Reuters reports that Amazon is planning a major roll-out of an online grocery business which they’ve been working on for years. Called, “AmazonFresh” the program is already live in its Seattle test market, delivering groceries including fresh produce, seafood, meat and dairy to area residents who place their orders online.
Amazon is poised to revive a defunct online grocery delivery business model. However, the dynamic is entirely different for this brave new foray into a market defined by spectacular failure. With the extensive distribution network Amazon has built through two decades of successful (non-perishable) e-commerce, they are far better situated than their failed forebears to succeed as they won’t be starting from zero in this regard. However, there is still the danger of the “germ” that could slay the mighty invader just before its hour of greatest triumph.
In H.G. Wells’ epic story, War of the Worlds, alien invaders intent on exterminating humanity were not undone by the Earthlings’ considerable military response. It wasn’t battleships, jet fighters or even nukes that ultimately brought ruin to the invaders. Rather, it was lowly earthbound microbes that killed the interloping spacemen, who had no natural immunity to our planet’s bacteria.
The idea for e-grocery, first brought to market in 1999 by dotcom startup Webvan, famously imploded and is often regarded with the dubious distinction of being the dotcom era’s biggest flop, going bankrupt in 2001 after burning through billions in venture capital funds. The money was predominantly ploughed into the allegorical equivalent of billion-dollar aircraft carriers and missiles in the form of the vast infrastructure the company built – enormous warehouses, distribution centers, and a fleet of refrigerated delivery trucks. With the money spent on infrastructure far exceeding sales growth, Webvan collapsed under its own weight. (Interesting note: Amazon purchased Webvan for pennies in 2008). With the infrastructure already in place and supported by positive revenue, Amazon won’t succumb to the same fate as Webvan. However, other dangers lie ahead for the concept.
Replenishment will be a key factor to success, ensuring their perishable supply chain is operating smoothly and that they have visibility into inbound product. Maximizing shelf life on perishable product will require Amazon to turn products quickly and manage inventory levels closely. It also demands the ability to manage on-time performance and weed out chronic late deliverers.
This is why thought leaders at UltraShipTMS are suggesting that Amazon would be wise to utilize a transportation management system (TMS) software to manage the inbound shipping of thousands of grocery items SKUs into its distribution centers. Especially crucial to maintaining high quality levels for perishable products like produce, meat and dairy, having absolute control and real-time visibility over the inbound inventory of a grocery operation makes the difference between customers happy with their firm cucumbers and fresh sea scallops and customers upset over moldy blueberries and browning, oxidized ground beef. With web-based TMS systems affordable and easily implemented, these solutions represent a small, easy to overlook step for the likes of AmazonFresh, but one that, left unaddressed, could prove to be the microbe-sized destroyer of an otherwise superior business plan.