The term  “Amazon Effect” takes on many dimensions not only from the all-important retail industry business and supply chain impacts, but in broader dimensions as-well. That increasingly includes both changes in Cloud computing platform selection and signs that Amazon’s own IT systems have new vulnerabilities.

Cloud Computing Platform Market Adoption Implications

This week, global retailer and Amazon arch competitor Walmart announced an expanded five-year business relationship with Cloud computing platform provider Microsoft.

Plans call for Walmart to deploy Microsoft’s Azure machine-learning, artificial-intelligence, and add-on services to better manage online and physical store merchandizing strategies as well as to optimize the operational performance of physical retail store assets. Other plans point to improved means to mine customer and product data for improved predictive analytics and decision-making. The relationship with Microsoft stems from Walmart’s prior 2016 acquisition on online platform Jet.com whose capabilities were built on Microsoft-based technology. When asked by The Wall Street Journal as to whether the industry rivalry among Amazon and Walmart was a factor in this week’s announcement, Microsoft CEO Satya Nadella indicated that the decision was: “absolutely core to this.”

Walmart is not the only major retailer to shun Amazon’s Web Services (AWS) technology as a business strategy. In September of last year Supply Chain Matters highlighted retailer Target’s decision to do just that with a plan to move away from complete dependence by sometime this year.  We have highlighted similar reports from major retailers and consumer goods manufacturers who have been queering their tech vendor base for any reliance on AWS for fulfillment or data management tasks. Many brand-name retailers had been hosting their online fulfillment presence on AWS while some of their suppliers have been featuring select merchandise on Amazon.

In June of last year, The Wall Street Journal initially reported that Wal-Mart had begun instructing its technology support vendors to not host applications on AWS. All of these competitive related actions continue to fuel buzz in the Cloud platform hosting community that many retailers and consumer goods manufacturers continue knocking on doors for seeking AWS alternatives. Alternative Cloud platform providers IBM, Google, Oracle, and SAP are continuing to benefit from the “Amazon Effect.”

 

The Internal Implications- Amazon Prime Shopping Event

The internal implications for Amazon’s explosive growth began to become much more visible in terms of internal operational performance glitches.  Amazon Prime

The three-day 2018 Amazon Prime shopping event concluded this week with initial estimates of upwards of $4 billion in online sales from this single hyped three-day shopping event.

Business network CNBC, citing obtained Amazon internal documents, reported that during the very first hour that began on Noon Monday, the online retailer began experiencing web site response glitches hindering online customer abilities to complete their shopping cart transactions. The retailer reportedly had to alter the front page to a more simplified “fallback” page, as well as cutoff and interrupt international traffic to reduce transactional pressure. Additional actions required “manual” addition of augmented computing servers to process added traffic demand. An internal automatic compute and memory  scaling application named “Sable” apparently failed to perform, requiring manual intervention. The report further points to problems encountered in other areas, including that some warehouses and customer fulfillment centers were not able to scan inventory or pick-and-pack orders for a period of time. To the credit of Amazon’s technical IT teams, Amazon.com did not encounter a complete crash, and obviously, a successful Prime shopping event ensued.

But, it is rather important to note that the now, new dimension of the “Amazon Effect” are more visible glitches and potential vulnerabilities regarding Amazon’s internal IT systems and processes brought about by never before encountered added online shopping volumes.

The retail industry was stunned this week with survey results by eMarketer indicating that Amazon’s revenues could reach upwards of $258 billion this year, a 30 percent year-on-year increase, and perhaps capture nearly half of U.S. online retail sales volume by the end of this year. Such numbers can indeed shudder and cause concern among other retail industry players. By our lens, that represent flashing warning signs for Amazon itself in the current readiness of its internal processes, supporting systems and supply and demand network capabilities to adequately support such activity.

The 2018 Amazon Prime shopping event was indeed an early warning indicator of vulnerabilities with explosive added growth.

It further expands the implications and meaning of the “Amazon Effect” in its now external industry and internal Amazon operational implications. The upcoming 2018 holiday fulfillment period is looming ever more significant to test these new dimensions of such effects.

 

Bob Ferrari

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