AWA: Academic Writing at Auckland

Question One

Amazon Groceries (AG) lack of economies of scale due to a smaller operational size, rendering them less capable to compete on price.

As price is the most important factor that determines the choice for consumers, it is crucial that retailers try to keep their prices as low as possible. One method retailers like Walmart try to keep their prices low is to implement economies of scale, where they move products at a large scale so that costs can be distributed over a larger number of goods. This decreases the unit costs of each product allowing for a lower price for consumers. Walmart can have economies of scale as they have 5,000 stores, unfortunately for AG, Whole Foods only has 500 stores. This size difference prevents AG from utilising economies of scale to an extent comparable to Walmart, thus rendering them unable to compete with larger supermarket chains on price. As price remains the most important decision factor, this lack of economies of scale would prevent them from competing against their competitors on the most important factor price.

The intense industry competition due to near identical products offered by supermarkets.

The Fast-Moving Consumer Goods industry (FMCG) has a very strong competition among different supermarket chain. This is because each chain tends to offer the same products to the consumer. This means that that price is the main differentiating factor that each chain competes on. The intense rivalry in the industry is a challenge to AG as it makes AG’s ability to achieve a competitive advantage difficult. This can be seen when Kroger and Walmart started to undercut Whole Foods by encroaching in Whole Food’s niche market and selling the same product but cheaper. Therefore, the intense competition in the industry is a challenge to AG.

Question 2

To reimagine a more convenient and affordable grocery experience.

AG wants to create a new grocery experience that is convenient as seen with its delivery service and online shopping, it also aims to be affordable as seen with its goal of consistently low-price fresh food products despite seasonality. The reimaging a new experience stem from the mixed format shopping which is a radical departure from traditional experience.

Question Three

Mixed format shopping

A strategy that AG could use to realise their strategy is the mix format shopping model. This model allows AG to avoid competing against other grocery retailers on price as AG prices are uncompetitive. This strategy allows AG to improve the convenience of grocery shopping by allowing consumers to shop online for non-perishable items and select their own perishable items. Consumers therefore save time on shopping for non-perishable products that are consistent in quality and therefore are suited to being purchased online. Moreover, AG can implement more home deliveries which can further increase the convenience for its customers. This allows AG to reimagine the grocery experience by radically changing its process to compete on consumer experience rather than price. This would help AG achieve competitive advantage without directly competing on price.

Hub and Spoke logistical system to save costs and some economies of scale for hub deliveries

The second strategy relies upon a logistical model that help provide movement efficiency and limited increases of economies of scale. The hub and spoke system improve movement efficiency as it removes the need to connect to all stores as the stores are supplied centrally by the hub warehouses. Thus, suppliers only must supply a few warehouses rather than many stores, this would reduce AG’s transportation cost. Furthermore, instead of multiple trips to multiple stores, there can be one large transport to the warehouse leveraging economies of scale and smaller trips to surrounding stores. The hub and spoke model also mitigate the problem of smaller storage facilities at Whole Foods stores by having bulk storage at hub areas. This logistical design is to assist AG in reducing operating costs and make their prices more competitive so that they may achieve a competitive advantage.

Question Four

Developing a reliable software system

The mixed format shopping strategy relies heavily on a reliable digital system as a critical success factor (CSF) to offer a convenient grocery experience. If the system fails or do not function properly, shoppers would not be able to use the system. This is a critical success factor as the strategy relies heavily on digital technology to function, without the system, customers would not be able to purchase non-perishable goods or request a home delivery. Therefore, if the system developed does not function reliably then the mixed format strategy would fail. Thus, developing a reliable digital system is critical for this strategy to function and provide AG with a competitive advantage of convenience.

Maintaining a reliable logistical network

A hub and spoke strategy rely heavily on a dependable transport network as a CSF as each store does not carry much reserve stock, instead relying on the hub network for resupply. This is because stores like Whole Foods do not have the space to store products. Thus, if a delivery fails or arrive late, sales can be lost as consumers become frustrated when they cannot get what they want. Therefore, it is crucial that a reliable logistical network is implemented to ensure that the stores receive enough stock to operate.

Question Five

Total length of system downtime in a month

This key performance indicator (KPI) measures the amount of time that the system is unavailable for use for each month. It is effective at monitoring the system reliability CSF as it would clearly indicate how much time the system would be unable to be used by the customer. For example, if the downtime is one hour, then customers would not be able to put in an online order in the hour the system was unavailable. The increase of this KPI value would be detrimental to the CSF as a higher amount of downtime would indicate a more unreliable system.

Amount of time between a product order and its arrival at the store

This KPI measures the time between the internal ordering of the item in the store and its arrival at the store from the hub warehouse. For example, the time between a Whole Foods store orders more bananas and when the bananas arrive at the store. This KPI is effective at monitoring the reliability of the transport network CSF as it measures the lateness of a delivery and its failures. If the timing is above acceptable benchmark, it means that the delivery of fresh products is late. If the timing is very high or non-existent then a delivery has failed to arrive, and the store would have run out of stock. The increase of the KPI would be detrimental for the CSF as a long lag time between ordering and receiving increases the risk of running out of stock.

Question Six

System development process

This process is strongly related to the KPI of length of system downtime as a well-developed and maintained system should be more stable and suffer from fewer downtime. If there is an increased efficiency in this process, more work would have gone into the development of the system and would therefore result in a more complete and stable system. This would in turn reduce the KPI which is good for AG as a system with high availability, shoppers can continually shop and place online orders for delivery or pick up. Therefore, this process is strongly related to its respective KPI.

Goods delivery process

The goods delivery process is the process of handling the perishable product and delivering it to the stores from the hub warehouse. This process is related to the lag time KPI as if the delivery process was done well the lag time should be kept low. If the process was made more efficient by for example, reducing paper documentation then there can be less time spent documenting the delivery. This reduces the overall time between the order and the delivery. Therefore, this process is strongly related to its respective KPI.

Question Seven

It is assumed that the incomplete order section is part of the customer complaints process not the order fulfilment. The scope of the order fulfilment process model is assumed to end when the customer receives their order as the order has been fulfilled. If the order is incomplete, it is still fulfilled just improperly completed and any feedback by the customer regarding this would trigger the customer complaints process not an extension of the fulfilment process.

Question Seven (b)

The objective of this reengineering is to reduce the waste in time and transportation costs of the previous process and would also decrease delivery times.

A major problem in the industry is the intense rivalry of different retailers, making food price a major point for competition. This reengineering would help reduce price by reducing transportation costs. This reduction in cost can assist in reducing the price of AG’s deliveries making them more competitive. This reengineering also shortens the entire process making the process faster to complete. This would increase the convenience of AG’s food delivery as customers do not have to wait as long to receive their food delivery.

One of the changes made was that for delivery the perishable products are no longer sent to storage but rather straight to the packing unit. This reduces the redundant cost of bringing the perishable products from the store to storage where non-perishables are kept and onto packing unit. This would reduce the transport costs such as fuel and labour.

Another change to the process was the concurrent assembling of perishable and non-perishable products, this is in contrast to the previous sequential method of assembling. This saves time and can increase convenience for customers as the delivery can now be faster.