supply Chain Innovation summary? Let us know your thoughts at the Feedback section below.

Happy to see you are trying to wrap your mental arms around this muddled mess of Big Data.

Every year we have more data - but how much of it is useful, and how much of it become information, become the real question.

Data becomes information the moment it answers the question asked. Until then, it is just data, nothing more. Better analytics may help us sift through the data faster, but the best of the analytics packages are constrained by something that technology will never improve; the ability to ask the right question.

Data is the fuel that drives execution improvement. Information is the fuel that drives tactical improvement. Questions are the inspiration that drives Strategic improvement. We need data to measure and improve execution performance. We need Information to decide on the tactical options available, and to develop new versions of tactics to deploy. These are all good, but create marginal improvements.

Until we start asking better questions, as in the questions focusing on The Goal of the Supply Chain, we won't improve our strategic strength of our supply chains.

David K. Schneider
David K Schneider & Company, LLC

Congratulations on your first part on "big, big supply chain data."

I would like to share one example of big data which I consider very helpful to avoid human casualties these days as to prevent catastrophic floods in particular risk regions.

In summary, programmed software analyze periodic data of mapped flood risk regions as depth level of nearby water reservations and watercourses (as rivers) and rain levels occurred and forecasted.
Afterwards, compare periodic data results with risk levels parameters and using this to plan contingency safety measures on these flood risk regions.

At high flood level risk would demand an evacuation plan.

Also would like to share a reflection of Dee Hock on his book "The Chaordic Organization," which I remember as: "as time goes by data will begin to transform in information, information in knowledge, knowledge in comprehension and after long time could become wisdom."

I wish you good writing on this multiple perception theme.

Daniel Camargo
PwC