What the Amazon Effect Means for Everyone Else
By Jemel Derbali, Wise Systems Co-Founder
The Amazon effect may be one of the most frequently used terms in logistics these days, largely because Amazon has single handedly reshaped customers’ expectations of product availability, delivery speed, and visibility. Amazon currently has over 101 million Prime subscribers as of Q4 2018 — almost equivalent to one out of every three Americans — and those customers are transferring these inflated expectations to every other delivery experience, as well. Meanwhile, delivery organizations are grappling with increased order volumes being delivered to more places. This is widely referred to as the Amazon effect.
While Amazon has aggressively built operational capabilities to meet their customer commitments, the rest of the industry is forced to meet those same expectations, often without having the same operational scale or technology foundations. A 2018 Penske and Forbes Insights survey of 433 senior logistics, supply chain, and transportation executives reported that 44% of respondents said “the so-called Amazon effect is having a dramatic impact on more than their logistics, supply chain and transportation operations.”
To keep up, some companies have opted to increase the size of their fleet operations (trucks, drivers, and dispatchers). For instance, last September Walmart announced their plan to hire more drivers to help meet the increased freight demand, yet even Walmart has run into difficulties attracting drivers in a tight job market. Other fleets are relying on technology to bridge the gap between current capabilities and customers’ needs — improving fleet delivery efficiency throughout the supply chain, whether between distribution hubs or in the last mile direct to consumers.
These teams are updating their legacy routing systems, which were not built to meet today’s delivery challenges, to next-generation platforms with the capabilities to dramatically improve business performance. These new systems include: dynamic route optimization, real-time updated sequencing based on day-of-delivery changes on the road, fleet-wide visibility for dispatchers, instant driver feedback, and machine learning to continuously improve route and fleet performance — among others.
The University of Washington’s Urban Freight Lab projects “[a] compound 20% annual e-commerce growth rate from 2018 - 2023 … [that] will more than double goods deliveries,” emphasizing the reality that the Amazon effect will not be going away. In fact, the delivery expectations and associated fleet pressures will only increase. So, for teams facing mounting operational pressure, next-generation routing and dispatch software provides the opportunity to take on the Amazon effect, streamlining routing and dispatching, improving customer service, and driving bottom-line savings. Are you ready?