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What Logistics and Warehouse Businesses Should Learn From Amazon’s Mistakes During the Pandemic

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What Logistics and Warehouse Businesses Should Learn From Amazon’s Mistakes During the Pandemic

Amazon has dominated the COVID-19 news because of its ability to get some medical supplies and the reliance of people on ecommerce to protect them as they shop. It’s been a good time for the company’s financials, with significant increases in sales and secure positioning for its other services.

Unfortunately for Amazon, it was also in the news because of product mishaps, fulfillment concerns, worker illnesses, and poor handling of concerns. What the brand did, and didn’t do, can be a useful guide for smaller warehouse and logistics companies to follow.

The best lessons are from Amazon’s mistakes because few 3PLs and service companies are big enough to survive similar mishaps.

Take care of your partners

Amazon faced a tough situation, just like all of us. We all got some things wrong. The hope is that they won’t turn into long-standing issues. For Amazon, it’s unclear if that’s the case, but the thing with the most significant potential for prolonged harm is how it communicated and worked with its partners.

The biggest misstep from a partner standpoint would be when it announced a halt to accepting shipments from some third-party sellers and gave little guidance on what this meant. Sellers flooded Amazon’s forums to ask questions, and rumors spread just as fast as valid answers. People were upset, scared for their businesses, and frustrated that Amazon might not be a viable marketplace in the future.

While Amazon did eventually move back to allowing all third-party shipments for its FBA program, some harm has been done. Companies are looking at moving to do their own fulfillment — which was rewarded by the Amazon AI at some points during the pandemic — to prevent any future move from Amazon bringing an entire small business to a halt.

Amazon may be trying to tackle some of that relationship harm with efforts like waiving some storage fees or supporting more fulfillment operations. Still, it’s unclear how much harm happened.

Diversify and simplify when you can

An estimated one-third of top Amazon sellers are in China. It is believed to source some of its own products from China, and many of its smaller sellers also get products or drop-ship directly from the region. The spread of the pandemic and closure of factories, as well as shipping issues, then hit Amazon and its sellers quite hard.

Different points at the supply chain all ran out of goods or production capabilities, which started limiting what was available and hurt revenue for everyone involved. Diversifying sources and partners, both in goods and location, could have mitigated some of this risk.

Logistics professionals should look at regional needs and concerns right now. Identify where your product lines could struggle and if there are potential replacements for materials. If you’re a 3PL or providing other warehouse services, consider expanding to multiple locations. This can help you get goods to the end-customer faster as well as protecting fulfillment operations during COVID and similar black swan events.

Safeguarding people is just the minimum

At least seven of Amazon’s employees have died from the coronavirus, and the company has been very unclear about how many others have become ill. There is a new lawsuit by employees around the company’s contact tracing and potential exposure of employees — worth noting that the lawsuit doesn’t seek damages, just an injunction forcing Amazon to follow public health standards.

Throughout the pandemic, Amazon has taken heat for how it has treated its workers. This covered safety equipment and protections, sick leave and sending people home, and how it responded to labor demands. And, much of the anger is deserved.

The pandemic is scary and should be taken seriously. It was Amazon’s responsibility to make its employees feel like they were taken care of and protected.

Hopefully, this has served as a wakeup call for logistics and warehouse businesses. Your people matter, far beyond just what they contribute to the health of your business. There’s also a good chance your business will be judged by how you treat your teams. The world now makes much of this information public, too, if you need that extra layer of fear to get going and ensure your teams are safe, protected, and following the right policies.

Protect long-term customers and your business model

Consumers are spending more money on Amazon and shopping more often, largely due to the pandemic, but they’re not as happy about it. People saying they were either “very” or “extremely” satisfied with Amazon’s service fell from 73% to 64% from June 2019 to now.

The biggest frustrations have been delays in shipping and unavailable products. People view that they’re paying for the service, and its interrupted supply chain is still creating waves. Prime shoppers aren’t able to get the fast, two-day shipping on all purchases, despite being the most lucrative customers. Amazon has actually seen a decline in customer satisfaction over the last five years, according to that same report.

Growing discontent is a threat. Logistics and warehouse businesses don’t have the size of Amazon or the weight to throw around. If your customers aren’t getting what they’re paying for, they’ll move on to another service provider. The same is true if you’re late, damaging goods, or getting orders wrong. There are few real alternatives to Amazon, but there are many alternatives to all of us.

That’s perhaps the most important lesson in all of this for the logistics profession. Amazon needs to learn it before a genuine rival rises to compete, but it’s a good focus for warehouses starting today.

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Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

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How Coronavirus Impacts Ecommerce Business and Beyond

There is no vaccine to prevent the spreading Coronavirus, yet, and that holds lessons for ecommerce businesses and the people who work at them. Today, we’re facing a time to prepare and hopefully limit exposure and risks at work.

For businesses, preparation and the possibility of illness are going to reshape the day-to-day. After reviewing scenarios and government guidance (here’s your list of cleaners that can take out COVID-19), we’ve put together some thoughts on the most significant impacts we’ll see soon and how companies can respond to protect their people best.

Sending people home is best but expensive

Many ecommerce businesses are small shops, though we’ve been impressed to see some grow significantly in recent years. It’s always a fantastic thing to witness, but their scrappy nature usually means staff are perpetually busy and wearing multiple hats.

Unfortunately, that might mean the COVID-19 threat will hit you especially hard.

Your best bet to keep everyone at work safe is to let anyone go home when they feel even the slightest bit sick. If that happens, document the person arrived and left, plus who they came into contact with at work — employees and anyone who might’ve visited — and how they got to work. This can help medical professionals who are already going to be stretched thin.

The best practice here is going to cost you, but it could also save your team from significant harm, and that is to pay your team to stay home. Help people use their sick days and vacation time if they have it. If someone doesn’t, review your budget to see what you can offer.

If people can’t afford to stay home, they come into work even when sick. That’s a danger none of us can afford right now.

Wash your hands and everything else

There is a little bit of a silver lining in the ecommerce world: most of the products moving through your warehouse are going to be safe. You’re watching for people above all else.

This is because most coronaviruses, including COVID-19, struggle to live on surfaces. So far, we haven’t seen evidence of contaminated food products, which is generally where you’ll first see illnesses spread by products/goods.

For products, the risk is a “smear infection” where someone coughs or sneezes onto a product or package, and a new person touches that and then their face. The virus is believed to have a short lifespan in smear cases, so your team should be relatively safe. Maximize their safety by prioritizing handwashing. Have your team wear gloves at all times, but still make them wash up after unloading a truck.

What ecommerce and other businesses will want to be aware of is the route their goods are taking to get to warehouses. If something is passing through areas where there’s been an outbreak or if you learn that a delivery person for a specific company has fallen ill, pay extra close attention to cleaning these products and packages.

For goods that have been traveling to your company for days or weeks by ocean, there’s minimal product risk from that leg of the trip, but local infections may be possible. Air travel is fast enough that you could have higher smear risks.

So, wash hands, wear gloves, and clean everything as you go.

Alternatives may become scarce

Some impacts are already rippling through the global supply chain. One significant shift is that companies are scrambling to find alternative sources for products and raw materials. Not only are prices for some materials already rising, but there’s growing lane congestion.

This will be a double hit for businesses.

If you’re not manufacturing your own goods, then you need someone to do it for you. New partners can be expensive to source. At the same time, your competition will be turning to them as well. Also happening concurrently, manufacturers will be looking to secure new sources of raw materials. Shifts, such as nearshoring production and buying local, all come with increased costs and supply chain changes.

The other impact is that it could generate more congestion for local delivery and fulfillment options. Companies may face the cost of shipping their goods rise, as well as see delays in fulfillment times. Those delays are already happening in areas where there have been cases of the virus.

Your business will pay more, but you might not be able to pass on additional expenses to customers. Delays in fulfillment times will hit the ecommerce sector hard because customers already expect two-day shipping options. Now, you’ll have to tell them it could be longer and cost more, which may see them take their business elsewhere.

Outsourcing will increase

Expect companies to start diversifying the way they get goods to customers. One particular method is going to be outsourcing fulfillment to companies that have multiple warehouses. It’s a smart way to avoid supply chain bottlenecks because it minimizes the chances that a local outbreak will impact your entire fulfillment operations.

For some ecommerce companies, this outsourcing may come with a small benefit of reaching customers more quickly (once they get stock to third-party logistics providers), while also protecting some workers. If we see sustained infections and spreading of the virus, there’s a potential that many small ecommerce businesses will start outsourcing their entire fulfillment operations.

In the short-term, that could cause some issues with warehouse space and fulfillment staff. In the long run, it might cause cost reductions and lead to greater product availability.

Companies who can figure out how to avoid delivery slowdowns — such as large ones able to own and use their own delivery fleet — will dominate the market. The U.S. has faced a truck driver shortage for years, and growth in outsourcing may help curb some of that, but it would come with higher wages for those who have a greater potential risk of being exposed to the Coronavirus and other health concerns.

Our world will look different tomorrow

We’ve fully embraced the gig economy and home delivery, and there’s a potential it all comes crashing down. Whether these employees continue work amid growing exposure (and even after becoming sick) or if services start slowing down, it’ll impact the daily lives of many Americans.

Businesses will also face changes in the way we bring people to the office, help staff pay for healthcare, and what processes we no longer choose to do to protect ourselves. The global, interconnected supply chain is already changing, and nothing but time will tell us how profound and varied this impact is.

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Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.