Internet retail giant, Amazon.com announced it would enlist the help of
Manugistics Group to support its global expansion and operational improvement
initiatives. Manugistics will provide its NetWORKS Strategy and Transport
solutions to give Amazon better visibility to its growing global fulfillment
network and facilitate the flow of goods from the company's suppliers
to its customers.
Transport will be used to plan Amazon's inbound and inter-facility shipments
to reduce costs and improve freight management. Amazon will also use Transport
to automatically tender loads on the Internet, track inbound shipments,
pay carriers, allocate freight costs, and run historical reports for improved
Manugistics' more recent offerings, NetWORKS Strategy will allow Amazon
to plan locations of distribution centers for its global expansion program
to best optimize its business around constraints such as supplier lead
times, fixed and variable costs, and tariffs and taxes.
applications are intended to give Amazon help in controlling distribution
Amazon.com arguably best exemplifies the companies competing for market
share in the new economy. The online retailer of books, CDs, and other
goods has $1.6 billion in net sales, over 20 million customers, a $20
billion market cap, and has never turned a profit. Like others of its
kind, Amazon is continually looking for ways to improve the efficiency
of its operations to forestall the effects of shrinking margins and other
worries are typical of all Internet retailers but the dollar impact is
magnified due to its size. Overstocking can lead to inventory mark-downs
and write-offs. On the other hand, failing to stock enough products can
result in long delivery times and cancelled orders, especially during
holiday times when late orders can alienate customers and imperil future
sales. Inventory charges contributed significantly to low gross margins
for Amazon during its fourth quarter, which in turn was a factor in the
company's $720 million net loss for fiscal 1999.
partnering with Manugistics, Amazon acknowledges the impact that uncontrolled
transportation costs have on its business. Though many Internet retailers
find it difficult to manage the delivery of goods within one geographic
segment, expansion to a global customer base brings a host of new complexities.
Strategic network design applications such as NetWORKS Strategy enable
companies to plan their supply and distribution networks from scratch,
taking into consideration all the variables that can influence costs.
Though a great portion of the work can be accomplished in the initial
planning phase, a flexible application is required to allow adjustments
to changes in suppliers, expansion to new customers and geographic regions,
and changes to fixed and variable transportation costs.
Amazon's move should embolden smaller Internet retailers to seek help
in cutting costs and capturing elusive profits. Manugistics NetWORKS Transport
offers the most mature functionality of all the transportation planning
packages on the market today. Further, its hosted applications available
through b-networks.com give smaller companies the opportunity to acquire
advanced planning capabilities at lower up-front cost compared to traditional
installations. Manugistics also has a strong solution for retail and consumer
packaged goods and considerable experience in implementing its solutions.