Amazon - Friend or Foe

In the last blog, we reported on Mark Thornton’s talk at the UK Warehousing Association (UKWA) conference on Amazon as a ‘foe’ to those who compete with it and service it, including those in warehousing and distribution. Today, we cover the counter-argument of Professor Neil Ashworth, CEO of Collect Plus – ‘our friend Amazon!’

Neil started the debate with a quote from Sun Tzu: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle” - regardless that this session was about Amazon being a friend, it was clear from Neil that Amazon is a beast that you have to understand before entering into any commercial relationship with them.

Neil went on to highlight principles from The Amazon Way, which can be applied to business in general and our warehousing industry specifically:

  • Obsess over the customer: start with the customer, work backwards and deconstruct the retail process. From this you can then take out the costs of the chain.
  • Invent and simplify: Amazon is very externally aware but also encourages innovation from their internal teams. Simplification makes processes easier which in term lowers prices for the customer.
  • Insist on the highest standards: Amazon does their very best to ensure that damaged or defected goods are not sent to the customer.
  • Think big: Amazon shareholders do not expect a dividend and Amazon runs at a loss. This allows Amazon to lower prices to the customer but increase volume to the stock that they carry.
  • Practice frugality: it breeds resourcefulness.
  • Be vocally self-critical: this reveals problems and mistakes which can all be learned from, with everything being an opportunity to learn and to improve.
  • Dive Deep: everybody at Amazon operates at all levels.
  • Have a backbone: disagree and challenge opinion but also commit to your disagreement and opinion.
  • Deliver Results: Amazon expects its leaders to rise to the occasion and also to have an understanding of what it is required to rise to the occasion.

Neil then went on to explore what warehousing and distribution can take away from the Amazon principles:

  • Scale is power but data is king. Amazon has an unquenchable thirst for data that they can use in order to make business decisions. Amazon doesn’t ever make snap judgments or decisions but that every piece of data is analysed and scrutinized in order to get the very best outcome for the company. With the sophistication of warehouse management and traffic management systems these days, warehousing and logistics companies are also data rich.
  • Amazon has a different financial expectation and, as stated earlier, shareholders do not expect dividends. The business is run very leanly with profits being reinvested into the building of fulfillment centres and also in different shipping lanes. Amazon do not accept eth status quo in their warehousing and distribution models.
  • The Amazon machine is continually being configured and reconfigured with inconsistency being a consistent. Developments to look out for in the UK include Amazon Dash.
  • Think Sun Tzu and know your enemy!

Neil believes that the UK logistics Industry can compete with Amazon and there are opportunities for the sector if it harnesses the required technology.

A potential risk to the industry is that the Amazon brand will suck in those individual with the most potential in the warehousing and distribution sectors. This point was touched upon earlier by the previous speaker, Mark Thornton, who stated that his son probably would not want a logistics job with a major 3pl but the same logistics job with Amazon would undoubtedly be a lot more attractive.

However, Amazon Logistics appears to have struggled at times, particularly in the US. Legislation is now starting to work against them and whereas in the past they have snapped up land and built warehouses and sheds in low cost areas, this is now not the case, although its fulfillment centres and warehousing provision in the UK do continue to grow.

For carriers such as Collect Plus, UPS and FedEx, Amazon has been excellent for business and undoubtedly kept those wheels turning. However, looking at the Figleaves case study discussed in our previous article, could Amazon be watching and learning from sidelines and a take on UPS et all by building a logistics business from their delivery network? At a conference in June 2016, Bezos was asked this very question and his response was that Amazon was creating a delivery and warehouse network that added to rather than replaced its partners. Bezos declared that Amazon is not trying to take over. We shall see!

Peter Ward, Chairman of the UK Warehousing Association closed the session by asking for a show of hands as to who in the audience thought that Amazon was a friend and who in the audience thought that Amazon was a foe. Overwhelmingly, the audience voted that Amazon was a friend to the Logistics Industry. So is Zupplychain – your easy to use search engine for finding warehouse space and pallet storage!