Since 2015, Amazon has been creating a “Christmas in July” craze with Amazon Prime Day which took place July 16-17 this year. 

Amazon announced that Prime Day 2024 was Amazon’s biggest Prime Day shopping event ever, with record sales and more items sold during the two-day event than any previous Prime Day event. With U.S. shoppers spending more than $14 billion online during Amazon prime Day, it’s not hard to see how robust logistical capabilities across the entire supply chain were needed to pull it off. Let’s take a closer look at how businesses planned the demand, logistics, and distribution for such huge spike in e-commerce sales over such a short period.

Prime-itive instincts for decoding the customer cravings

This year, Prime Day was scheduled for July 16-17 and featured a wide range of product discounts and new deals that are constantly being updated every few seconds. And it’s popularity and effectiveness is only growing. It was reported that Amazon saw a 11% increase in revenue over 2023. There was also a significant increase in orders made through Alexa, providing consumers with more options to get that “must have” purchase.

Anticipating customer demand and understanding consumer needs are crucial for Amazon to effectively manage its supply chain operations, and this is put to the test during Prime Days. While the multinational company has strong forecasting capabilities, they may still face challenges when demand surges during this unique event, leading to potential stockouts or excess inventory. This could result in dissatisfied customers and damage the reputation of Prime Day, ultimately impacting overall profitability.

Alexa, order me a logistics nightmare!

Independent sellers, specifically, sold more than 200 million items over the course of the 48-hour Prime Day event. Amazon said most of them are small and medium-sized businesses.

Additionally, Amazon said its new AI-powered conversational assistant — which it calls Rufus — helped millions of customers shop during the event.

Managing inventory movements, coordinating order processing, and ensuring on-time deliveries during this high-pressure period could be like a logistical nightmare.

This sky-high demand for carriers may lead to rising rates and potential delays for other companies within the industry as Amazon's network includes warehouses, fulfillment centers, and a fleet of unique delivery vehicles.

It takes a village (of businesses)

Let’s be honest, Amazon has changed the retail game, forcing legacy organizations to evolve or fall behind. But Amazon is not doing this alone. A collaborative ecosystem is the cornerstone of Amazon Prime Day's supply chain success. The vast network of business partners, including suppliers, manufacturers, and distributors, plays a crucial role in sourcing and delivering goods for Prime Day.

Effective communication and seamless coordination with partners enable working closely with suppliers to manage inventory levels, align production schedules, and maintain visibility into shipments and deliveries. However, this level of teamwork requires more transparency than a glass house.

By fostering these partnerships and using collaborative tools (no, not just group chats), Amazon doesn't just meet the sky-high Prime Day demand - they crush it. This approach also strengthens its supply chain resilience, helping them flex when unexpected hiccups pop up and maintain Amazon’s competitive edge in the e-commerce industry.

Is there a ‘green way’ to do Amazon Prime Day?

Packages within packages. Transportation emissions. Underpaid and overworked delivery drivers.

It is obvious that we need more sustainable practices in e-commerce, particularly in areas such as demand forecasting, inventory management, logistics, and packaging optimization.

Amazon aims for net-zero carbon emissions by 2040 through initiatives like "Your Amazon Day," which consolidates deliveries to reduce trips and emissions. Despite these efforts, Prime Day faces ongoing scrutiny in aligning its rapid growth and customer-centric approach with long-term environmental goals.

What’s the solution?

Packaging logistics is a crucial aspect to consider when determining the appropriate packaging for certain items. The challenge lies in creating packaging that is lightweight yet sturdy enough to protect the content, in a bid to reduce weight and subsequently the carbon emissions. It calls for designing packaging on the fly in such a way that it can flexibly cover a wide range of applications, thus decreasing the number of packaging materials required - a concept known as 'Packaging on demand'. The idea of 'Hole in the wall' production of packaging directly nearby the logistics centers is pivotal as well.

Intelligent packaging design can significantly contribute to sustainability. Smaller and lighter packaging, such as a transition from corrugated cardboard boxes to paper bags or plain-label dirct the product packaging, can maximize transport capacities, thus contributing to CO2 reduction in logistics. Ultimately, packaging should be made recyclable to the greatest extent possible upon disposal. Many governments are now supporting this through levies on non-recycled plastic packaging.

The role of recycling used packaging also plays a significant role in the overall move toward a circular economy. The waste paper contained within these packages serves as a valuable resource that can be integrated into the production of new packaging materials. This utilization, along with the formation of corresponding cycles, can allow paper and packaging manufacturers to make a significant contribution towards reducing the need for fresh pulps.

Companies can leverage AI to advance their carbon-free initiatives and meet ESG goals, particularly in logistics, by optimizing transportation routes, accurately forecasting demand, and managing multimodal transportation to reduce emissions. AI-powered solutions can measure comprehensive emissions, automate reporting and compliance, and integrate renewable energy sources. These strategies not only reduce carbon footprints but also improve operational efficiency and cost-effectiveness, demonstrating that sustainability and business performance can go hand in hand.

Download the IDC InfoBrief to learn more about the importance of AI in Supply Chain.

Many years ago there was a commercial on television from a company selling oil filters for cars. The commercial featured an auto mechanic telling us about why oil filters were important, and why you want a quality brand. The commercial ended with the mechanic saying “You can pay me now, or pay me a lot more later”.

How many companies understand this message? It is not those that defer critical maintenance. It is not those that when they have to purchase always go to the lowest bidder. The market pressures that incentivize short term focus on minimizing costs can lead to long term failure. In the case of a car, it means engine failure that leaves you stranded and paying dearly for a new engine or a new car.

Of course spending needs to be sustainable. Unlike our federal government, paper mills cannot print money (except for those that do). However, many CFOs are rewarded for a sexy bottom line each quarter instead of providing for a healthy and sustainable future.

That is one of the reasons why some mills hang on to legacy systems. Antiquated and obsolete systems are prevalent throughout industry. Because vendors no longer support these systems, mills resort to eBay for spare parts. There is no guarantee of finding what is needed to maintain operation.  

While the scenario described seem like very bad reasons to defer upgrades, replacement, and migration, there can be logical reasons for hanging on to legacy systems.

The 3^rd industrial era began with uncertainty about replacing mechanical systems with computers. The vendors had to convince industry that their systems could be trusted. Vendors had to put a lot of effort into design and testing. Determinism, fault tolerance, and reliability were required attributes of the system. Industry demanded that quality be proven in the product.

Granted, prior to the 4^th industrial era vendors did not have to worry about malware and ransom ware. That made it a bit easier. However, at that time vendors were starting from scratch. They had to design and build every hardware and software component.  

Today vendors build upon prior work and outsource an increasing scope of their supply. Software embeds libraries provided by others. The February 2024 issue of IEEE Spectrum contained an article “WHY BLOAT IS STILL SOFTWARE’S BIGGEST VULNERABILITY”.  A bug in an object or library that the vendor does not control can bring your system down or cause performance problems.  

Vendors have also been downsizing quality control. It has been assumed through agile software development, artificial intelligence, and automated testing that fewer experienced software testers are needed. Software releases are resulting in serious operational impacts that require hotfixes.  

That is one of the reasons why industry holds on to legacy systems. They see these systems as bulletproof. Of course they will eventually fail, and it will only take one or two such failures to add the chance of failure to the classically defined fiduciary responsibility of senior management.

Industry can go in 2 directions:

• Industry can continue to incentivize short term cost minimization, which forces vendors to do the same and keep legacy systems alive. 

• Industry can incentivize quality. You can pay now, or pay a lot more later.

Speaking of Amazon Prime Day, every day is a prime day in a pulp and paper mill. Just have your ERP system go down and you will know what I mean.

Many mills have been brought to their knees because they could not print a shipping label. A few years ago, a CEO in our industry suddenly "retired" when a data breach shut down all the company's mills.

When I started in the business, computers were novelties in the acccounting depatment. Today they are as vital as the fan pumps.

There are still a few managers around that treat their computer systems lightly. They will be out the door soon.

Most people in the current workforce had no exposure to AI technology when they attended school. This makes it challenging to identify, manage and mitigate its risks.

Organizations seek ways to optimize operations and gain competitive advantages as the industrial Internet of Things (IIoT) becomes more common. Combining edge computing and Industrial IoT offers such solutions.

Many companies find it difficult to incorporate AI into their business processes. To change this, SAP wants to work more closely with the appliedAI initiative.

Digital transformation isn’t just another industry buzzword. It’s a pivotal shift that can reshape your manufacturing operations, unlock new opportunities, and give you an edge over competitors. In the digital age, failing to leverage technology will separate those who thrive from those who don’t.