Like the serpentine river from which it got its name, Amazon.com Inc. (Nasdaq: AMZN) is weaving itself into more segments of the economy. Now it has focused on bringing its cost-reduction powers and pricing visibility into the industrial and manufacturing supply chains. Though it hasn't happened yet, I can imagine a future when equipment vendors may submit bids for components on www.amazon.com/supplychain.
I hope you didn't try to click on that site. It doesn't exist. Yet. What does exist is a service called Amazon Supply, a venue for buyers to source a wide range of components and finished industrial and manufacturing products. Many of the products are of limited interest to electronic companies, but purchasing managers and their colleagues at OEMs, EMS providers, and test and measurement companies will find some of the items they order occasionally or frequently.
The company breaks Amazon Supply products into 14 groups: Hydraulics, Pneumatics & Plumbing; Materials; Lab & Scientific; Occupational Health & Safety; Fasteners; Power & Hand Tools; Janitorial & Sanitation; Power Transmission; Test, Measure & Inspect; Cutting Tools; Abrasives & Finishing; Material Handling; Office; and Fleet & Vehicle Maintenance. Each group has at least eight subgroups, which take you to listings for hundreds or thousands of products. For instance, the Fasteners group offers the anchors, bolts, nuts, pins, rivets, screws, threaded rods, studs, and washers you'd find at your local Home Depot or Lowe's.
I was dumbfounded and fascinated. Amazon said it has more than half a million parts in its warehouse with "more added every day!" I can just imagine the size of the warehouse where it keeps all these and the logistics involved in getting them to customers promptly. If you supply products to the electronics industry, the archrival you should be concerned about may no longer be the company you've competed against for decades. It's Amazon. A buyer in the electronics industry can peruse items in the Materials section, for instance, and find bronze, ceramics, copper, plastics, rubber, and stainless steel, all of which are used in one form or another in the production of high-tech equipment.
The Test, Measure & Inspect category is even wider -- tens of thousands of dimensional measurement, calibration, motion, speed and force, and pressure and temperature devices. I don't know whether these are of value to folks in the procurement department at electronic companies, but soon some purchasers from the industry will be poring through Amazon's offerings or asking the company directly for help in sourcing these products. What Amazon Supply doesn't have today for the electronic procurement audience, it is highly likely to add eventually.
Amazon's pricing information is open to everyone. This is probably one of the more intrusive and disruptive impacts Amazon Supply is likely to have on the electronics supply chain -- the idea of making pricing transparent and furthering the convenience of "no haggle" negotiations. On Amazon Supply, the price you see is the price you pay. Of course, the company may offer a large volume buyer better pricing concessions in direct negotiations, but not through the Website.
I see two potential problems with Amazon Supply, though. One is that quality may not be guaranteed. That's a factor of extreme importance to the electronics industry. I am assuming Amazon has taken steps to ensure the products offered on its site are not only genuine but also come with reasonable, competitive, and acceptable warranties. The second potential problem is related to volume. Buyers in the electronics industry often purchase parts in the tens of millions and need to be assured of pricing consistency and part availability. Neither of these issues are deal killers, though. Amazon Supply will likely find satisfactory solutions to the challenges.
If Amazon can resolve these potential hurdles, the electronics industry may be entering another disruptive phase in part procurement.
Anandvy, Your concern is the same others have raised. I guess we'll have to wait and see how and if Amazon is able to satisfy these demands. What's clear is that they have a wide -- and growing -- range of products. Many of these may not be of interest to electronics component buyers but some of the parts I've seen there could be used on the manufacturing floor and cost-conscious buyers will be poking around the Amazon site.
If the company passes the price, quality and delivery tests, it will win many purchasers' business.
Douglas, These are very valid concerns that you raised. However, don't forget this company has been in the business of managing sensitive items and materials for quite a while and may have answers to some of your questions. Plus, when an engineer like yourself submits a purchase order, you can bet they would also ask for verification information.
I am not advocating for Amazon in this case. They've thrust themselves into this market and the industry should respond by holding them to the same standards expected of companies that handle such sensitive materials.
@Bolaji, thanks for the post. I just visited the website, seems like they already have pretty good collection of items. I really hope Amazon will give some kinda of quality assurance so that buyers dont have to worry about the quality.
Bolaji,
Speaking as a component engineer, this prospect is disconcerting. The best distributors have Product Managers, Application Engineers, Technical Sales, and Quality Assurance to guard against things like counterfeit parts, obsolesence management, and now we see the beginning of environmental compliance management. If Amazon is going to be anything but a middleman for sales, they have to staff up with technical people before they will gain my business. How are they going to manage returns to guarantee they are not taking in untested garbage parts and restocking them into their live supply inventory. Will their incoming inspection know how to test for genuine, working parts before passing them onto their customers? Will they be versed in special handling requirements like ESD shipping materials. If they get ESD sensitive materials returned in non-ESD safe packaging, will they scrap the parts or try to repackage? If they will be non stocking and just run all inventory direct from OEMs or other distributors, do they even know what safeguards are required to ensure product integrity?
I would also use Amazon for parts procurement. I have been using Amazon mainly for books over the last 8 years on a regular basis and I have been very happy with their service. I do appreciate that electronics parts is a different kettle of fish, however, "Amazon" as a successful brand name does make a difference in making a purchase decision I believe. If one had a positive experience with Amazon, it makes it easier to give a shot to "Amazon Supply" as well.
If their information support with the parts will be as good as what they have for books, I can easily become a regular user of Amazon Supply as well.
Furthermore, if Amazon Supply heats up the competition in supplying parts, I am all for it because the buyers are the ultimate beneficiaries of such healthy competitions in the market both from cost as well as quality perspectives.
rohscompliant, Amazon would be thrilled by that enthusiastic endorsement. It also tells me they are filling a niche or providing a service that may be sorely needed. Could you please help expand on why you are supportive of this service?
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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