7 Amazon Supply Chain Lessons from Jeff Bezos

As a startup company in the garage, Amazon has made a giant leap that revolutionized many aspects of supply chain management.

With more than 130 million stocking keeping units to manage and millions of transactions to control, this article will show you how they make it.

We dig deeper and find one interesting article on Forbes named “The Best CEOs - Amazon’s Jeff Bezos” (Jeff Bezos Reveals His No.1 Leadership Secret).

The article provides many examples about how Bezos manages various business issues and many of them are supply chain management related.

7 Lessons from Amazon

1) Put yourself in customer’s shoes: at Amazon, they care so much about customers and this is not just something fancy to say. In many internal meetings, Bezos leaves one empty chair next to him and tell people that they should also think on behalf of one important customer who can’t manage to be there. Then the word “empty chair” becomes a symbol of customer centric business practices inside Amazon.

Also, many executives have to attend call center training so they can know customer’s feedback, good or bad, firsthand.

Update 9 Sep 2013: I just come across one interesting discussion on Quora saying that Amazon actually named one of its building “Wainwright” after its first customer and this customer still have the original book and packing slip with him. This is something remarkable!

2) Don’t be distracted by the competition: many companies focus on benchmarking performance against competitors but this is not the case for Amazon. Bezos believes that the pace of industry change is too fast so it’s not good to make knee jerk reaction after competitors do something new. What Amazon does is to acknowledge what happens but keep focusing on it customer’s needs.

3) Keep an eye on the ball: “culture of metrics” is the word used to described the obsession over the performance measurement. They’re currently tracking about 500 KPIs and 80% of them are customer related.

4) Go extra mile: Bezos once insisted on using better quality box so customer can reuse it. And when Amazon’s brand is on every box, it’s the free publicity. He also pushed many executives at DCs to extend order closing time to 6pm or 7pm, even though this means over-time cost to Amazon.

5) Plant seeds and watch them grow: the example of this philosophy is that Amazon invests in many hardware technologies that don’t make any short-term gain just to make sure that they build Kindle that people love.

6) Learn to improvise: Amazon asks candidates to make action plans, outside their comfort zone, with the assumption that there will be no budget for such plan, to test how each candidate react to unfamiliar business issues. As mentioned earlier, the pace of industry change is fast so they need people who can think outside the box.

7) Build the dream team: Amazon believes small work team is more efficient. To determine the right size of each team, they’ve developed a “rule of thumb”. If it needs more than 2 pizzas to feed the team, that team is too big (so I name it “2-Pizza Heuristics”).