How does Amazon use Time Based Competition?

Introduction

Time based competition is a very important concept in the academics of supply chain management and is an emerging trend which everyone is focusing on. In the words of Barnes, (2014) it is a major source of competition for many organisations and helps in value creation in the supply chain process. 

The exact part where time based competition is applied is the logistics industry which is involved with the transportation of goods and services and also its distribution and sales. In the modern competitive world, this is of crucial importance because the time saved in the logistics process can enhance the delivery time, which is an advantage to the buyer as well as the supplier. Baah, (2019) see it as an economic benefit which influences the organisational performance and impacts the sales of the buyer. The main goal of time based competitive strategies is optimizing the logistics process for better efficiency. An essential part of this logistics process which uses the time based competition strategies is the speed of service, the better warehousing operations, distribution to various centers, and others. Technological advancements have also enabled real-time data so that shipments can be tracked and errors reduced. This facilitates first-hand handling of the logistics problems if any.

It is said that in tough competitive times, globalization is always increasing and hence market dynamics are also changing. Information and resources are now available to everyone. In such a situation time is of the essence and the customer satisfaction criteria now depend on how fast goods can be delivered to them. Most manufacturing companies stay ahead of the competition by offering a faster delivery lead time. Therefore it is essential for companies to focus on the supply chain process, especially on logistics operations. Carbone & Gouvernal, (2017) are of the opinion that many international companies have improved their time based competition strategies by listening to consumer demands, other known as VOC or Voice Of Customers. This is the essence of the competitive advantage!

How organisations have evolved to make their supply chain processes faster?

It is interesting to note that the greatest weapon in the logistics process has been the logistics service providers or the LSP. They are usually third party organisations hired by the manufacturing company to take care of the logistics part. According to researchers Carter & Rogers, (2008), this falls under outsourcing strategy which is a very important component of the supply chain process. Many companies crucially analyze and assess their logistics operations before hiring the services of LSP. Christopher, (2016)here pointed out that there are two main categories of outsourcing which are responsible for time based competition. Firstly, it is non-core outsourcing which represents areas like HRM, IT skills and logistics, and core outsourcing which represents departments like design, manufacturing, packaging, and others. It is important to note here that the success of time based competition depends on which category the organisation focuses on. The analysis must be done according to external and internal factors which an organisation faces.

Donald Rhodes, (2015)states that that outsourcing availability in logistics is a proven and effective measure in reducing inconsistencies and errors in the operational process. In this stage, prioritizing becomes important for organisations as the success depends on it. Thus, it can be said that time based competition is a crucial part of the supply chain process. It is also a part of the operations strategy whose main goal is to optimize the production performance and minimize the cost involved in the process as well. Having said this it is evident that time based competition also influences overhead cost, the travel time, the sales and distribution process, and more. The most glaring example is the manufacturing sector, be it any industry like leather, FMCG, and others. Export and import companies largely rely on LSP to improve delivery time and increase the value in terms of faster ETA and ETD.

Going through the academic literature, it is seen that outsourcing activities mainly constitute transportation and warehousing management. In simple words, focus on these activities by an LSP enables the company to put more focus on the production and quality management process(Martin, 2017). Companies also increase their capacity for expansion, since LSP provide larger warehousing facilities and better management than what most companies can afford. Exceptions are only to those large scale companies, who have their own departments of logistics like Amazon and eBay. Yawar, (2017)says that the essence of time based competition lies in connectivity and communication, which further increases the efficiency of the process. This is especially important for the international supply chain process which is much more complex and challenging than domestic ones. He says that here coordination and integration are the two main factors that revolve around time based competition. As mentioned earlier it is increasingly seen with companies dealing with imports and exports. 

To cite an example, the port of Rotterdam in the Netherlands can be taken into consideration, which is the largest and the busiest seaport in Europe. It acts as the prime logistics hub and warehousing and storage facilities for all European companies. Countries like Germany, Belgium, Netherlands, Spain, France, Austria, and Bulgaria all take the services of this port for their shipments. Statistical figures indicate that 469 million tons of cargo are received annually by Rotterdamin Europe(Port of Rotterdam Authority N.V. , 2020). Thus, it can be said that European companies understand the importance of time based competition better than any other business region. Logistics is also a very important part of the Middle East, especially the UAE. The nation acts as the central trade hub connecting the West to the East. All major air shipments go through the Middle East. Seaports like Jebel Ali also act as important hubs for the LSP(Searates.com, 2020).

Literature Review

Many researchers like Jamieson, (2013) are of the opinion that when a project is carried over in the short term, outsourcing may involve handling the control of public services to private firms. This is a very important move for the organisations as according to the researcher it is the source of competitive advantage. According to Schönberger, (2019) also the dependent variable here is the capacity expansion decision of an organisation. It can be said that when production exceeds the existing capacity of an organisation, it decides to expand so as not to constraint parts of the supply chain process. This has been increasing in recent years due to the over increasing demands of the market. Having said this it is important to note that capacity expansion decision is an important factor that is linked to time based competition. Heitmann et al, (2017) also mention that the relationship between outsourcing and the capacity to expand depends on some influencing factors, which impacts the role of cost strategies and innovation. These factors act as a moderator between the two, giving an organisation the competitive advantage it needs. Innovation must be pointed out as an important influencing factor, as pricing and cost strategies depend on innovation in the supply chain process; the more innovation in technological advancement, the more competitive the unit cost of a product is. Innovation is also directed to outsourcing, where e-services further make the system efficient. Researchers Liu, Nie, & Yuan, (2019) here cite that innovation in outsourcing can create a sustainable economy by creating a risk-free international market and introducing flexibility in the existing domestic market scenario.

As competition forms the integral goal of the time-based strategies, it must be mentioned here that time has become of increasing importance as consumers rely on time-based service, and organisations must use this in creating value to its products. For this reason, time based competition strategies must be taken in accordance with the corporate strategies of the organisation. Rich & Hines, (2016) point out that since the intent is value creation, the scale of time compression must be considered especially if a company is operating on a global basis. Thus the researchers state that the impact of a commercial advantage here is the reduction of commercial risks in the logistics process. Yu, (2019) further points out that time based competition was not seen until the 1900s. Logistics then was only carried out by a group of industries, who had dedicated the lowest possible budget for the process. It is only after World War II that timely delivery became of crucial importance as competition then was as close to survival in war times. The process gained momentum, after the 1900s, as technological advancements increased and the World Wide Web came into being. He states that with this advancement, companies differentiated themselves from their competitors by focusing on cost-quality and timely delivery.

Several other researchers like Purvis, et al., (2015) also mention that globalization further contributed to creating time based strategies competition was increased and consumer, as well as the supplier, focused on the value of time. They called the process production industrialization; the supply chain process becomes more commercial and industrial as time becomes an integral issue. They further mention that there are two categories which are affected the most by time based competition; first is the scope of the outsourcing that each organization had and second, is how critical a task is that is carried out through the outsourcing process. As mentioned earlier the scope here depends on various internal and external factors. While some organisations take the help of third-party LSP, some stick to their own department of logistics. No matter what the process it, all strategies are directed to speeding up the time in the supply chain process, especially logistics. Studies have also proven that proper handling of the process can improve the overall organisational performance.

Rae, (2017) here pointed out several issues that the logistics department of the UK industry faced when dealing with Brexit. He says that since logistics depended on delivery and price, much of the buyers were affected as prices hiked and delivery was delayed. He says that in such a price and time-sensitive market it is essential that companies gain competitive advantage by offering time guarantees. Taking the current scenario of Coronavirus pandemic into account, people highly understand the importance of timely deliveries. While most people are locked at home, 75% of the public depend on e-commerce solutions to get goods delivered(Staff, 2018). Now, the highest performing companies that offer time guarantees are UPS, DHL, FedEx, and such others. Although the companies are trying hard on the delivery, it shows the vulnerability of time based competition in times of pandemic and critical situations like natural disasters. An article in the (Magazine, 2020) cites the example of a massive tsunami and earthquake that hit Japan in 2011. DHL was affected the most, as containers were washed up the shores and goods destroyed. Many companies including LSP, buyers, and suppliers suffered huge losses due to this. The article further states that situations like these are bound to rise by 5-15% as time goes by.

Taking Europe into consideration, certain studies have pointed out various LSP that provide time based competition. Logistics companies like Bpost, PostNL, BRT Corriere Espresso, Asendia, and Mondial Relay deliver almost 6000 deliveries in a day. As mentioned earlier Amazon UK, is at the top of the list when it comes to daily eCommerce. For other deliveries, Royal Mail and Hermes UK are major logistics players which provide extremely competitive and timely deliveries. Hermes UK is said to deliver around 10,000 eCommerce couriers and 4500 personal parcels a month(ecommercenews.eu, 2019). It is important here to note that deliveries have become very sensitive after the 2000s. The customer expectation has severely increased and now all eCommerce must have same-day delivery as one of its features. Researchers Fernie & Sparks, (2018) here state that capacity expansion and mergers and acquisitions are the main reason that impacts such a huge customer expectation. They further state that e-services have further supported this, as customers can now track their shipments through special IDs. Hence time-related expectations are on the rise.

Application of the ideas and concepts of time-based competition by Amazon

Amazon was chosen to be an organisation on which the application of the concepts of time-based competition would be studied, in order to gain an insight into how companies utilize these concepts in the eCommerce scenario.

Amazon, as it is known, is an eCommerce giant which delivers products all over the world. It is based in Seattle and has over 750,000 employees worldwide. It is deemed to be the largest company in the world in terms of internet revenue(Jeff Bezos, 2019). The company initially sold electronics, household goods, video games, toys, furniture, and books, but added on product variations with time. Soon, it became big enough to surpass Walmart through the process of market capitalization. Ashayeri & Yuan, (2016) here state that this is important to note as Amazon’s time based competitive strategies were responsible for the market capitalization process. Going through Amazon’s company principles, it was noted that the company focuses on customer obsession rather than competition. This is where the company uses VOC or Voice of the Consumer to influence market forecast and the profit-making goals of the organisation.

Elnahla, (2016) here pointed out that one of the crucial applications is the technological advancements that the organisation took up. Essentially, it is the largest virtual marketplace holder to work on AI and cloud computing platforms. It also uses digital streaming to conduct video conferencing for its retailers, so that more product line and more trusted suppliers can be added. Prince & Slobin, (2015) here also point out that Amazon time based competitive strategy is also based on the diversification methods that it had innovated. Simply, put Amazon Prime members are entitled to two-day delivery, one-day delivery, and even 8 hour delivery on special cases. In addition to this, the company has Amazon twitch, Amazon Music, Amazon web services, Amazon Publishing, and others which are all linked to provide the highest customer service and delivery like no other company! Although the company has been criticized for technological surveillance overreach, Amazon still sticks to its tech methods to gain the highest time based competition in the market. One such advancement was reached when Amazon used drones to deliver in places where human reach is impossible. The wing is called Prime Air and goods are delivered in scared locations in less than 30 minutes(Amazon.com, 2020).

Amazon, unlike other companies, does not use third-party LSP but rather they have their own logistics department and warehousing facility which is used in their supply chain process. Initially, the company had launched two fulfillment centers only, one in Seattle and the other in Delaware.  However, Amazon UK has its center in Glenrothes in Scotland. This center has especially become important after Brexit, as earlier Amazon used the fulfillment center in Germany for its deliveries to the UK(Sisson, 2019). For time based competition, employees have five basic tasks which help in speeding up the process; unpacking and inspecting the goods upon arrival, placing the goods in proper storage and cataloguing them, making individual shipments according to records, sorting and packing and shipping. Technology is again the main feature here, all operations are computer-generated for faster results. In fact, most of the systems are innovated by their counterpart Amazon Robotics(Routley, 2018).

Effectiveness of the concepts of time-based competition taken by Amazon

The effectiveness of Amazon can be solely credited to innovation and technological advancements, which provide real-time data regarding consumer behavior and VOC to improve its time based competition. According to Stevens, (2017), Amazon is expected to sell almost 12.6 billion products in the year 2020. This accounts for nearly half of the online retail in the UK. It has also been said that fulfillment centers will have better data centers for its cloud computing business. The company currently hires contract drivers all over the nation through its Flex delivery service and the hiring is just expected to increase over the years(Schoolov, 2019). Drone delivery is considered a breakthrough by Amazon Robotics and the company will soon launch its own cargo plane for large scale deliveries.

Researchers Weber & Badenhorst-Weiss, (2016) say that Amazon has gone beyond human capacity to drive its profits by optimizing the fulfillment centers in various regions. Studies suggest that the company spends USD 1.5 billion on shipping per day, just reorganizing and optimizing every level of the logistics process. Thus, the dedication towards time based strategies is noticed! Not only this, capacity expansion decision taken by the firm has further promoted The Climate Pledge according to Amazon Press Center, (2019), where Amazon is achieving zero carbon emissions by the year 2040. Although this is a very complex process, Amazon believes that advancement in technology is possible to achieve this goal. Thus, time based competitive strategies also paved the way for green goals by the organisation. It is also important to point out that the corporate goal of customer obsession has further made this possible, as the company was dedicated to providing the highest level of customer satisfaction possible.

Conclusion

To conclude it can be said that time based competition is an important part of the supply chain process, which has impacts on the operations strategy, the capacity expansion decision, and most importantly outsourcing. Researchers Esteban & Annachiara, (2019) state that most of the time based competition has been based on computation technologies, especially in large scale industries and Amazon, is the right example for it. The stress on computation and automation is what made Amazon the leader in the eCommerce business. It is, therefore, safe to say that time based competition is an emerging trend which is bound to get stronger, as customer expectation increases.

 

 

 

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