The new economy means that the balance of power has shifted toward the consumer

VIDEO CASE – CHAPTER 10

AMAZON: DELIVERING THE GOODS … MILLIONS OF TIMES A DAY

“The new economy means that the balance of power has shifted toward the consumer,” explains Jeff Bezos, CEO of Amazon.com, Inc. The global online retailer is a pioneer of fast, convenient, low-cost virtual shopping that has attracted millions of consumers. Of course, while Amazon has changed the way many people shop, the company still faces the traditional and daunting task of creating a seamless flow of deliveries to its customers—often millions of times each day.

THE COMPANY
Jeff Bezos started Amazon.com with a simple idea: to use the Internet to transform book buying into the fastest, easiest, and most enjoyable shopping experience possible. The company was incorporated in 1994 and opened its virtual doors in July 1995. At the forefront of a huge growth of dot-com businesses, Amazon pursued a get-big-fast business strategy. Sales grew rapidly and Amazon began adding products and services other than books. In fact, Amazon soon set its goal on being the world’s most customer-centric company, where customers can find and discover anything they might want to buy online.
Today Amazon claims to have the “Earth’s Biggest Selection™” of products and services in the following categories: Books; Movies, Music & Games; Digital Downloads; Kindle; Computers & Office; Electronics; Home & Garden; Grocery, Health & Beauty; Toys, Kids & Baby; Clothing, Shoes & Jewelry; Sports & Outdoors; and Tools, Auto & Industrial. Other services allow customers to:
● Search for a product or brand using all or part of its name.

● Place orders with one click using the “Buy Now with 1-Click” button.

● Receive personalized recommendations based on past purchases through opt-in e-mails.
These products and services have attracted millions of people around the globe. This has made Amazon.com, along with its international sites in Austria, Canada, the United Kingdom, Germany, Japan, France, and China, the leading online retailer.
SUPPLY CHAIN AND LOGISTICS MANAGEMENT AT AMAZON.COM
What happens after an order is submitted on Amazon’s website but before it arrives at the customer’s door? A lot. Amazon.com maintains huge distribution, or “fulfillment,” centers where it keeps inventory of millions of products. This is one of the key differences between Amazon.com and some of its competitors—it actually stocks products. So Amazon must manage the flow of products from its 15 million suppliers to its distribution and customer service centers with the flow of customer orders from the distribution centers to individuals’ homes or offices.
The process begins with the suppliers. “Amazon’s goal is to collaborate with our suppliers to increase efficiencies and improve inventory turnover,” explains Amazon’s vice president of supply chain. “We want to bring to suppliers the kind of interactive relationship that has inspired customers to shop with us.” For example, Amazon is using software to more accurately forecast purchasing patterns by region, which allows it to give its suppliers better information about delivery dates and volumes. Before the development of this software, 12 percent of incoming inventory was sent to the wrong location, leading to lost time and delayed orders. Now only 4 percent of the incoming inventory is mishandled.
At the same time, Amazon has been improving the part of the process that sorts the products into the individual orders. Amazon’s senior vice president of operations says, “We spent the whole year really focused on increasing productivity.” Again, technology has been essential. According to the senior vice president of operations, “The speed at which telecommunications networks allow us to pass information back and forth has enabled us to do the real-time work that we keep talking about. In the past, it would have taken too long to get this many items through a system.” Once the order is in the system, computers ensure that all items are included in the box before it is taped and labeled. A network of trucks and regional postal hubs then concludes the process with delivery of the order.
The success of Amazon’s logistics and supply chain management activities may be most evident during the year-end holiday shopping season. Amazon received orders for 37.9 million items between November 9 and December 21 one year, including orders for 450,000 Harry Potter books and products, and orders for 36,000 items placed just before the holiday delivery deadline. Well over 99 percent of the orders were shipped and delivered on time.
AMAZON’S CHALLENGES
Several sales growth options are possible for Amazon. First, it can continue to pursue growth through sales of hundreds of thousands of electronic books, magazines, and newspapers through its new Kindle devices and store. Second, Amazon can continue its expansion into new product and service categories. Recently, it launched its Outdoor Recreation store—the latest in over a dozen such categories. This approach would prevent Amazon from becoming a niche merchant and position it as a true online retail department store. Third, Amazon can increase the availability of products from other retailers through its Amazon WebStore. These retailers can create a customized, branded website that uses Amazon eCommerce technology. Finally, Amazon can pursue a strategy of providing access to its existing operations for other retailers through its Fulfillment by Amazon (FBA) service. Online retailers store their products at Amazon’s distribution centers and when they sell a product—Amazon ships it!
Amazon.com has come a long way toward proving that online retailing can work. Its logistics and supply chain management activities have provided Amazon with a cost-effective and efficient distribution system that combines automation and communication technology with superior customer service. To continue its drive to increase future sales, profits, and customer service, Amazon acquired Zappos.com in mid-2009. According to Bezos, “We see great opportunities for both companies to learn from each other and create even better experiences for our customers.”
Questions

1. How do Amazon.com’s logistics and supply chain management activities help the company create value for its customers?

2. What systems did Amazon develop to improve the flow of products from suppliers to Amazon distribution centers? What systems improved the flow of orders from the distribution centers to customers?

3. Why will logistics and supply chain management play an important role in the future success of Amazon.com?
For decades experts have been talking about a time when customers will really be the focus of companies and organizations. We call this the marketing concept but over the years so often consumer needs and expectations were below par, forcing consumers to complain and/or take their business elsewhere. Today, technology has given consumers a stronger voice - one that is heard loud and clear - forcing companies and organizations to pay attention and make changes. Consumers now live in an interconnected world where mobile devices and social media makes it easy to voice opinions and share positive and negative sentiments. Consumers now have recourse and marketers are on alert knowing that influential customers with large followings on social media can influence brand opinions and brand sales.
Consumers today expect products to live up to expectations, services to be beyond reproach, marketing messages to be ethical, and companies to be good corporate citizens. People also expect companies to form relationships with customers by being responsive to their needs, sending timely offers, and answering questions, often in real-time. This is no easy task with wireless technology that connects consumers with organizations 24/7 across time zones, cultures, and countries.
Various marketing services companies help marketers provide exceptional customer service in this interconnected world by providing cloud-based platforms and databases that marketers use and access to help ensure complaints and questions are tagged and answered, that each customer interaction is logged, that databases are populated with customer communication timelines and information, and that salesforces have customer and company information at their fingertips. Marketers can then correlate data to sales and profits to return on investment.
Salesforce, the world’s leader in customer relationship management tools (over 620,000 clients in over 125 countries), provides such marketing services with cloud-based platforms that companies and organizations can use to develop trusting relationships with their customers.
Salesforce’s attitude to business puts customers first and harnesses technology and data to make marketing, communications, and business practices simpler, faster, and better. Its approach is that to succeed, businesses need to become customer companies that are available 24/7 - whenever the customer desires and on whatever device they prefer. Customer oriented companies listen to each customer through every communications channel and connect customers, employees, partners, and products to earn consumers’ trust and business. Customer focused organizations create useful communities for clients, send out offers, and track interactions to ensure customers are delighted and recognized from their multiple contact points whether this is in-store, via e-mail, through a text message, through online customer service chat, or on social media. These platforms respect consumers’ identity and their rights to privacy.
Salesforce provides cloud based platforms that help marketers focus on consumers. Salesforce Chatter is an example of such a platform that works as a company’s closed access social sharing hub. This platform allows employees to collaborate on projects, post updates on work-related items, share ideas, and solve business-related problems on a social sharing platform similar to Facebook. Salesforce also has Salesforce Sales Cloud that helps salesforces log, track, and access information on sales interactions, pitches, and targets. It also has its Salesforce Service Cloud that connects agents to customers and tracks customer service cases. Salesforce Marketing Cloud is another service that is of particular help to marketers. It helps marketers schedule, deploy, monitor, and measure e-mail marketing campaigns, social media marketing programs, and mobile marketing campaigns. It drills down into e-commerce interactions to build richer relationships with its customers. It also allows social media managers to monitor, measure, schedule, and respond to social media comments and questions in real-time, capturing data in dashboards that visualize demographics, highlight share of voice, pinpoint engagement levels, identify positive and negative sentiment, and show how social campaigns perform.
In November 2013 Salesforce launched its Salesforce1 Customer Platform app (for mobile devices) so business customers can access updates, data, and communicate on-the-go to better connect with clients. The Salesforce1 Customer Platform app also allows developers to create their own business-facing apps that are built on the Salesforce1 platform.
Compatible across Android and iOS platforms, Salesforce1 provides real-time access to critical business information at all times using the cloud to offer downloadable business apps through its Salesforce AppExchange platform. Agents can collaborate, communities can help each other, and users can search a knowledge bank to help troubleshoot problems to deliver outstanding customer service. Salesforce1 is generally included with user licenses of Salesforce CRM and the Salesforce Platform. 
This approach is no surprise, considering Salesforce’s forward-thinking approach puts customers first. Salesforce calls this the Internet of Customers whereby companies can be more productive by connecting employees, partners and products from anywhere, anytime, and on any device. Salesforce believes that the Internet of Customers is the future and that the brands that get there first will win the hearts and minds of consumers.
Questions

1. What business practices and consumer expectations do you think prompted Salesforce to create a business app for its customers?

2. What general benefits can apps bring to business users?

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