How amazon is reinventing the supply chain

The business we are in is the problems that we solve, not how we solve them. It means when the world changes around us without notice, we might have to change how we do things, and quickly.

We might need to solve new problems which didn’t exist before, and where even part of our supply chain consideration set. And when a global pandemic adds complexity to how things must get done, we don’t get a choice. The only option is to adapt.

As we start a slow and painful exit from lockdown, the business strategy de jour seems to be about waiting for permission for the doors to open again. To limp out of isolation, cross the fingers, and hope everything gets back even a sense of normality. For small and medium enterprises, it would be remiss to expect anything more. Most have been decimated operationally and financially.

To their credit, many small businesses adapted very quickly moving online and even went beyond e-commerce, and some even hacked together new forms of kerbside commerce.

But for big businesses, the type our portfolios are made up of, we must expect significantly more. It’s incumbent upon them not just to re-open and hope for restrictions to be progressively lifted – it’s their job to innovate around the new normal.

Let’s take the world’s richest man as an example Mr Jeff Bezos. His leadership has a lot in common with what we see coming from the People’s Republic of China. They both do two things very well:

1. Tell, don’t ask
2. Focus on the future

In times of rapid change, it seems autocracy has a certain economic advantage. No CEO in history has been as prepared to reinvest profits from today to reinvent tomorrow than Big Jeff.

At the recent corporate results announcement on April 30, Amazon's profits came in substantially below expectations. But what Jeff Bezos also said was that Amazon would be investing the entire $4 billion in expected operating profit next quarter on COVID-19 related expenses.

The trick, of course, is that they aren't really COVID related expenses, but an investment in building the world’s first COVID-safe supply chain. It’s the kind of innovation we should expect from the biggest and most successful firms but so rarely do.

Bezos then went on to summarise his vision for; entry and exit COVID testing on all sites, testing at home COVID-tests, plasma donors, PPE equipment, distancing, additional staff compensation and on-going protocols to adapt to a new world. Just think at how strategically vital this is – it’s genius.

All of a sudden Amazon has gone from protests outside its warehouses from at-risk workers, to a supply chain where workers, suppliers, vendors and customers can feel safe. The benefit, of course, will extend beyond COVID-19 and remain in place for whatever pandemic happens to come next.

Of course, it’s not dissimilar from what we are seeing from China – just check their operations procedure for kids going to school. Both are focused on solving the problem with actions – not just hoping.

In the three months since the end of January, Amazon’s share price is up an incredible 18.4 per cent while the S&P 500 index is down 9.7 per cent.

The upside of having a COVID-safe supply chain isn’t just for the benefit of those who create it – there’s a real chance it can become something you can sell to others. What Amazon has done here echoes whispers from the past.

Its most profitable vertical in its vast operational matrix continues to be Amazon Web Services (AWS). It is worth remembering that this was born out of a problem of scale they had to solve for themselves – building their own scale-able cloud server system. It then went on to be sold as a service to anyone else who needed it – something we might see again with their virus secure supply chain

If the first emergent corporate strategy is a COVID-Safe supply chain, the second will be the advent of Exo-labour. You’ve probably never heard of it because I just coined it right now. But you probably have heard of powered Exo-Skeletons.

Recently, technology has enabled wearable mobile machines that humans can put around themselves to undertake work. They are often powered by any combination of electric, computational and hydraulic technologies.

They allow for limb movement with increased strength and endurance and can sense the user's motion, and work in concert with the person inside the skeleton. But, when we add this technology to other forms of augmented reality – think haptic gloves and AR headsets, all of a sudden, we can give birth to Exo-Labour.

Exo-labour – work undertaken remotely, by unskilled workers, as directed by geographically displaced skilled workers through augmentation tools.

This isn’t exactly a new idea.

We can harken back to a time when a mechanic would talk a lay person through how to find something wrong under the bonnet of a broken down car somewhere deep in the countryside. Or, the more dramatic Hollywood version of events where an airplane passenger would be guided to land a plane safely.

This idea is going to become a reality across the globe – because it has to.

One of the biggest challenges in the back half of this year will be getting skilled labour to the locations where work needs to be done.

With many borders remaining closed for the foreseeable future, there has never been a better time for corporations with global supply chains to implement exo-labour.

It might be as simple as utilising the recently re-launched industrial-focused Google glass – to a more radical version. But those who do it, not only have a chance to maintain revenue streams, but might invent new ones by selling their solution to others.

New problems require new solutions. New solutions invent new market opportunities.

As global economies come back on line, we’ll begin to see who has been thinking in the downtime and who has been simply waiting for everything to magically be ok again.

As the next 12 months arrives, it won’t be the companies who have the best product and services who win financially, it will be those that can get their inventory to the other side of the market in the new wartime like economic environment.

Steve Sammartino is a technology commentator at Eureka Report. To access more investment insights, start a 15-day free trial.