Supply Chain by Amazon – Too Much of a Good Thing?

The latest offering by the global giant looks, on the surface, to be a massive potential benefit for small sellers. But could Supply Chain by Amazon be too much of a good thing for Procurement?

“Why can’t we just buy it on Amazon?”

“Why does it take 4 weeks, I can get one on Amazon tomorrow?”

“I’ve found one on Amazon. Can we put it on the credit card?”

Over the past few years procurement professionals around the world have probably heard some, or all, of these questions. As Amazon grew, people were able to get what they needed at home both cheaply and quickly. This led to them questioning why they couldn’t have the same level of service when it came to their professional lives too. 

With Amazon simplifying the selling and shipping processes for small and third-party sellers, reducing costs relating to servicing customers requirements, and making it easy for them to access new markets, Procurement professionals can access these suppliers faster and more effectively. 

It’s even got to the stage now that a small business with non-complex, off-the-shelf requirements could run their entire buying operation with one person and an Amazon Business account. As a procurement professional, if that thought doesn’t bring you out in a cold sweat, then you’re in the wrong profession…

And now Supply Chain by Amazon looks set to take these offerings to the next level. But could this all be too much of a good thing for buyers and sellers? And could it present a problem for Procurement further down the road?

Growing the Supply Chain Offering

‘Supply Chain by Amazon’ expands on the company’s current Fulfilment by Amazon (FBA) service by adding in a service offering for collecting from manufacturing facilities and sellers globally, and then providing support for international logistics, including customs clearances.

The service is supported by Amazon’s network of hubs and uses the existing freight service, Amazon Global Logistics (AGL), to ship across borders and provide real-time tracking for both sellers and customers. For both parties, this means greater reliability and shorter delivery times.

In addition, sellers will see their costs reduced, as well as being able to pass on the risk and complexity of their own supply chains to a third-party who is already well versed in dealing with it. With plans to further develop this Service to include Multi-Channel Fulfilment, it could prove to be a major development step for Amazon in this field.

Too Dominant a Force?

If you are a small company, sole trader, or business that would otherwise struggle with experience in or resources for global shipping, customs clearances and end-to-end fulfilment, then yes. Lower costs, improved delivery times, happy customers and time to focus on core business activities – it does seem to tick a lot of boxes.

Buyers and customers have the comfort of buying from a verified source, and have a more reliable and less risky logistics and delivery process. And yet, this comes at a cost for all parties.

As far back as 2017 experts were putting forward the idea that Amazon was spreading itself too thin and embedding new strategies that didn’t form part of its core business. In addition, even with the assistance provided to sellers and small companies with ‘Supply Chain by Amazon’ there are many people who believe Amazon’s dominance in this area is negatively impacting the High Street and may actually hurt small business in the long-run.

From the point of view of Procurement, the profession has shied away from using Amazon as an ‘official’ supplier. Amazon is unlikely to complete a Pre-Approval Questionnaire, or agree to a different set of Terms & Conditions. On-going concerns about the quality of goods, uncontrolled spend via online accounts and a perceived lack of traceability on goods have all added to this too.

Amazon has worked to try to alleviate some of these concerns and there have been significant improvements, leading to some Procurement professionals beginning to have a change of heart.

Too Much of a Good Thing?

As good as reduced costs, increased reliability and lower risks all sound, and as much as using Amazon as a primary supplier might help to take a chunk out of Procurement’s repetitive tasks, it could become something of a double-edged sword. 

There are benefits but what happens when this creates an expectation that everything can be sourced like this? Without good boundaries in place and expectations being managed, it will create a perception that all goods can be bought as easily and will arrive much quicker.

As a one-stop shop for off-the-shelf items, Amazon may prove valuable for your business. However, there will always be goods where requirements are more complex, and a more focused approach is required. This is the true art of Procurement and it’s unlikely to be replaced by a marketplace-style solution completely in the near future.

Despite these new offerings, there is still much to consider when determining whether Amazon should be a part of your strategy. Hopefully, the next time you face one of those questions, you will have a clearer understanding of whether it’s the right fit for your organisation.