The Amazon Effect on Inventory Management

There is no doubt that people are becoming increasingly aware of the impact that Amazon and e-commerce are having on society today. Many of us tend to view this as a phenomenon that’s The Amazon Effect on Inventory Managementoccurring strictly in retail. Yet, this “Amazon Effect” has a significant impact that reaches all levels of inventory and supply chain management.

In other words, the manufacturing industry is experiencing a lot of change that requires manufacturers to speed up order turnaround times to remain competitive. Goods are expected to reach the market faster, and this has led to changes in the business strategies of manufacturing companies, as the definition of an acceptable order fulfilment time continuously changes.

According to a recent JDA Software study, manufacturers are implementing new strategies to optimize inventory management, integrated planning and execution technologies to adapt to the “Amazon effect’’. The study found that of the 271 U.S.-based manufacturers surveyed, 51% are focusing on better “internal and external collaboration across the supply chain,” 44% are prioritizing “demand sensing” to more accurately gauge and meet consumer expectations, and 41% are prioritizing inventory optimization.


So how is the Amazon Effect impacting Inventory Management? 


Internet of Things and Artificial Intelligence

More and more retailers are increasingly experimenting with Internet of Things (IoT) technologies. This is mainly because consumers are expecting their shopping experiences to be seamless across channels; from mobile apps to physical stores and even phone calls to customer service representatives. IoT technology has a lot of potential to transform consumer experience in retail and Amazon has also taken notice.

For instance, recently the company introduced new IoT devices called Dash Buttons. These devices make it easy for users to get household necessities delivered to them quickly. How does it work? Users just press a button to make an order for a household staple such as coffee or bleach. The key is to make shopping easier and more pleasant. Similarly, many other IoT inventions are being made towards the same goal due to the changing customer expectations.

As far as AI is concerned, eighty-five percent of organizations have already adopted or will adopt AI technology into their supply chains, according to a 2016 Accenture report. Within five years, 50% of manufacturing supply chains will be robotically and digitally controlled and able to provide direct-to-consumer and home shipments, according to IDC Manufacturing Insights.


Drone Technology

When people think of drones and supply chain, they typically think of Amazon’s idea of delivering packages to their front porches. Amazon made headlines in 2013 when their CEO Jeff Bezos announced that the company was working to develop a drone-based delivery system called Amazon Prime Air. Customers that lived within 10 miles of an Amazon warehouse or fulfillment center would eventually be able to receive small packages (under 5 pounds) in 30 minutes or less, using drones.

In fact, drones can do more than deliver goods. Drones have proven to be very useful within the realm of inventory management and they are being tested for their usefulness inside warehouses. For example, using drones to fly throughout your warehouse and scan the barcodes of your inventory. They can be used to confirm inventory in a fraction of the time that a team of people can.


Efficient Warehouses

In the past, Amazon received some very negative publicity that stemmed from reported working conditions in its fulfillment centers. Since then, the company has made efforts to improve working conditions for its workers, and also integrate technology into its fulfillment centers to make worker’s jobs easier. Amazon introduced automated robots that can retrieve, package and sort order shipments without the need for human assistance. This has saved the company millions of dollars annually and reduced the role of warehouse workers to handling order confirmations.

Small to mid-sized businesses should look to Amazon as a trendsetter when it comes to the future of inventory management. Overall, the warehouse is seeing an increasing need for technological advancement and flexibility. Amazon is definitely leading the charge, but soon every warehouse and distribution center will need to adapt to remain competitive.



Managing your inventory well can prove to be one of the best investments you can make in your business. Disruptive supply chain technologies has transformed supply chain management. It is essential for companies to evolve supply-chain strategies to stay relevant in their industry. Amazon has set the bar high for its competitors and has definitely changed the retail space. The current trend in the retail industry is to make sure that the customer experience is as seamlessly convenient as possible.

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