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.
The real test for Amazon will be the next shortage market. When things get tight, suppliers dole parts out to their biggest and most strategic customers and distributors. If Amazon hits a certain level of volume with suppliers, they might make the cut. But we can be assured that if that happens, we will hear a lot of noise from the electronics supply chain. Amazon doesn't provide the kind of training, product support and sales services that electronics distributors and even online sales sites provide. But if you are a casual buyer, Amazon's service is awesome, and no matter where it comes from, a sale is a sale.
Ariella, Your comment is spot on. Many companies fail to take advantage of the goodwill generated in good times to advance their operations into new areas and increase sales. As you pointed out, Amazon has a good reputation in the market already and if it can leverage this now to expand into new areas the better for the company. As several other folks have commented, many people are already using AmazonSupply. It may be a new service to many of us but for those who are quicker this is already an old service that seems to be getting better in meeting their goals.
Amazon has established itself as a pretty reliable company. Its setup and good name has even attracted a number of online suppliers who have their own portals to set up storefronts through it. So it should be able to have quite an impact on the supply chain.
I really don't know how far amazon can take this, but i don't think this can get as far as components sale can it?
I checked out the site and their stock is amazing, and i can just imagine the groups increasing from 14 in the near future, you can even place orders by phone internationally and get technical product support.
It is also not an open market where anybody can sell whatever they like before it is vetted so it is highly unlikely that it will pass on substandard parts.
Selling components/parts, responsibility should be both Amazon and suppliers/contractors/manufacturers. I think.
Amazon has marked itself in this business - online retail. I think, handfull of online purchasers would give vote of confidence in patronise Amazon including myself. In the past, totally OKed with products bought at Amazon, no regret or return of materials though. I wouldnt say whether that would remain as it's spreads to electronic components.
Anandvy, Amazon itself has a reputation to protect. The company is not a manufacturer itself but it has built a business on selling original items to customers and cannot afford to damage this reputation. It is also not an open market where anybody can sell whatever they like before it is vetted so it is highly unlikely that it will pass on substandard parts. Still, buyer beware. Right?
I forgot to mention this in my blog (thanks to the EBN reader who reminded me) but Amazon Supply is not entirely a new service. It is new to Amazon but the company is leveraging an acquisition it made earlier. It got into the business by buying smallparts.com, which apparently was already a reputable firm selling components and equipment to manufacturers.
What Amazon has added is its incredible reach and marketing savvy (we are discussing the operation, now for instance, because of Amazon.) It is also adding to the service. As you noted, previous customers of Amazon will check out this new service and try it out based on their positive experience with the company.
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.
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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.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
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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