Does it seem a stretch to pair Amazon and UPS together when thinking culture? One is an Internet- enabled enterprise that seems to be taking over the planet and the other an old school package delivery firm that is best known for its brown box shaped trucks that seem to be double parked any street you happen to be on.
I believe that they are a matched set. In each case the company is doing it best to provide a consistent level of service as it processes millions of transactions per day. This means implementing processes and enforcing very strict quality management regimes. It also means that there can be very little deviation in how they do business. Every transaction within a class of operations needs to be handled the same way. That is the only way to guarantee consistent high-quality outcomes, which for both companies (at the volumes they need to operate at) involves delivering product to their customers.
Both companies are very good at meeting most of their customer’s needs. Or are they? For a long time, I have been frustrated by UPS’s apparent lack of flexibility in dealing with its customers; namely me. If I need special treatment (something not in their standard operating procedures), they are unwilling to bend. The positive side of this is that their refusal to deviate from standard procedures ensures the excellence in on-time delivery that they are known for. But there is a downside.
Case in point, Amazon’s decision to build its own delivery capability. I would argue that if UPS, FedEx and the USPS (or any single one of them) had been listening to Amazon rather than trying to optimize their current, very efficient, processes, Amazon might never have decided to cut them out of their delivery capability.
I was most definitely not in on the internal discussions that Amazon had around this decision, but the reasoning must have been pretty compelling. Otherwise Amazon would not have directed as much management talent (and focus) away from their primary business (which isn’t actually delivering packages) to implement and operate a logistics operation of the size necessary to largely displace their traditional vendors. It remains to be seen if this decision will pay off, but Amazon management now has another significant business it must oversee and manage. The payoff will have to be large to justify the cost associated with the aforementioned decision to split focus by starting and continuing to operate this new business. Specifically, there are three potential impacts to these carriers:
- The loss volume related directly to Amazon’s business; and
- The potential that Amazon will start to deliver more of its Marketplace’s customers deliveries. and
- What if Amazon doesn’t confine itself to business directly related to the consumers of their delivery services outlined first two points outlined above, i.e. they become a full-service delivery service? Don’t laugh, they have much of the infrastructure (logistics expertise, physical locations and now delivery trucks) necessary to pull this off.
Given this, you have to wonder whether it was a shrewd business decision or a huge mistake on the part of the carriers not to figure out what Amazon wanted and reconfigured their service to accommodate one of their largest customer’s needs.
That said, Amazon has a similar challenge in dealing with its customers. Amazon’s processes are optimized to do what it thinks its customers want—at scale. I would argue, similarly to UPS, FedEx and the USPS) that Amazon doesn’t have an effective way to listen to its customers, process the input and make decisions that result in happy customers. And, I don’t even think that Amazon knows that it is pissing off its customers and how much that is costing—because, like me, I have to expect Amazon’s customers just find other outlets (e.g. eBay, Walmart, Best Buy) and reduce or eliminate their use of Amazon. I know that I used to buy 90%+ of my online purchases from Amazon and that it is more like 60% today.
If you have ever tried to interact with Amazon customer service (even sent a message to Jeff@amazon.com), you know that it is a crude operation compared to its ordering and fulfillment operation. I admit, I am not privy to the operation of Amazon’s customer service operation, but from the outside, it appears to lack sophistication and its management does not appear to understand the power (in terms of both data collection and customer relationship management) of a capable customer service operation.
Amazon is undoubtedly a remarkable organization as are UPS and FedEx. That doesn’t mean that their management can afford to focus only on the things that resulted in the company’s success and miss opportunities. The very focus that resulted in that success blinds them to other dimensions that outstanding organizations find are equally important to their continued success. I am talking about an obsession with the customer and having the culture, organization and process necessary to capitalize on their customer’s input.
At the same time Amazon has taken on initiatives (e.g. Whole Foods and delivery) that distract it from the truly important task of understanding its customer and adapting its core business to ensure continuing success.
This brings me to the last part of my observations. Retailers have apparently not noticed this chink in Amazon’s seemingly impervious armor. They continue to try to beat Amazon by reducing both prices and service levels. This is a game that they cannot win because Amazon will always have a cost advantage and customer service is something Amazon doesn’t understand; and even if it did, there are things that a capable sales person can do (answer questions, help find the right product) that would be difficult for Amazon to replicate. To effectively fight back, retailers need better (more highly paid) sales associates who can listen, deliver expertise and provide a personal touch that has substance. That is the only way this observer sees them being able to compete against the Amazons of the world.
Copyright 2020 Howard Niden
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