Love Thy Customer…

Written by jeffbarson
on October 23rd, 2006 / Leave a Comment / Print this

Customer obsession the Amazon way:

pushing 300,000 - 600,000 units of product per day through a fulfillment center is no easy task. gratefully, amazon’s home-grown software and efficient processes help to deal with the immense volume. sometimes, if there are inventory gliches or poor product flow, an activity known in warehousing as “product chasing” occurs. “chasing” is when a product is ordered, but it is nowhere to be found in the (1MMft^2) facility. in reality, it is somewhere, but according to the inventory software the product is supposed to be in its assigned bin, but it has been moved somehow, drifted to another bin, or stolen. this defect is called Inventory Record Defect Rate and is one of the most important metrics at amazon, and is highly scrutinized and reviewed by Bezos and his senior team. why is it important? because when the front-end amazon store allows you to order something, the precondition is that the product and the quantity desired is currently in an amazon facility: the software follows a very complicated algorithm based on network optimization, shortest path techniques, and traveling salesman routing; a check is made against the inventory database — in real time — how many are available, which facility, and how many have been committed already. when the order drops into the assigned facility, the picker goes to the bin where the product is supposed to be, but because IRDR is poor, the item is not there. this situation leads to two following options: (1) go to a local store and buy the item and ship it to the customer or (2) do a “network flip”, where the assigned facility “flips” the order to another facility that has that product. option (2) is ideal, but during the holiday season, it is very difficult to do. during the holidays, option (1) is common.

doing option (1) is heroic and is a true example of customer obsession at work: it’s not about serving all customers as an aggregate, but it’s about serving one really well, several million times. at amazon, they really believe this and live this.