2.8 Conclusion
Companies like Amazon.com, Caterpillar, and IBM have shown that a winning logistics service strategy can get you into the competitive game—and keep rivals out. Yet, despite these companies’ delivery prowess, managers know that they must get better. As rivals close the service gap, what once was remarkable becomes routine. Customers are quick to raise expectations. To win, you have to constantly deliver a unique customer experience. Consider Amazon's quest to raise the service bar through predictive shipping.
Amazon.com leveraged outstanding delivery to become the world’s largest online retailer. How did Amazon go from an online bookstore to Walmart’s most feared rival? Born in 1995 as a pure play virtual retailer—totally unconstrained by a physical footprint—Amazon could theoretically offer customers more titles than Physical location (not online), such as a retail store. rivals like Barnes & Noble.*
However, by 1997, Amazon began to build large fulfillment centers. Analysts expressed dismay. As a virtual retailer, Amazon wasn’t supposed to need profit-diluting bricks-and-mortar investments. Such investments pushed Amazon’s first profit out to the fourth quarter 2001—four years after its IPO. Why own fulfillment centers? Jeff Bezos, Amazon’s CEO, was convinced that online shoppers desire rapid, reliable, low-cost delivery. In other words, customers want the back-office operations to be as hassle free as Amazon’s state-of-the-art web interface. This delivery-based strategy changed customers’ buying habits.
In 2014, Bezos announced that Amazon was ready to change the rules again. Bezos claimed that Amazon—armed with cutting-edge IT, an extensive distribution network, and a patent for The concept of shipping products to customers before they place the order. For example, Amazon.com obtained a patent for anticipatory shipping in 2014. —was primed to start shipping even before customers placed orders. By gleaning insight from its copious data on customers’ shopping patterns—e.g., previous orders, product searches, wish lists, shopping cart contents, and returns—Amazon believes it can get into customers’ minds and accurately anticipate their needs. Shipping products to customers before they even realize they need them is the ultimate in logistics customer service. Such a capability could create intense customer loyalty, making bricks-and-mortar stores irrelevant—and impressing science-fiction writers.
*In 1998, Barnes and Noble acquired Ingram Book, a leading book wholesaler, to counter Amazon’s competitive advantage of offering a broader range of book titles.
Ultimately, the holy grail of logistics service is to know precisely what each customer wants and then to be able to deliver exactly to each customer’s expectations. Such a goal has always been viewed as unattainable—except perhaps in science fiction thrillers. However, as Amazon’s quest for predictive shipping foreshadows, emerging technologies such as “Big Data” andAlso know as 3D printing, additive manufacturing is the process of making three-dimensional products by adding one layer at a time. may one day make this level of service a virtual reality.
For now, the closest you will get to perfect order fulfillment is a well-conceived and well-executed customer segmentation strategy. You won’t be perfect all the time, but you won’t drop the ball when it counts the most against you—this is critical. Since logistics customer service is often the last touch a firm has with its customers, for better or worse, it leaves a lasting impression.