Alignment
Amazon and P&G Blow Business Collaboration Wide Open!
July 21, 2015
Alex Short
3 minutes

Now this is business collaboration built for the 21st Century! P&G have recently joined forces with Amazon to take business to business collaboration to an almost unprecedented level. We believe this is the future!

So what does the business collaboration Involve?

Sitting in some of P&G’s enormous warehouses are the ambitious employees of Amazon. About three years ago unbeknown to mere mortals, Amazon and P&G took on a bold project to to integrate some areas of their businesses.

Employees of Amazon are packaging, labelling and shipping P&G products direct from the warehouses they are produced. According to recent report, every day P&G loads a selection of products that have been ordered onto a pallet and hands them over to Amazon, who are inside a small ring fenced area within P&G’s factory. Amazon employees then package, label and ship the items directly to those who have ordered them. Amazon are technically setting up small distribution shops inside P&G’s core warehouses….

The two businesses are quietly working together to reap a wide range of benefits for both sides. The birth of this business collaboration has come from Amazon’s desire to deliver traditionally bulky household products like diapers, paper towels and soap powder at an affordable price. These items were previously seen as bad candidates for online sales due to the cost of shipping them, as a consequence of their size to cost ratio. However from this collaboration Amazon have found a way to shave enough off the delivery cost to make it profitable. You can’t blame them for trying either, as currently Americans buy just 2% of these goods online which equated to $16 billion in 2012!!! This is surely one of the biggest current growth areas for Amazon at present.

Both these businesses are known for having innovation at their core and are always looking to stay ahead and disrupt the market. Through a shared desire to collaborate they have found a way to improve their overall profits and tie down a relationship that could continue to grow in the future. You tell me now who is the supplier…. Neither, they are both offering each other a service that helps drive both businesses forward, this is the future…. Business to business collaboration.

Here we have a rare glimpse at how both companies are looking to stay ahead of their rivals in the future. These rivals are of course are a little disgruntled, but due to their lack of innovation it’s to be expected. Until you can treat your supply chain as an extension of your business, do not expect game changing ideas like this collaboration to be part of your future road map!

Amazon have officially called the programme Vendor Flex which shows their intent for the future, and why shouldn’t there be intent, the benefits are vast for both sides of the fence:

What are the Benefits for both sides?

  • Cost of Storage – Co-location reduces the cost to Amazon of having to store bulky items like toilet paper in their distribution centres.
  • Transport – P&G saves money on having to transport their items to Amazon’s distribution centres.
  • Quicker Delivery – Both companies have cut down the time it now takes to get their product to the final end user.
  • Disruption – By cutting out another piece of the supply chain it has meant there is less chance of disruption from uncontrollable variances. It has also reduced the risk of error when it comes to delivering the correct product.
  • Internet Sales – One of the biggest benefits for P&G is that Amazon will help boost their online sales now that they are supplying these products at an affordable price.

The old way of thinking “beat your supplier over the head with a stick and demand for more cost reductions” now looks incredibly outdated, like a flared suit in a coffee shop! Building a strong relationship over time has paved the way for this scheme to go ahead, but imagine the possibilities of building partnerships like this with your strategic suppliers!!! The opportunities to work closely with your suppliers are endless, it just takes some some cahooners and an environment that allows for innovative thinking and true supplier relationship management.
I will watch with fascination to see how this programme and new found collaboration evolves in the coming months. If you have seen other fantastic ideas of collaboration then please get in touch….
Vizibl Return On Relationships.


SRM



Alex Short is Founder of Old St Labs he is passionate about building the next generation of business software. He is recognised as one of procurements thought leaders.
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