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Amazon, Grainger Focus on Taking Operations to the Next Level

Amazon, Grainger Focus on Taking Operations to the Next Level

August 20, 2012
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Already widely seen as leaders in operations, Amazon and Grainger both clearly see room for ongoing improvement.

Amazon, which launched AmazonSupply.com earlier this year as a more formal effort to sell industrial and lab supplies in the B-to-B marketplace, is making an aggressive move to build out a much larger distribution network in the U.S. and internationally. Supply Chain Digest recently outlined Amazon’s plans to add 18 new distribution centers worldwide in 2012. At the end of 2012, Amazon may have more than 40 DCs in the U.S. alone, according to the article, which I would expect would have some impact on its AmazonSupply business, as well.

The build-out is strategic. One of the goals with this expansion is to reduce Amazon’s shipping costs by bringing the company closer to its customers. The Supply Chain Digest article asks whether the placement of fulfillment centers in some metro markets may suggest an eventual shift to offering same-day delivery service for some areas, which would certainly be a game-changer.

Amazon also has not detailed its plans for Kiva, a robotic picking system provider that it purchased in early 2012, but it may have a great impact on the company’s overall productivity.

Grainger is also continuing to make its distribution network a priority. Grainger has implemented what it calls its Continuous Improvement (CI) Culture, which it outlined in its 2012 Factbook, published at grainger.com. The initiative, focused on improving execution in its DCs, has significantly improved Grainger’s inbound and outbound cycle times, as well as space utilization. The distributor is also focused on sharing best practices across its many divisions by leveraging a team of network and space planning experts. Grainger trained more than 250 employees in “CI problem solving” in 2011, according to its Factbook.

As of the start of 2012, Grainger had 19 distribution centers in its North American distribution network, including three of what it calls Super Regional DCs.

Amazon and Grainger aren’t alone in their efforts to improve on operations. Many leading distributors big and small have made operational improvements a priority over the past few years – some driven by the need to improve productivity and do more with less. Some are driven by the desire to serve more markets more efficiently, while still maintaining high service levels.

Perhaps they recognize that operational excellence is no longer a strategic differentiator, but necessary. According to Brent Grover in his new book, The Little Black Book of Strategic Planning for Distributors, operational excellence is a requirement if you want to compete effectively. “Operational excellence is taken for granted by the customers distributors want most,” Grover writes.

Thanks in part to companies like Amazon and Grainger, customer expectations continue to increase when it comes to customer service. And as many have said, expectations in the B-to-C world have seeped into B-to-B markets. “Mere operational competence is not enough to compete for business and make adequate profits,” Grover says.

Instead, operational excellence is an imperative these days, and the giants in the business are taking steps to build on what were already arguably strong operational foundations.

Operational excellence requires you to align all aspects of your operation to your current and foreseeable needs of your most profitable accounts. Read more about what Grover says about the interplay of operational excellence and customer intimacy in his book, The Little Black Book of Strategic Planning for Distributors.

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