Amazon Business Isn’t the Greatest Threat, Customer Expectations Is

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Customer expectationsAs electrical distributors launch, or prepare to launch, their eCommerce sites, they need to be aware of a key customer dynamic that is changing…the expectation of accuracy.  While many have talked about Amazon Business being a key competitor (or threat), their biggest impact may be on customer expectations … and the expectation that the inventory information on the website is correct but more importantly that “what you order is what you get.” And then, the key is doing this repetitively and profitably.

State of eCommerce, Distributor PerspectiveThe findings from our recent State of eCommerce, Distributor Perspective survey, which was conducted with Dick Friedman, highlighted this need.  Given Dick’s warehouse expertise, he shared his thoughts and observations on what distributors need to be prepared for within their warehouses / fulfillment centers (if branches are to be used):

A recent State of eCommerce from a Distributor Perspective study surveyed over 230 distributors, with 1/3rd being electrical distributors, revealed that Amazon Business (AB) is still a threat, but not the greatest e-commerce threat.

Some key findings:

  • AB ranked 4th behind national chains (with a local presence), independent distributors and Grainger.
  • More than 50% of respondents indicated that their customers are buying from AB because it is easy to do and prices are competitive.
  • About 1/3 of the respondents indicated that they bought from AB to fill customers’ orders when the needed items were not offered or were sold out.
  • Looking forward, almost 50% of respondents indicated that AB sales could represent more than 10% of industry sales.

These results confirm what this author has stated before — that AB per se is not the foe; that the foe is the business model that AB is perfecting, and others are copying. Illustrating the threat of the business model are Grainger’s two new e-commerce sites, Zoro.com (a site for selling lower priced products to small businesses) and Gamut.com (an experimental web site to enable medium to large customers to solve specific problems via Gamut’s products). Although not addressed in the survey, the threat of manufacturers selling direct to end-users continues to grow, as evidenced by some manufacturers telling the media that they have been approached by AB to become sellers. [Channel Marketing Group created and conducted the survey, with review and dissemination support by this author; results of the survey are available for purchase for only $79.

To compete against e-commerce alternate channels, electrical distributors need warehouses that are very productive (low cost) and very accurate (no mistakes). Here are a few tips for achieving high warehouse productivity and high accuracy (i.e., 99.9%).

  • Organization – Store items picked the most often closest to the packing area, and even where items are stored by “family” or vendor line, store faster moving ones closer to the front of the section. If more than one item is stored on the same shelf, location codes should contain the identification of each usable location (aisle, bay, level, slot). The exception is that heavy products should be stored on the lowest shelf or on the floor; e.g., pre-formed 3” conduit bends.
  • Receiving – If a unit of measure in displayed PO/put away data (on the screen of a scanner) or on a printed put away list is not the same as that on the corresponding packing list, the receiver should note that discrepancy on the packing list or record it via the scanner. Wire nuts often cause confusion.
  • Put Away High productivity, not to mention accuracy, requires recording storage locations as soon as possible, and accurately.  If there is no permanently-assigned storage location for a newly-received item, because its location is determined after receiving, the person doing put away must record the selected location on any document taken along during put away (e.g. copy of PO) or a put away form, or via bar code scanning of the location-ID code. If paper is used, the new location ID must be entered into the ERP system ASAP.
  • Pull Down – The time to replenish picking locations from bulk/overflow is before daily picking begins, regardless of whether someone is using a printed pull-down list or displays data on a bar code scanner.  Pulling down and picking at the same time leads to congestion that reduces productivity, and tends to cause mistakes.
  • Picking – To minimize picking time, items must be picked in a sequence that minimizes walking time, which is minimized by storing items as described in “Organization”, above. But listing all items on one pick ticket or displaying all (in groups) on a scanning device may not minimize picking time. If there is a great variation in item size or weight, using one person to pick all the lines for an order may take more time than splitting the order into two or more tickets or RF-displays – one for the smaller items, and one for the larger/heavier items. For example, grounding clamps and reels of wire.
  • Packing/QC –  If possible, during packing, before an item is placed in a carton or wrapped or simply placed on a pallet, the checker should compare the code of the item to the data for the order; visually or via scanning bar coded labels; and verify the quantity being packed to the quantity on the order. To avoid repeating mistakes already made, an order checker should not be the same person who picked the order being checked.
  • Loading – To save time and reduce mistakes, the smaller and lighter items and packed cartons of an order should be placed on rolling shelves that are used only for staging outbound orders (not picking), with only one order on any section of a rolling shelf unit. Each rolling shelf can be pushed into or near the appropriate truck.

Although the e-commerce competitors have spent millions of dollars on their warehouses, traditional distributors can maximize productivity and accuracy by using these recommendations.

Dick Friedman helps distributors prevent warehouse mistakes that lose sales and customers.  Contact him at 847 256-1410 or via www.GenBusCon.com for a FREE consultation.

Amazon’s name recognition has driven many distributors’ eCommerce investment as it stimulated discussion and created awareness among customers. Further, electrical buyers, many who purchase from Amazon as consumers, have heightened their expectation of service.  Online pricing is expected to be accurate. Inventory information is expected to be accurate. Delivery information is expected to be accurate. “Contents” of delivered boxes are expected to be accurate. The stakes are raised but proper processes can help you meet customer expectations while also improving profitability through reduced error rates and “rework.”

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