Tuesday, February 11, 2014

Significant Role Technology Playing in Supply Chain

For many of us, at least online shoppers, our online shopping experience had never been better ever before. When online just emerged, what we could get online was very limited, most probably only some books. The delivery will also take pretty long and the delivery period was kind of uniformly distributed: sometimes you get it in 2 days, sometimes you get it in 2 weeks.

Now, the volume of online shopping has been exponentially grown but our shopping experience has also been improved. “Basically you can get everything you can get on earth from Amazon, at least that’s where we are headed”—VP of Amazon. The delivery period has been precisely controlled. Even more, Amazon has started a same day green grocery delivery in Seattle and LA.  

All of those changes are facilitated by the use of advance information technology in their supply chain.

First, it helps company to save huge cost in storage. When amazon is moving its distribution centers closer to the customers, it requires these centers to be more populated area so that Amazon can reduce the distance of last-mile-delivery. The land in those more populated areas are also more expensive, which requires amazon utilize its warehouses more effectively. In the video we can see that in the massive warehouse, totally different products are shelved together like a book and a toy are put on the same storing unit on the shelve. Amazon did so because those products are similar in dimensions, so putting them together would reduce the space needed to store all the products. But this require comprehensive information system to keep track of all the products, otherwise it would be a disaster. In this case, the advance information technology Amazon used to manage the storage helps them to save lots of space thus in turn, lots of cost.

Second, it makes it supply chain respond faster and handles larger volume. Imagine this, on the cyber Monday, Amazon received 300 orders per second, that’s like a million orders per hour. Without automation on its supply chain management, it’s impossible to handle such volume of orders. The technology made the selection, sorting, packing and scanning of products much faster and more precise than human operations. Eventually, those packages are sorted to different transportation lines based on zip code on the order, and this sorting process is also done by automation.

Looking ahead, Amazon is not satisfied by current technology. It put GPS, aviation technologies, navigation, autonomous etc. together and developed the “drone” delivery. It’s not in place yet due to the FAA regulation. But what can be said now is that it will be a revolution in the supply chain history.

My question is: Will technology increase the entry barrier for future supply chain management?


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