An article in the CBS News website (http://www.cbsnews.com/news/amazon-files-patent-for-anticipatory-shipping/) titled “Amazon files patent for anticipatory shipping” provides an outline of the idea. The key is that goods would be shipped out before the customer places the order so that the deliveries are closer to order placement. Data regarding customer searches, purchase history, shopping cart contents etc would be used to initiate shipments before orders. But details of the idea also suggest that while the product is shipped, the delivery address would be specified later, after the item is in transit, to enable lower customer lead times. Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ? Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ? Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ? Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
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Meta
Global Supply Chain Musings 
Marketing already involves a lot of data mining. The use of the data for inventory in Hubs (closer to end-user) is also not new, I would say. But actually having products on the way already and later specify the address seems new and very risky to me. It will be a pretty costly operation to keep track on all “anticipated orders” shipped. What will be the positive effect? Shorter lead-times, but by how much? Will this really create more sales or are they anticipating that products / anticipated orders that have been shipped will become orders, because it will be the last push to convince the customer of actually placing the order or adding the anticipated product to the order? The changes in legislation made in Europe the last year (and coming changes) will certainly increase costs when using this structure; specially with the renewed return policies.
It sounds like warehousing closer to customers. UPS and FedEx take on the handling risk while Amazon maintains the capital risk.
I like this innovation. As this patent has a very broad application, to focus on operations and logistics part, I see following advantages using this method:
1. predict geographic demand of products, e.g., based on zip code and manage inventory accordingly in that area
2. optimize on shipment planning and costs, e.g., instead of overnight air shipment use ground shipment and make it arrive 5 days later.
Predicting geographic demand will help create virtually brick and motor experience. This would greatly help the “same day delivery” or “4 hour delivery” options.
Optimizing on shipment is a great financial goal, specially when Amazon has 2 day prime shipment for free.
This will thrive on “people want things instantaneously”. This can be useful in trends and fashion, e.g., when launching new toys (or variations or new series of existing toys).
In my opinion, these options are greater impacting from operational and logistics side of planning and costs than customer experience.
Should the customer be provided a product for free – this is an interesting idea. If you have math on real-estate/warehouse cost per unit and if a balanced tradeoff can be made, it might be effective financial deal to give a product for free as a trial and free up the space.
Privacy is an issue for sure. I remember hearing about the case where Target used purchasing habits to determine the stage of life of a person, they sent maternity related coupons to a house where the dad was unaware of his daughter’s pregnancy. So, if done smartly, it is an operational excellence without making customer feel uncomfortable.
Vijay, I think that you have are spot on with many of the key issues.
I agree with Vijay’s points. One of the benefits to both Amazon and the consumers is that the consumers are unaware of which items are packaged close by. At this point the use of data, though there are always privacy issues, can only benefit the consumer who is likely to receive their package earlier. If they were to expand and send items directly to customers through anticipatory purchasing data, then there would be more of an issue. Particularly considering the example of pregnancy related items showing up to a household where a father may not be aware that his daughter is pregnant and thus instigating social consequences.
As for items being free, that could be a great idea if the cost of repackaging and storing outweighed the cost of giving away the product. Amazon does attempt to pre-empt this with their bundling suggestions. I am unaware of the effectiveness of this strategy especially as it would pertain to actually benefitting Amazon to prepackage these items. They may be able to entice enough people to go for the bundle by reducing the price of the other items.
I can see the potential value to some end users of less lead time to receive desired products but as an Amazon Prime customer, I’m not sure it provides me that much-added value. I already have the ability to receive most of what I want within two days, often less and there is no shipping cost. For me personally, I would be less impressed and more irritated if I was impacted by heavier marketing for specific products because they need to offload them. If it could, in fact, result in decreased product cost, it would be more attractive to me. I also think it will impact the return process. Amazon already processes a large number of returns and often the items are sent to a secondary auction type of merchant to sell for pennies on the dollar just to avoid the restocking and processing costs. If people are subject to more pressure or impulse buying through the use of predictive analytics and marketing, I think the end result could be more negative than positive. Perhaps, the ability to accurately schedule delivery times within a small window (similar to Amazon Fresh) would be a more beneficial option to the end user.
Kim, your comment about marketing is spot on. I order a special shampoo from Amazon, and I’m not sure I’d be thrilled if my products were being pushed on me when I didn’t need them (due to less exercise, or travel or whatever the case may be.)
I agree with Kim’s comment. I see more risks for Amazon than benefits for both Amazon and the customers. Amazon Prime already brings a very reliable shipping process and uses a freight optimized cost. Implementing this kind of strategy would mean an increase in reworks and costs. I’m talking about incremental costs; labor, packing, logistics, and/or product cost; every time that the forecasting model is wrong. In addition to the risk associated with exposing customer’s habits. The cost-benefit relationship of this strategy would not be financially positive and add more complexity to the business. Delivering products in few hours would not increase customers loyalty because the current Amazon Prime structure already meet most of the customers’ expectations.
One of my favorite things about Amazon is their ability to use marketing spin to pump their brand and shape public perception of their company as an innovator. From drone delivery on they’ve just kept pumping their brand.
Kim is right that Amazon ships so quickly and with prime 2 day (and often 1 day shipping) is possible. Here in Chicago we’ve seen Amazon expand their logistics network of warehouses.
I’m sure there are some aspects of this technology that could be implemented immediately and be successful. Shipping and positioning products to local warehouses before inclement weather could allow customers on the East Coast of the US to get their gloves before the bomb cyclone storm drops in.
I can’t imagine giving out free product because of overstock issues – Amazon is a tough buyer and typically forces vendors to issue credits for anything necessary to keep Amazon’s margins intact. I tend to think that this is just another opportunity from Amazon to fuel their marketing efforts.
I guess I’m a little confused. I have an Amazon fulfillment center two hours away from me, and it already offers an incredibly quick turn for me. If I want, I can order subscriptions to items. Why would I suddenly want to receive items when Amazon decides “it’s time.” They’ve already taken the liberty to subscribe me to HBO and some other channel this week, and I’ve been quite displeased with the fact that they were going to automatically charge me. I’m not interested in doing business on their terms. Why would other consumers be any different?
In terms of the business model itself, I don’t think that giving away free products would help. Perhaps discounted rates on products already shipped would be ok…but at some point, I’d stop ordering early and just wait for the discounted product to arrive.
I think history speaks for itself and that this system has increased customer loyalty and increased Amazon market share. I don’t think customers mind the information shared as long as it makes their day to day life more convenient. Customers are sharing their personal data all day long. The concept that people are worried about sharing their data will become even less of a concern as generation C becomes a larger consumer segment.
Given the number of consumers ordering a particular product, there’s always likely to be a buyer. For example, let’s say the product is in high demand, like the iPhone. If US demand is 100k / wk and you have 50k / wk in transit, you would be likely to sell all transit units!
Great idea … just need to convince the shippers this is a good idea (they will likely need an incentive to accept this!)
I agree that Amazon’s anticipatory shipping ideas will improve the convenience and service levels for many consumers, and I am sure that this will become the new reality for buying many goods and services in the future. Beau mentioned one of the key words, “generation c”. However, I am not sure how the “free of charge if incorrectly anticipated” idea would work. How to prove that consumers did not intend to buy a product? Consumers could take advantage of this policy. On the other hand, if those products would not be free, Amazon could intentionally push more products onto consumers, using this as an aggressive marketing tool in the hope that consumers will buy more than what they initially wanted.
While my business mindset thinks that anticipatory shipping is part of the future, as a consumer I personally struggle with this concept and would be hesitant to use it, especially for groceries. I would feel uncomfortable sharing my personal information so openly. Also, living in the center of a European city puts me in a different position than if I would live more remotely or in another country. Various grocery stores, butchers, bakers, bottle shops and a large farmer’s market with fresh produce from this region are just around the corner. I can walk there whenever I want and handpick the products I like. I know it’s corny, but to me grocery shopping doesn’t get any more convenient and relaxing than that.
I know that Amazon is doing something similar to this currently called Amazon Subscribe. My wife has used it form some household products that based on usage can be forecasted better. It has worked to date, but I don’t believe this will become a way of life for most people. Most people prefer to consume in a JIT manner and don’t want to forecast money for consumables. I believe this is a way to help Amazon forecast their inventory more effectively and they are marketing it as a consumer “want” service they are providing.
With the increased maturity of AI (artificial intelligence) and its accelerating adoption for managing the customer experience, I think this is a first of many steps, focused on anticipating the customers’ behaviors and influencing them. I don’t think this idea is to mimic the goal of moving goods closer to the customer, since they will need to forecast local demands for all their customers who’ll be served out of a given warehouse, and different optimization algorithms will apply, when the goal is to have products closer to the customers (same day delivery).
The free idea could work, especially if the costs of shipping and restocking to Amazon are higher than the product’s cost, and this will certainly improve the customer loyalty and satisfaction. Risk is the customers might start abusing the system, and canceling on purpose knowing that Amazon will give them the products for free. So, some guardrails need to be put in-place for this to work.
In this day and age, customers’ worry about the privacy of their digital lives is fading away very quickly, due to both acceptance and inability to do anything about their privacy, once they get online. So, a new customer service like this one shouldn’t cause any concern with their customers, from a privacy perspective.
Yes, it will improve Amazon’s profitability, since it will allow Amazon to optimize the flow rate out of its warehouses, reduce inventories, and maximize profits. In addition, once they start rolling-out their delivery drones, the cost of delivery will drop very significantly and might provide them with new flexibility in managing returns, moving them closer to a demand-driven (Kanban) process to manage their supply-chain.
Mimicking product lines across warehouses may not be the best idea but would reduce delivery time. We’ve learned in marketing that if consumers have time to think, you’ll likely miss a sale. Amazons’ forecasting models and logistic processes have taken the time of thinking away. The time between ordering and receiving for prime customers can be as short as the same day. No, I don’t think free promotional goods for outlier purchases benefit Amazon or the supplier. Amazon as marketplace and distributor does not require loyalty to a product but creates value through pricing and its logistic processes.
I honestly don’t believe this is a good idea for Amazon unless you’re talking about basic, repetitive and/or perishable goods being order on a somewhat predictable basis by the customer. This is because Amazon might end up with additional shipping costs and excess inventory if things don’t turn the way the model has predicted. While I do believe you can pull this off with certain specific product categories, it would be catastrophic to assume it can be done with most goods.
I remember when I first heard of this idea I immediately thought, creepy, but kind of intriguing. The “creepy” aspect of this was the idea that a retailer would be able to predict that I needed something before I knew I needed to order it. And then interesting when I think about the incredible convenience of a potential service like this. As a frequent on-line shopper, I think I’ve grown accustomed to the idea that producers pretty much have access to know everything about their consumers. While I appreciate the “other people who looked for this ultimately bought this” or “because you bought this, you might like this, too” there is certainly a dark side to having even more detail about my buying habits and timing.
From a business perspective the ability to predict demand to this extent would be beneficial for an inventory and planning perspective, as we’ve learned in our Ops homework to date.
Through reading this article I could imagine another possibility where it’s more of a subscription based service that understands your buying patters and needs, predicts the needs, then notifies consumers of such, and then asks for your permission to order. This could help with forecast and the risk associated with the supply that’s not met with demand. The service would still “push” to the customer, versus the customer having to actively shop.
My friend Mike and Paul have good comments. In fact we also used the subscribe feature for a couple years ( and still use it today for certain items) when we had our baby where we have automated the process of buying certain goods such as diapers etc. mostly for non-perishable goods. In this age and day, “Data” is the new currency and amazon probably has the most customer data on the planet than any other retailer/ closest competitor. Since Amazon does not have any physical store presence ( until a few months ago where they opened their first physical Amazon go store, and a few brick and mortar book stores) they are exploiting technology to the fullest extent in terms of shopping experience and delivering it to consumers. Advances in Data analytics and delivery mechanisms will certainly propel new ways in which producers (amazon and sellers on Amazon) will interact with the end consumers delivering new consumer experiences.
Outside of cultivating the fear that technology is taking over which could harm future sales by propagating the already stirring notion that Amazon is taking over the world, I have to wonder if this anticipatory shipping does not just transfer the cost of premium shipping (borne by buyers, with exception of Prime members) to a business cost in the form of PP&E. By increasing the regional warehouses and other equipment needed for the re-addressing, sorting, etc. they are vastly increasing their fixed assets and eating these costs only in depreciation which will make their margins increase, but falsely as it was really just a shell game of expense. Amazon at this point would be outpacing demand for the sole purpose being on the forefront of technology – not because consumers are demanding quicker delivery. This also poses the opportunity for warehouse inventory buildup and the visualization of all of the items left in the cart by shoppers worldwide.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Being based of Amazon we know that there is already a vast infrastructure of warehouses across the country so in theory the product is already readily available to the consumer. If Amazon is able to cut down lead times based on data mining and trends, then I would venture this is a positive for the consumer. I see this as taking what trends they already monitor to the next level. There will obviously be a geographic input to where products are shipped and how they are available. For example, someone in Florida isn’t going to be purchasing winter clothes on a regular basis so the expectation for immediate turnaround is not driven. I don’t think it mimics current structure but builds upon it to better serve the consumer.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
No, I don’t believe customers should receive free good because they have changed their buying tendencies or a forecast is not met. In the end Amazon is still able to get product to the consumer within 2 business days. This comes back to expectations. Obviously as this model grows and is implemented it will tailor our expectations as consumers to receive products quicker. Ten years ago, we would be told 8-10 days shipping and be happy when it arrived on the 8th day; then 3-5, etc. Now we have developed that expectation it will be there in two days based on the customer service amazon is providing. So, as the consumer we will want and expect that immediate gratification; but by no means should we receive free products or discounts based on a change in tendencies or a standard shipping duration. Remember there is always the option to get off your couch and go to a store if it is that important.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
Technology and data collection are the norm we live in. If a company such as amazon is able to provide the consumer with quicker solutions, then I believe it will only increase customer loyalty. There will always be the far-off cases of “the government is watching me” but over all its our societal norm and has become our expectation that companies will take the knowledge and trends to better provide solutions for the end use.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
I don’t think there will be a drastic increase in margins as the country is already inundated with Amazon warehouses. This is just an opportunity to reposition the product that is flowing through said warehouses. I do think there is an opportunity to increase sales as ease of use and reliability will grow. As amazon is able to better serve its customers they will be able to expand its already vast customer base.
From a consumers’ perspective, I think this initiative is especially great for many products that have become more commonly purchased from Amazon, rather than traditionally at a convenience store or supermarket. I noticed the article was from a few years ago; this concept of forecasting consumers’ purchase intent is clearly already being implemented though some of Amazon’s ancillary enrollment programs like “Subscribe and Save” or “Prime Pantry.” Rather than gaining free items, through these subscriptions consumers are given incentives to purchase necessary household goods such as paper towels, cleaning supplies, tissues, and even grocery items, on a monthly or quarterly basis at a discounted rate for “subscribing” to 5 or more items for future delivery without penalties for canceling or changing the frequency.
I personally feel like its increases customer loyalty as I’ve actually used these subscription services through Amazon solely for the sake of convenience and the ability to request or defer shipments as needed. As far as increasing margins, I’m curious to find out what the result has been thus far. I can’t imagine it has had an astronomical impact, however I do feel that it better serves Amazon customers, which ultimately benefits Amazon’s bottom line.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ?
Yes, I believe that the idea behind this is just merely mimicking the goal to move goods closer to the end user.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ?
Yes, with Amazon packaging potentially multiple items into one box, if they end up ordering just one of those items and amazon has already sent the item out for delivery, it is not the customers responsibility to account for those items. Stopping the order and removing/adding content may take more time than it would have to just have waited for the customer to order the actual item in the first place, effectively making the program a bust. Amazon could create a lot of customer loyalty by just giving the additional items away as promotions, but I could imagine that it will also have a side-effect of a lot of people creating search bots that trick amazons algorithms into packaging a bunch of items into one box and then just purchasing the cheapest item in the box. People are becoming more accepting to the fact that their data is out on the web and there is not much they can do besides take certain precautions to prevent it from falling into the wrong hands, I don’t know how much backlash amazon would get from just using peoples data even more than they already are.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
Maybe, but I think that their increased margins from savings in shipping might be eaten up by their increased cost of write-offs by loss of product.
Yes, I do believe that this is about moving goods to warehouses/distribution centers closer to customer locations. The volume of purchases that go through Amazon every week/month provide them with a good idea of customers’ buying patterns and consumption rates. I’m not sure that Amazon could do this for all goods, but I’m sure their forecasting models could provide them with accurate estimates of anticipated consumable orders.
I think the key item in the article is that Amazon would push the items forward and provide the delivery addresses once they receive the order. There is always the risk that the order is not received as expected and on the anticipated timeline. They would need to have a means of holding the items at the distribution center pending receipt of the order. However, if they understand the buying pattern for a geographic region, the items could be stockpiled forward in anticipation of the purchases, some of which may be seasonal, to decrease overall shipping time. I also believe for some items, customers could sign-up for this service. Some customers may like the automatic orders without having to place an order.
I don’t think it should be free if the actual purchase decision does not match the forecasted shipment. There is the potential for abuse in the system. I also think this anticipatory shipping approach, if used properly, could enhance customer loyalty. There is so much information collected on customers already that I don’t think it changes customer’s concerns.
I do think Amazon could increase its margins by providing shorter lead times. Currently, they provide 2-3 day free (premium) shipping but if they could ship using a longer timeline and still be transparent (2-3 days) to the customer then the company could save money.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ?
I think that Amazon providing the good for free would quickly backfire with people figuring out the data tracking and abusing the predictive model. There should be a classification of items that Amazon ships in advance. If it is a commonly purchased item for a region, they should ship in advance to a regional warehouse. If it is a level 2 product that is not as commonly ordered, they can make a calculation based on the expense of shipping and holding inventory at the regional warehouse to inform the decision to forward ship. And level 3 products that are rarely ordered should be sent on a normal schedule.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ?
I know many people who are wary of what information retailers are gathering on them and take measures to actively reduce the information shared with vendors. They would certainly see the preshipment as an invasion of privacy. A majority of americans are not data literate and therefore would unlikely be turned off from Amazon purchases because of this.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
A regional distribution center and the three tiers of shipped product could potentially alleviate the need to rapidly ship products and could save money on high cost shipping. In addition, the rapid shipment would be tough for other competitors to match due to the reduced data and insight they would have. This could further differentiate Amazon and its products.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Amazon is a powerhouse when it comes to their abilities to deliver and to meet and exceed customer expectations. It makes me wonder about how strong their supply chain team must be and the skills they have at forecasting. Forecasting models really show a snapshot of demand; they constantly change. It may mimic the goal to move goods closer, but by having the patent grant publicized, they increase consumer awareness of their service.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
Coupled with Amazon’s prime service (which delivery is a backbone of), they have only increased customer loyalty. I’ve never read anybody worry about how much information Amazon has on their customers (unlike Google or Facebook, for example).
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Amazon (and 3rd party sellers) do ask for a premium price for their products where they offer premium shipping service. I’m sure that, for customers that need a product in 1-2 days, they are happy to pay for it. Prime in and of itself helps to build that loyalty to that service. However, with such a robust 3rd party marketplace, I’ve found that I can find the same products at lower pricing. So if time is not a priority, I find myself now looking for suppliers that offer a lower price and don’t charge taxes.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Yes, it is essentially a smarter way to get the final goods closer to the customer. Using forecasting models, items could be moved from Amazon’s fulfillment center to a shipping hub close to the customer, or perhaps customers, if there is a geographical demand for those items in anticipation of an eventual purchase. This approach is utilized in restaurants (prepping certain dishes to reduce service time) and in hospitals (moving items from PDCs to SDCs closer to the units that need them). With their purchase of Whole Foods and the drive to implement drone delivery, kudos to Amazon for leading the “last mile” in retail by leveraging lean concepts.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
If forecasted intent does not match actual purchase decision, it will be off by a small window of time or it may get the detail wrong (customer chose to try a new flavor or new brand). In these instances, Amazon can offer the customer the incorrectly shipped product at a discount or the customer may return the incorrect product to the nearest Whole Food/Amazon store for an in-store credit. Nothing is free.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
Moves like these convey to the customer that Amazon is proactive and responsive to their needs. From the customers’ perspective, Amazon has just eliminated waste in the form of time spent grocery shopping and has enabled reallocation of that time to more worthy causes as determined by the customer.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Absolutely. Amazon would see increased margins stemming from the ability to charge more for JIT delivery and reduction in the cost of premium transport and central warehousing. Another advantage is they increase the utilization of their Amazon Stores and Whole Foods supermarkets by re-purposing square footage as delivery staging/temporary storage. Customers will be willing to pay more for a JIT service because this solution would reduce their managerial processes associated with buying (K as represented by time to shop, taking inventory to develop a grocery list, achieving cost savings by shopping for best price, etc.) and it would also reduce the need for storage space in their homes (holding costs).
Using consumer data to establish trends in purchases and then moving products to a location (warehouse) nearer is a logical logistical step, and one which I believe already happens. It makes sense for large companies such as Amazon to ensure that the highly demanded products are available quickly for consumers.
However, given that I receive orders the next day if I order before 1900 the previous day, I’m not sure how much quicker it can realistically get (if I want something absolutely immediately I can go to the shops physically myself and buy one).
I do not think that items should be free if they do not match the forecast; until a customer actually ordered an item, it should not be sent out to them. Also; consumers nowadays are a lot smarter and will figure out how to abuse this system in order to have free products delivered to them, or items which they can sell on.
Having a proactive approach will help with customer loyalty as customers know that they will be able to receive products really quickly (Prime) and may be happier with the suggested item than the one they would have chosen.
All together this will allow Amazon to increase its profit margins as they can charge more for the quick delivery (as you do for Prime). By also using storage space more efficiently and transportation more effectively this will reduce the wastage in time and space that they currently have.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Yes, I believe this is about moving the goods closer to the consumer. The consumer expectation from the order being placed to deliver has significantly changed in recent years due to Amazon’s fast Prime delivery services. This article was in 2014 and many things have changed in 4 years especially the concept of quick delivers. Amazon’s vast fulfillment centers across the country have allowed the products to get closer to the consumer and allow for quick deliver services, which have changed the game in consumer expectations for other companies.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
I do not believe the products should be free. Amazon can use technology to recommend items without given products for free. Today they have the pantry option, which encourages you to buy and fulfill a box of supplies and you get a discount. Amazon’s reach data allows them to promote key items you might need to fulfill the shipment for free delivery. They also have the subscribe and save option which allows you to place reoccurring orders and receive a discount. This allows Amazon to better match forecasts to actual demand and gain more market share in specific categories. This has now expanded with their purchase of Whole Foods and Amazon lockers around the country in which they can provide more cross-selling solutions to push consumers to buy things they might need on a reoccurring basis without given things away for free. Their speed of delivery is the key value as well as being a one stop shop for almost all buying needs.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
Amazon’s fast shipping (prime) and their vast offerings from TV shows, music, groceries etc. has increased Amazon loyalty. You can buy almost anything on Amazon and have a flawless experience. Being the one stop shop has increased loyalty and benefits of prime membership, which started with fast shipping have quickly expanded the benefits, which have increased Amazon’s consumer loyalty.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Yes, Amazon’s ability to match consumer demand to products with its fulfillment center location strategy, ownership of Whole Foods with delivery space as well as Amazon Lockers being placed in more locations they should be able to increase margins. Additionally, Amazon keeps introducing more services to buy more and get a lower price or subscribe and save, which helps it cut down on premium transportation costs. Additionally, the vast transportation network Amazon is building on its own such as Prime Aircraft, drone delivery are strategic ways they are cutting out the middle layer of the transportation network and using innovation to deliver on its core value of fast deliveries while trying to improve or maintain margins.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ?
This idea should certainly help move goods to warehouses closer to the customers. It should reduce expediting costs, and improve inventory turns at each warehouse location.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ?
No. The items should be diverted to the nearest warehouse rather than be provided free. That would only encourage people to game the system.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ?
Customers understand that Amazon has a lot of information about them. So long as the customer perceives the resulting outcome (products delivered quickly) as more valuable than the loss of privacy, they will continue to use Amazon. The threat to Amazon is if competitors are able to provide the same or better service, or if Amazon has a large scandal involving loss or misuse of customer data.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
Absolutely.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ?
In some ways, yes, the ultimate goal is to move goods closer to the customer locations but using forecasting models of the customer purchase intent to make smart decisions of what goods to move and to where. Given that the article was written in 2014, I’m positive Amazon may have already implemented components of this idea. Amazon is now able to deliver goods same day in many locations, this could only been possible by moving the goods closer to the customer by somehow anticipating their purchase intent.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
If a customer’s order is delivered wrong then they should probably be allowed to keep the product for free, and this is already happening today. However, this is unrelated to the service model of anticipating customer purchase intent and moving goods closer. Based on my understanding, the goods are only moved to a close by fulfillment/shipping center until after the purchase is confirmed, so there should be very few instances of missed orders.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
I believe this service will have a little bit of both outcomes. Without a doubt, it’ll certainly drive customer loyalty, been able to order goods from the comforts of your house, without the hassle of driving to the store, and having it delivered in record time will always be attractive to customers. On the flip side, this service will be dependent on collecting enormous amount of data on customers, which then supports the privacy concerns. At the end of the day, I don’t think we can totally get away from companies collecting personal data on consumers, the question will be what they choose to do with the data collected.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Without a doubt, this moves will increase Amazon’s margins and we are seeing the result of that today. Amazon has launched components of this service and it’s on track to being the second US company to hit one trillion dollar in market value.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ?
Yes, this idea helps moving goods to warehouses close to the customers. With that idea probably costs are decreased (transportation) and further improvements made (e.g. lowering inventory turns and decreasing total holding costs).
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ?
In general I would not recommend to give away products for free. They should keep them on stock and deliver it when ordered. BUT: In sense of “pushing demand” Amazon could try to create further needs at the customers with products not matching the forecasted intent. Here I would suggest to start a “pilot” with the “average Amazon client” to see if this works out, before fully implementing it.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ?
Up to my mind nowadays people are already used to the situation, that a lot of companies have detailed data about them. I think it will increase customer loyalty and does not lead to unintended consequences as long as a value/benefit is given to the customer (Amazon e.g. convenience, quick delivery)
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
Yes, from an economic point of view it makes absolutely sense.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ?
Yes, this seems to be a way for the company to greatly minimize transportation lead times and have things more immediately available to customers similar to if there were warehouses of goods closer to all customers.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ?
Depending on the type of product, this may not be a bad approach. It would need to be something that customers would buy again and that has a high quality/satisfaction rating to drive additional purchases from that customer and/or word of mouth recommendations to drive additional sales. Otherwise giving away the product for free would not drive revenue.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ?
I think globally there is a decreasing concern about companies like Amazon having access to too much information. People continue to buy Alexa and other Smart devices that listen in on every conversation. More and more technology is used to link all of our data together, so as this continues companies having access to our data will start to become the norm.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?
Yes, I believe if the data exists to order products in advance to reduce lead times this will allow Amazon to have a competitive advantage and increase its margins.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Reading the patent, I would say that the forecasting model doesn’t mimic moving goods to warehouses closer to customer locations – it is the very embodiment of moving goods closer to customer locations – but sometimes it isn’t warehouses it’s other hub types. This is the penultimate in meeting customer delivery expectations. That is if someone were to choose Amazon over a brick and mortar store, then this practice by Amazon mimics the readiness of goods that a traditional store provides.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
The key phrase ‘some products’ hooked me into this question. If Amazon were to give products away that didn’t fit the new logistics management process, then it would be too costly for Amazon and, in turn, be too costly for Amazon customers. However, if Amazon wants to minimize their holding time and associated costs per product, then the products that could be eligible for promotions could be these items that they over purchased. Without discussing the operational efficiency they should aim to achieve, this method would be a good proximation of consumer demand – just off in either quantity or timing. I would suppose that the algorithms that told the purchasing team to purchase the goods in advance would be items that were in demand – so the forecasting errors would be timing and quantity. So, if people are looking at or purchasing these items en masse in a particular geographic area, but not purchasing all that Amazon ordered, then selling these items at a promotional price could hook customers in – thus endow loyalty in customers.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
It really depends on how Amazon continues to use customer data and metadata. If they reserve the acquisition of identifying characteristics to those which you directly supply to them and the use of those characteristics to marketing through the tool (and maybe through the email you provide the system), I don’t think there would be negative consequences. Customers understand the logic of marketing like products to the ones purchased on the site. They also understand reminders of items placed in the queue to be purchased but left there without purchase. It all goes back to the use of the information. If Amazon decided to ambiguate the customer data, creating an aggregate of geospecific data groups to discover what to stock hubs and warehouses with, I don’t think customers will take issue with this process. The benefit to Amazon could be Just in Time delivery. This type of delivery would create customer loyalty. However, if Amazon were to ever expand their data gathered to data not directly given to them, and/or expand the usage of customer data, I think it could strike a negative blow to customer loyalty. People like convenience but can find the same convenience with other e-retail vendors. Some commenters on the blog have mentioned Amazon sending goods to customers’ homes without purchase (and maybe have to pay to keep the item). If this is not a specific service that someone subscribed to (like the Amazon Subscriptions mentioned above), I can see a drop in loyalty occur due to a seeming invasion of privacy.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
That’s exactly what this kind of move could do. If Amazon were to actually purchase just the right amount of goods to meet demand before the order occurred, and have it arrive in the warehouse or hub just before the order occurred, Amazon would save quite a bit on the sourcing logistics and holding costs. This would be the ideal. There would be errors in sourcing and storing in a Just in Time framework. The question is, would Amazon be able to still save on costs and increase margins considering the errors in supply chain management? I’m sure that’s to be seen. It certainly seems like a risk that Amazon would take.
This new model does mimic moving the product to warehouses closer to customer locations. They are focusing in on reducing the amount of time from customer order to delivery of the product, without having the need to pay overnight shipping prices.
I do not believe that customers would be provided free products for Amazon’s mistakes. Depending the size of the mistake, this could get very risky for Amazon. You might also have customers start “working the system” searching/nearly committing to ordering something large and expensive….just to back out and order something small…in hopes of receiving the large item in the mail.
My personal opinion is that these moves will decrease customer loyalty. First, the customer now has to share much more information with Amazon (all browsing history, etc.)…in the controversial times we are in, there will be some on bored, but I think many more that will reduce their loyalty to Amazon. Also as Amazon is creating and implementing the said algorithm, there will be many more errors (nothing is Right First Time). These large number of errors, would mean inconvenience to customers from receiving items that were not ordered. Do they need to put time/effort into sending them back? Do they get upset because they are receiving items that are different then they ordered? I think the overall result would hurt Amazon’s loyal customers.
Depending on the robustness of the system…it might help increase margins, but I think the reality is that it will not increase margins. I think the added time of product on trucks/trains/planes, increased room for shipping errors and increased risk of losing items, it will not benefit them. Should they look at increasing the number (reducing the size) of their warehouses? That could be a large amount of capital…but could they create a partnership with a retail/grocery store that is under-utilizing their space?
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Yes, since the goods would be closer to the customer this idea would help Amazon to achieve their goal to speed up the process and essentially have a faster delivery. Also, I do believe with this idea they would be able to reduce their logistics costs.
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
Meeting the customer expectations is very important for Amazon, which I personally believe they do a great job. Since the customer is expecting the item they bought within the delivery time Amazon gives I don’t believe giving free products would really solve the problem. However, Amazon would have to do something to compensate the mislead on the product delivery time by checking what is more cost effective for them to keep a loyal customer during the pilot test; either to let the customer keep the product (if it is not what they purchased) or replace it and give them a gift card for the inconvenience keeping them as a loyal customer.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
Today people are getting more and more familiar with situations where stores uses their cellphone’s data to study their habits. Groceries stores, internet search engines, etc. already have systems consolidating the pattern or the products that they are looking for, so I don’t believe customers would stop buying from Amazon. As a result, by being able to deliver faster and somehow compensating the customers for delivery mistakes wouldn’t hurt Amazon with their loyal customers.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Yes, I absolutely think this would help Amazon increase their margins.
Yes, it does merely mimic the goal to move goods to warehouses closer to customer locations
Implementing the model worldwide where customers are counted by millions, with hundreds of distribution centers to control across the planet, and thousands (maybe more) suppliers is not an easy task. But it is undoubtedly a brilliant step to the future and a unique way to differentiate them from the competition
When it works, such a system basically outsources your shopping list to an algorithm, so you don’t need to worry about it, and a worry-free customer is often happy and loyal. The convenience of knowing you’ll never run out of toilet paper, for instance, is sure to encourage you to do more shopping at Amazon, because it frees up your time to do other things. Let’s face it, most shopping is mundane, and we wouldn’t mind someone else taking care of it for us. With anticipatory shipping, Amazon is basically absorbing that responsibility, and the consumer wins.
Main question is what happens if their predictive model is wrong? This part also is under control through a system that can calculate whether it is worth (speaking of costs, of course) to return the product to the plant or if it is better to send discounts and promotions to customers in the area where the products are (always a lower value than the cost of returning the product to the plant). The idea is not so far-fetched. It allows offering great deals to customers and making them happy, as well as the liquid stocks are reducing costs and maintaining a complex logistics machine running.
Amazon must be careful when it comes to providing free goods to customers if their actual purchase decisions do not match the forecasted intent but first they can start with giving discounts and promotions and later give it free. I believe Amazon already know the risk and have calculated the loss/margin/profits, so they know what they are doing and like its mentioned in the article “Delivering the package to the given customer as a promotional gift will be used to build goodwill”
Any predictive analytics at the individual consumer level are going to be hit-and-miss at best. Predictive analytics work best across a large consumer base with a lot of data where one can predict that, on average, 5 in 100 people who match a profile will buy the product from Amazon. But with the predictive models that Amazon has, competitor retailers will not be able to compete with Amazon in delivery speed. If delivery speed is as important to customers as Amazon believes, this gives Amazon a huge advantage over any competitors and could eventually allow them to capture more online shoppers as well as potentially higher margins in the long-term.
I agree with Marcello on most of this.
Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations?
Yes, I assume this would reduce lead times and cost of the prime “2-day” shipping rates, by rendering it unnecessary. Amazon does not, however, want extra cost for shipping directly to consumer who may or may not want the retail items. Customers certainly do not want to be burdened with it. Amazon may utilize an algorithm which considers individual preferences, but also the geo-market as a whole (e.g. Minnesota people wear lots of turtlenecks, but Mrs. Smith orders blue turtlenecks).
Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions?
It depends on the type of retail items. The systems Amazon are currently testing are quite ingenious. They have Prime Pantry – for food and household items, which may need to be reshipped at regular intervals. I utilize this service for my elderly parents. If they have excess napkins, it is no big deal, as long as they don’t run out of storage space. The system would need to have a way to delay the next shipment as CVS or other retailers currently offer.
They also have Prime Wardrobe – where the customer only pays for items they want to keep. They don’t have to pay upfront like Stitch Fix. This is a great benefit for consumers’ credit. Folks who are afraid of ordering discounted Chinese clothes because of the size issues, can now do it worry free. Brick and Mortar stores and malls would have to come up with other ideas, such as scanning body dimensions for perfect fit, or more a more social aspect with entertainment (e.g. live musicians) etc., to retain market share.
I’m not a supply chain expert, but I am an online shopper. For items not in one of these 2 categories, I would HATE having the burden to return items I did not order. In so many scenarios the retailers, insurance companies, healthcare etc. are placing the burden on the consumer. Amazon would have to have quite a turnkey system of just leaving it on the front porch, or localized drop boxes like FedEx and UPS, but more availability with minimal travel. To reduce the consumer’s burden.
Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends?
As with my elderly parents shopping needs it is great and increases customer loyalty. The airlines, on the other hand are using search information, etc. to INCREASE their prices. If Amazon did this, I would drop them like a hot potato. Amazon is a bit like Zillow displaying average prices and other low cost stores for same item or alternatives, which prevents the individual consumer from getting price gouged! Right now, it is very positive unless you are a retailer – then they tend to take quite a bit of your profits.
Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation?
Yes, without a doubt.