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Will Amazon Be Your Sole Source Supplier?

(Image © Amazon Logistics)

The recent trend in procurement and supply chain is consolidating suppliers as much as possible. This gains the organization volume discounts for materials and services, increases the organization’s negotiating power due to the amount of spend, and it removes the administrative burden of managing and communicating. While not all companies can sole source with a single supplier, many work down to two or three in a range of categories.

But have you considered utilizing Amazon as your sole source supplier?

On October 23rd, Amazon announced new Business Prime Benefits for organizations in the U.S., Germany, and Japan. These new benefits include:

Where many business may buy from a major distributor, Amazon is set to be that distributor and compete with companies like Genuine Parts Company (think NAPA Auto Parts) and Grainger. Customers don’t have to deal with a dozen or more different suppliers. They find what they need on and buy through Amazon, and can even set policies and limits for their organization’s buyers.

Amazon is looking to make it as easy and transparent as possible. From the Amazon Business blog:

“Amazon Business Spend Visibility allowed me to perform several functions that would otherwise have been manually performed and incredibly time consuming,” said Chris Vanderbilt, Procurement Director at Alterra Mountain Company, who owns and operates more than a dozen ski resorts across North America. For example, to identify purchases out of compliance, Chris would have to download a transaction list from their procurement card provider, request info from specific users, and spot check purchases. Now, using Amazon Business Spend Visibility, he can quickly run a category spend analysis and identify non-compliant purchases across multiple companies and users.

You can learn more about Amazon Business Prime here.

Many people know about all the different markets Amazon has entered, such as publishing, audiobooks, and cloud servers. But now Amazon isn’t just working to compete with bookstores or MRO distributors, they are also moving to compete with the likes of FedEx and UPS.

In 2016 it was reported that Amazon was quietly building its own shipping company. That escalated this year with Amazon’s announcement that it would help entrepreneurs start their own package shipping companies. For about $10,000 (and some vetting) you can start your own Amazon package delivery company with vehicles and uniforms to match, as well as Amazon technology to track your workforce and deliveries.

This move is two-fold: Amazon now has full control of its small parcel shipping, while putting it in direct competition with shipping giants FedEx and UPS.

What are the implications of all of this? Market shake-ups in MRO/tools/parts and parcel shipping. Suppliers on Amazon will be driven to be more price conscious in order for Amazon Business customers to choose their product and price over the competitor, driving down prices (unless a supplier markets more on quality).

And could it mean that one day your business or organization may use Amazon as a sole source supplier?



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