The Amazon Effect in the Supply Chain of America

Over the years, an enormous investment has been pumped into the world of technology so as to improve our daily modes of communication, commerce, and lifestyles in general. Amazon which started as a book selling forum has particularly capitalized on the internet and brought on board a wide array of services such as online shopping and shipping which has sent a shock wave to the American and later the world’s economy. One of the most influential inventories that Amazon has put in place is initiating an efficient order visibility technique. The improvement in technology as particularly influenced Amazon’s visibility into its supply chain and thereby enabled them to have a competitive advantage over their rivals. As a result of the technological improvements on both the infrastructure and communication, Amazon’s supply chain operations are causing a revolution in the United States of America.

Amazon’s far-reaching effects have brought both opportunities and responsibilities to the American consumers (Coates The Amazon Effect and the Global Supply Chain). Being the largest online retailer, Amazon often connects the consumer and the suppliers. Most Americans have embraced Amazon with the perception that it is much more effective as a green option in comparison to the other traditional retail stores. Amazon does not necessarily require physical stores to operate and this has further threatened the lives of the other retail stores (Coates The Amazon Effect and the Global Supply Chain). The amount of energy and resources that were required to store goods at the traditional retail stores can now be cut down by a great margin. Amazon has since won the credibility of many as it has the potential of introducing green solutions to the supply chain strategy in America.

Amazon’s supply chain management has brought about an immense change in American society. The distribution centers, for instance, have changed their modes of operation from using batches to the continuous fulfillment technique (Dennis Forbes Magazine). It follows that orders are often processed instantaneously and sent for pick up at the warehouses. The shipping companies such as FedEx and USPO have equally been given the mandate to take their filled trucks to be sorted at the nearest sort centers. On the other hand, it has also become necessary for Amazon to establish a strong inventory control team which is in charge of ensuring that the stock in the inventories is refilled once the purchased products have been delivered (Hou, Fangfang, et al 964). It has, therefore, necessitated Amazon to establish a strong staff in addition to reliable software that will help in ensuring that the used stock is replaced immediately.

As per a 2015 report, Amazon has dominated e-commerce through their effective customer service as well as their rapid deliveries (Lee, Yun Shin 973). Over the past few years the retail, logistics industries, and the supply chains have had an immense transformation in the U.S due to Amazon’s leading role in the entire process. Other than transforming the American economy into a 24-hour economy, Amazon’s supply chain has resulted in new business strategies and consumer trends. The original role of the supply chain was taking costs out of the system through transportation, warehousing, and distribution. The improvements that are made on the supply chain are, however, meant to ensure that it is nimble, technological efficient and responsive (Mudambi & Scuff 185). The supply chain has further played a crucial role in improving and revolutionizing the previous customer service experience as well as riving revenues.

As a result of its boom and consistent economic gains, most Americans have been encouraged to invest in Amazon. As per 2016 Amazon’s sales were high above those of Walmart (Dennis Forbes Magazine). While Walmart dealt most with bricks and mortar whose demand was dwindling Amazon had invested heavily in e-commerce and hence was experiencing enormous financial gains. The disparity in the market and demand of the products and services of the two respective companies has made Walmart’s per share capital decline with up to 4% while Amazon has gained by over 120%. Since investing in Amazon has been highly profitable, most of the Americans have diverted their investments to Amazon and thereby leaving the other companies such as JC Penny and Sears Holdings out of business (Dennis Forbes Magazine). The Amazon effect in the Supply chain of America has suffocated the brick and mortar company, crumbled Sears Holdings and Sears Penny among others. A large number of stores that have been closing yearly over the past 5 years is a clear indication that most Americans are slowly finding it difficult to run to the stores to get their commodities.

A 2016 statistics further states that as per 2016 nearly 11% of the all the holiday sales were online sales (Dennis Forbes Magazine). Amazon, however, accounted for nearly 40% of the online sales hence making it a dominant online shopping site. Further statistics indicate a sharp decline at the rate which people visited stores (Dennis Forbes Magazine). Although up to 2007 the real estate investments were a tangible asset, the onset of online shopping has made real estate investors such as Sears Holdings irrelevant and redundant. Since more people are opting to shop online, the malls and stores are experiencing less traffic and thereby forcing more stores to shut down. Currently, in the American front, there are several vacant premises with no signs of occupancy. The mass shutting down of stores and other housing units will, in the long run, affect the demographics of the American cities by plunging the housing rates further.

The government of America has also often given handouts to retailers in the form of tax breaks with the intention of enabling them to locate their headquarters or build their stores. With the mass closure of stores all across the U.S, the property tax receipts that the government was once dependent upon have greatly declined (EIUCaseStudy YouTube). The decline of the tax receipts has a counter effect on the homeowners who will be forced to shoulder the tax burdens of facilities such as schools and other infrastructure. The government is also expected to suffer heavy losses due to a loss control of the sales taxes which it was much dependent on. Additionally, the tax holds that were once given to investors such as Sears Holding to hold jobs are now redundant and inefficient (EIUCaseStudy YouTube). The local American tax base has greatly been affected by the emergence of Amazon as an e-commerce platform and thereby necessitating the residents to pay for the expenses instead.

The high growth margins that Amazon registers each year have become a threat to many jobs and employment opportunities. Between 2015 and 2016 Amazon’s growth rate shot from 19%-28% thereby endangering the job opportunities of the other regular retailers (LeBlanc The Balance Small Business). The dominance of Amazon in the supply chain market has gradually faced out the other traditional retail store staff and hence this has affected tens of thousands of employees across the U.S. In the current U.S economic structure, nearly 16 million jobs deal with the supply chain market and hence Amazon has threatened to destabilize these jobs. Walmart, for instance, has lost a lot of merchandise in e-commerce sales. As a result, groceries have become one of Walmart’s best-selling commodities as they account for nearly 56% of their overall sales (LeBlanc The Balance Small Business). However, due to competition from other cheap grocery selling retailers, Walmart is currently struggling with its overall sales and hence this continues to threaten their existence.

In the current U.S supply chain, Amazon has obtained a comparative advantage in comparison to the other retail companies as it has mastered the skill of pursuing a sustainable supply chain. According to America’s green product purchasing trends that were observed in 2011, Amazon has the interests of the customers at heart. As time goes by, most of the regions in America are gradually getting greener and this serves to the advantage of Amazon which has already embraced the green efforts (Lee 988). Amazon, therefore, can commit itself to further release information about sustainability to their customers so as to further win their trust and continue thriving as the lead online retail company.

Although Amazon seems to be thriving, they equally encounter some challenges that threaten their operations. There is a new trend of supply chain insecurity that is targeting the supply chain companies such as Amazon. The most notable types of threats to the supply chain management include cybersecurity and cargo theft among others (Van Marle 56). The most common items that are prone to theft include food and beverages as the thieves use bolt cutters to access the locked containers. Since there are no special police departments that are trained to counter the theft, most of the supply chain companies such as Amazon often employ their own security by using their resources. In some instances, police and even spy cameras are often attached to the trailers but this system is not entirely efficient. It is estimated that the rate of cargo theft has tripled since the year 2012 (Van Marle 58).

The rise of Amazon has further revolutionized the overall outlook of the retailers in America. The retail industry in America, for instance, has transformed its strategies so as to enable them to absorb more costs while delivering greater services at the same time (Mountz Ted Talks). The overall outcome of this new strategy has further impacted the profit margins which have continued to shrink. The new trend where consumers often want little commodities shipped at different locations usually at little or no cost has further impacted the online retail companies. Amazon and the other online retail companies are equally under so much pressure to live up to the consumer expectations as the consumers continue requesting for difficult demands. On the other hand, the e-commerce platform has not further perfected some aspects and hence there still remains a gap in the execution phase. It could also be possible to insinuate that as the pressure continues to build up a disaster is likely to erupt and crumble the online retailers.

Mudambi (187) denotes that since Amazon has bridged the gap between the American manufactures and the consumers it still remains influential and essential in people’s daily lives. Unlike the other traditional retailers, Amazon has further perfected the art of supplying commodities from one point to another at a faster and much cheaper rate in comparison to its competitors who are since seeking for alternative ways to beat the competition. The emergence and development of Amazon as a lead online retailer has further led to the development of technology in the supply chain through platforms such as order management, machine learning, and chain visibility among others (Mudambi 190). Amazon, therefore, contains a comparative advantage over the other companies that have not mastered the art of online marketing as customer satisfaction strategies. With advantages to their side, Amazon, therefore, gets a chance to dictate the supply chain trends in the American market force.

In addition to changing the supply chain strategies, Amazon has further improved the American customer’s experience through establishing a reliable supplier network innovation and customer satisfaction all with the intention of addressing the sustainability issue (Van Marle 62). Amazon seems to be light years ahead of the other online retailers as they say that they invent better ways of supplying products as a lower cost while maximizing the consumer experience all at the same time before the need arose. Although Amazon has taken over the online retail company, it still needs its competitors so as to use them as examples and make much more resilient and effective decisions in the process (Van Marle 64). In order to further satisfy its consumer experience and satisfaction, Amazon has to shift its perspective and address far-reaching issues that might not be affecting their operations at the moment. However, although Amazon is at the top of the online retail chart, it is not guaranteed of a full immunity as the other competitors such as Apple are coming up with different supply strategies that might challenge those of Amazon in the near future (Mudambi 197).

Amazon has taken over the online retail business in the U.S since it has well-developed customer experience which is cheaper and more efficient in comparison to the other retailers. Amazon’s growth and dominance have further impacted on the other suppliers and the consumers in general. The other previous online retail and shipping companies such as Walmart, FedEx, and USPO respectively have since been affected as some has shut down large stores and laid off a lot of staff. Although during its inception Amazon’s main concern was to improve the consumer experience, they have equally managed to advance in several other fields such as online product management, tacking, and transportation among others. Unlike the other previous online retailers which sought to collect their goods from their warehouse and fill their tracks before dispatching, Amazon has devised an effective and quick way of dealing with the products and delivery of individual customers at a cheaper and more effective rate. The growth of Amazon has further had a negative effect on the government’s collection of taxes and revenues as the consumers are now forced to pay for certain facilities. Additionally, the online platform which is the main strategy that Amazon uses in their supply chain is vulnerable as it is subject to cyber threats. Overall, the American home front is equally suffering as a counter effect of the dominance of Amazon as most traditional retailers have since laid off many of their staff in addition to shutting down their branches.

Works Cited

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EIUCaseStudy. “Bricks and Clicks: Mall of America and Amazon Com.” YouTube, YouTube, 28 Aug. 2013, www.youtube.com/watch?v=93e4ys5Sk18.

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LeBlanc, Rick. “How Amazon Is Changing Supply Chain Management.” The Balance Small Business, The Balance, 24 May 2018, www.thebalancesmb.com/how-Amazon-is-changing-supply-chain-management-4155324.

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Mountz, Mick. “What Happens inside Those Massive Warehouses?” TED: Ideas Worth Spreading, June 2011, www.ted.com/talks/mick_mountz_the_hidden_world_of_box_packing.

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