OM in the News: The “Amazon Effect” on Logistics

A growing number of companies are paying to track in real time everything from truckloads of pork chops to shipping containers full of exercise equipment. Logistics providers, retailers and suppliers are inking deals with software firms that use location data and weather and traffic information to monitor shipments and alert customers to events that could hold up delivery, such as a loaded truck sitting in a yard for more than an hour.

The need for these services is growing as retailers and shoppers demand faster, more-precise delivery. Many Amazon customers have become accustomed to reliable 2-day shipping, forcing other retailers to offer similar service. Businesses are making new demands of their suppliers as they trim inventories and reduce supply-chain costs. Last month, Wal-Mart said it would penalize companies that made deliveries too late or too early. “It’s the Amazon effect—customers are putting more pressure on their supplier to know where their product is,” said a supply chain analyst with Gartner.

Pork producer Smithfield Foods hires more than 230 trucking companies to ship about 1,000 truckloads of product in the U.S. a day. “Managing that is an awful lot of phone calls,” said the firm’s VP of supply chain. Smithfield’s on-time delivery rate improved to 94%, from 87%, after it began tracking truck freight with software.

With this article in The Wall Street Journal (Aug. 30, 2017), we see that some businesses are using delivery speed as a way reach competitive advantage, as illustrated in Figure 2.4 in the text.

Classroom discussion questions:

1. What are other OM strategies for competitive advantage?
2. Name some of the leading software providers that help track shipments.