Amazon is one of the few companies that benefited from the COVID-19 pandemic, with surging online sales pushing their profits into the literal stratosphere. (Think CEO Jeff Bezos and his rocket company, Blue Origin.)
How did Amazon manage to become the default retailer and an essential service for so many consumers during the pandemic? By navigating many monumental challenges, including a labor crisis, delivery delays, and product shortages.
Many businesses don’t bother with strategic planning because they think it’s too cumbersome or time-consuming. But the truth is, if done correctly, strategic planning can save time and money.
In The Beginning – Covid-19 Pandemic March 2020
As traditional brick-and-mortar stores closed and shelves emptied, shoppers turned to Amazon for products like hand sanitizer, face masks, and disinfectants. Household products, such as toilet paper and groceries were also ordered. As time wore on with no end in sight, consumers ordered office supplies, fitness gear, and personal items to adjust to staying inside. Toilet paper sales on Amazon jumped 186% and cough and cold medicine sales surged 862% year over year.
This tsunami of online orders allowed Amazon to chalk up record sales, and then reinvest in coronavirus-related safety gear for workers and internal testing. On top of that, Amazon kept on hiring while other companies were laying employees off. They brought and established 175,000 new warehouses and hired delivery workers to fulfill customer orders. In just three months between April and June 2020, Amazon brought its head count to 876,800 – an increase of 34% year over year.
The pathway to success wasn’t always clear during the initial throes of the pandemic. Jeff Bezos acknowledged early on that COVID-19 upended Amazon’s operations. “The current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced,” he said in April 2020.
Focusing their full attention on the crisis, Bezos and Amazon’s senior leadership met daily to tackle inventory issues and discuss coronavirus updates.
While most global companies prepare for potential supply chain disruptions, the COVID-19 pandemic was unprecedented. Even Amazon, with its state-of-the-art end-to-end logistics network spanning warehouse, planes, trucks and vans, wasn’t able to keep operations on a steady keel. Amazon’s holy grail — it’s supply chain — had been hit and hit hard.
Amazon began by telling its millions of third-party sellers that items like hand sanitizer and paper towels would take precedence in its warehouse, since demand for those products was so high. A month later, in April 2020, Amazon began taking orders for nonessentials, but in limited quantities. Slowly, Amazon opened up sales of nonessentials, but kept a sharp eye on inventory in its U.S. warehouses.
Covid-19 Pandemic And Employee Safety
At the beginning of the pandemic, Amazon was widely criticized for its treatment of warehouse workers. Workers argued that Amazon didn’t do enough to keep them safe from the virus as they picked, packed, and shipped out orders at what seemed the speed of light. Sadly, at least eight Amazon employees have died from COVID-19. Today, Amazon says it has implemented more than 150 process updates inside its warehouses to stem virus transmission. These efforts include enhanced cleaning, social distancing measures, mask requirements and camera monitoring. Testing for the coronavirus was also ramped up.
Strategic Supply Chain Improvements
Over the course of the Covid-19 pandemic, Amazon has expanded its private fleet of long haul and last mile delivery trucks. The end goal is to reduce or eliminate its reliance on UPS, FedEx, USPS and other carriers to make deliveries, thus becoming more profitable while controlling customer experience. Amazon is also building an incubator for startup trucking companies and recruiting hundreds of people to start trucking companies and drive only for Amazon. The incubator will provide business training and loans for entrepreneurs to start these trucking companies. They are also exploring more sustainable fuels and looking at reducing its carbon emissions in its fleet by upgrading to natural gas class 8 trucks and are testing new vehicle types including electric, CNG, and others.
Warehousing is another area of supply chain improvement. Besides focusing just on its large regional ecommerce distribution centers and Whole Food distribution centers, Amazon is managing sortation centers for geographical regions. They are also building pantries and fresh warehouses that service dry grocery merchandise and/or perishables. In addition, Prime Now are facilities that stock a limited line of products that are in high demand and can be delivered within 1-2 hours of order placement. Delivery stations are being built which are last mile facilities where packages are sorted and then dispatched directly to the customer. These are smaller terminals that will receive Amazon goods and ship them out to end consumers immediately.
Amazon has also been aggressively investing in its air capabilities. Amazon Air is a cargo airline operating exclusively to transport Amazon packages. They have been purchasing numerous jets to build out its fleet and Amazon’s air hub at Cincinnati/Northern Kentucky International Airport is awaiting completion. Drones are also a big part of Amazon’s future plans, as well as its quest to use autonomous flying vehicles as part of its home delivery strategy. Amazon has doubled the number of staff employed at its Cambridge-based Air team to sixty employees, where the company is developing its drone delivery service. Amazon also has research tech hubs in London and Edinburgh.
The Amazon supply chain is one of the most innovative in the world. Heavy investments drive supply chain resilience for the foreseeable future.
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While scaling is preferable, it’s not easy to achieve. You can successfully scale outputs, processes, and the work itself, but you simply cannot scale people.
Discover The Benefits Of Innovative Supply Chain Operations.
How can you maintain a competitive edge and supply chain resilience during disruptions like Amazon did? One of the keys is to select the right performance indicators to monitor and detect lags quickly.
Read this report from Morant McLeod to:
- Understand the influence of specific non-financial KPIs on supply chain resilience
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- Learn which specific KPIs will help you analyze your supply chain for inefficiencies, ineffectiveness and fragmentation
ABOUT MORANT MCLEOD
Our operational and strategic planning consulting processes are a highly effective way for businesses to improve their organizational performance and achieve their goals. We offer expertise and specialized tools that can help organizations navigate the challenges involved in major changes.
