Amazon-Fresh: A new competitor in the grocery market

Amazon is one of the leading companies in the world when talking about logistics. You just need to visit their website, find the product you need, buy it online and it will be delivered to your home within 2-3 days. And if you are a prime member, you just have to wait one day or even pay a little extra fee for same-day delivery. To do so, Amazon runs huge warehouses all over the world located at strategic places, so that distances between retailers and customers are minimized. Besides that, product picking is fully automated to speed up the consignment process.

How ever, when it comes to fresh food, the tasks becomes more complicated. Fruits and vegetables as well as fresh meat, fish or dairy products require special storage and transport conditions to stay fresh and healthy. Strawberries for instance require a constant temperature of 4° celcius and additional low-oxygen atmosphere in order to stay fresh during a 3-4 days transport and storage period – requirements Amazon isn’t able to fulfill in its own distribution centers. Therefore the company created a new strategy for grocery.

Instead of investing a lot of money in own warehouses, Amazon leases storage capacity in grocery warehouses that are located in regions they want to enroll their business. Products sold come from big retailers such as Taylor Farms etc. Cosidering the supply chain of grocery, Amazon enrolls its business only at the last step, but instead of competing in the traditional grocery stores market, the company creates a new business model by delivering food directly from the whole salers to the customers.

(Traditional grocery supply chain)

The business model is as followed: After ordering online out of a catalogue of about 20.000 products, Amazon fresh delivers the ordered grocery either at the same day or the next morning. It therefore has its own fleet of small trucks. Each delivery costs 5$ when the total bill is below 35$. Orders bigger than 35$ are free. Alternatively, Amazon offers a one-year free delivery service, which costs 299$/year. A prime-account is necessary in both alternatives.

Amazon started started in 2007 in Seattle, USA and since then expanded to Los Angeles and San Francisco (2013), San Diego, Philadelphia and New York (2014). In february 2016, Amazon announced to have signed a cooperation agreement with Morrison’s, UK’s number 4 grocery store.  Further expansion to other countries is planned.



According to the lecture taught 02/26/2016, Distribution Network Design, it is possible identify different networks of distribution according with the shipping strategy. This strategy is related with the business model. In the Amazon case it is possible analyse:

Business model

Web page

Business-to-Concumer (B2C)

Business-to-Business (B2B)

Source: Own elaboration

Business-to-Concumer (B2C)

An organization that dynamize the exchange relationships between the consumer and her own business. Provider: business. End user: consumer.

Amazon support a seller create her own page on which she can list her products and serving consumers, although not directly. However, Amazon also offers its own products, both new and used, which consumers can purchase directly from Amazon.


Source: Reproduced from <>. Accessed: 02/27/2016.

Business-to-Business (B2B)

Represent the exchange relationships between business. Provider: business. End user: business.

The B2B ecommerce system provided by Amazon is addressed to all sizes of businesses, from SBA organizations to large enterprises. Specially manufacturers and distributors, professional sellers and vendors. Businesses can register for a Professional Selling Account or as a Vendor on Amazon.


Source: Reproduced from <>. Accessed: 02/27/2016.

How to generate value in this process?

At the Amazon Business Model Canvas it is possible identify the significance of the logistics partners (own logistics, Fedex, UPS) and the network of sellers, as far as key partners. The physical warehouses distribution and the web application and development are key resources. In relation with the cost structure the low cost structure, IT and fulfillment infrastructure and the economies of scale are the pillars of this model.


Source: Reproduced from <>. Accessed: 02/27/2016.

Lean Logistic

The concept of lean logistic come from lean manufacture (is a theory which looked to reduce and eliminate all the wastes during the process). This theory was integrated into the Supply chain as a concept that involves reduction process, eliminating inefficient costs, improved runtime, increased speed and flow of information and continuous improvement in the quality of services provided During all the process. Lean logistics is an ongoing challenge, especially reducing delivery times “Door to Door” when the distances are great, if it’s clear that there are many parties involved.

There are a strong connection between LEAN and the culture of the “Six Sigma” because this takes advantage of the strengths and weaknesses of each discipline to create cultural and operational model that helps logistics´ managers to resolve issues that are complex by nature, while improving operations at all levels.

Lean is a continuation of Six Sigma (TPM develop by toyota) culture which seeks to minimize the variations in the events that must happen in the process, while searching for the margin of error in the process always tends to zero.

Logistics providers must always be clear about these customer we need to reduce inefficiencies and control variations in the processes we manage.


Lean Source:

3 Key tools for inventory management

1. Flow diagram

First of all, it is shown a flow diagram for a book order of Amazon. This diagram describes the full process for a book order in Amazon ( As you can see, it is possible identify different improvement areas according with the information flow. For example, in this case it is possible identify the significance of the process of registration: (1) creating a new account o (2) register as a guest shopper (not available).

Areas of improvement: register as a guest shopper:

-dispensable processing, and

-duplication excess.


Source: Reproduced from <;. Accessed: 02/25/2016.

2. The ABC analysis

Secondly, the ABC analysis determines the relation between the factors A, B and C. Represent a hierarchical analysis in order to determine the priorisation around the different options.

Category A: the category for items that are outstandingly important, or business critica.

Category B: the classification for items of average or middling importance.

Category C: the designation for relatively unimportant items.

Important to weigh the relevance of the stock inventory. Related to Pareto 80-20.


Source: Reproduced from <;. Accessed: 02/25/2016.

3. Geographical analysis

Finally, in this picture it is possible identify the geographical distribution of Amazon in the United States. This representation allows analyze itineraries for an improvement proposal and get an overview of the company. Logistics is about time, this picture represent the vast organization that Amazon dynamizes (only et the United States).


Source: Reproduced from <;. Accessed: 02/25/2016.

The importance of time

The time in a company acquires a vital importance when there are many processes. The time is money invested in the workers, in the service or in the product, but we can spend this money in a profitable way or not. To understand the time of our process, there are three important visual techniques to plan the process: Gantt chart, Program Evaluation and Review Technique (PERT), and Critical Path Method (CPM).

The three techniques mentioned before show the time taken by each component of a process. The Gantt chart is an intuitive method and easy to interpret, but it doesn’t establish the relationship between activities, however, the PERT and the CPM method do it.  The CPM and PERT facilitate the critical path and the time which an activity can be lengthened without delaying the process.

These techniques are closely related with the logistics of a company because they are used to plan, to implement, and to coordinate a business. These tools become more important in the process when there are bottlenecks, processes using the same equipment, various processes in the same plant or processes on demand (we need to know when the product will be ready), among others.

If you want to learn more about these tools and how to use them there are more information in the links.

Gantt chart: What is a Gantt chart?

Gantt Chart Template for Excel:

Program Evaluation and    Review Technique (PERT):


What is PERT?

Steps in the PERT planning process:

Critical Path Method (CPM):


What is CPM?

Make a CPM (1’ – 5’):

Aurea Jordán Alfonso

Old warehouses VS new warehouses

You can read about the same day recovery in amazon in other post, but we want show the importance of innovation to increase the efficiency and effectiveness, for this we are going to compare the logistics center in San Fernando de Henares (Madrid) with the logistics center in Tracy, California.  You can see the process in Madrid and the process in Tracy.

This new technology makes us win: more space capacity, less time to prepare the order (times are down 90minutes to 15minutes), less tired workers that previously they  had to work long distances (the stock amazon has the dimension of 59 fields football).
Similarities: they continue using an ordered chaos and not classify objects by class.

Technology used in both stores: first quality control (photograph, measure and weigh), product identification barcode and very important for my machine labeled (if labeling performs poorly, the package is not sent and the company loses money and image. Many small businesses lose money to make the wrong type labeling for not having this technology).

Future technology: Sending by Drones, FAA, the federal agency responsible for regulating the airspace of the US, Amazon has given permission to use autonomous flying vehicles, although with many restrictions and an experimental license. Amazon hopes to deliver packages in less than 30 minutes, even in rural or difficult to access.


Alejandro Rodriguez Barea


This week I had to prepare the El Corte Ingles case, so looking for information about this corporate I found an interesting article about an innovating services that El Corte Ingles launched past 15th of December.

This services is called ¨2 Hours Delivery¨and as the article sais it´s about the delivery in just two hours for a large number of items of different categories. The customer can choose, when he makes his purchase through the web, the possibility of receiving the goods within two hours at his home. The website itself tells the user which products may receive in that period of time, depending on the place of delivery and the stock available at the time.

I think it´s a huge leap in the market , nowdays time it´s very important and everybody wants to have everthing you want NOW or or at least as soon as possible .

Here you can see how they present this service  :

They go directly to the ¨problem¨….if you are looking for an urgent gift or a urgent solution …they have the clue !

It can be a big problem for competitors , it´s quite dificult to compete with this. Only with a lot of resources you can sustain such a service.


Same Day Delivery

Last time we talked about the “Rodillas de Titano KaPeJu” Case in class and about the challenge that certain time lapses – for instance, the delivery time – need to be considered when ordering surgical material. This made me think about delivery time in general and how it is currently solved.

The same day delivery is an interesting and emerging topic within Logistics. Whereas 2012 50% of consumers were willing to wait a full week for free deliveries, it was only 35 % in 2014. So customers seem to get more impatient and demand short delivery times – even if they have to pay for it. The big E-Commerce retailers like Amazon or Ebay all offer same day delivery these days, even one-hour delivery services are offered.

How can Amazon realize same day delivery?

If you order in the morning and pay the extra charge of 5.99 $ (as prime member) Amazon guarantees that you receive your package until 9 p.m. the same day (if your city is in the same day deliver offer included). Amazon realizes that through investing in decentralized warehouses to establish next day delivery as standard and make same delivery an option for many.

Amazon Warehouses

With the Amazon Prime Now App you can even order your stuff, be updated about the status and even the location of the courier in real time (it’s delivered by bicycle in the video) and you receive your order within one hour if you pay 7.99 $. (The video in this case is nice to watch and only about 1 minute:

The complex challenge of processing, fulfilling, and delivering an order within a few hours requires new types of networks. Current processes are often too slowly, fast and flexible couriers cannot handle big parcels. So the creation of a same-day delivery network comes at a high cost. Large volumes in each delivery district need to be achieved, which is difficult in the beginning anddepending on the operating modelmay require extensive upfront investment. Nonetheless, e.g. Amazon started creating networks capable of providing same-day delivery services at scale. Of course, this service is not yet available all over the country or for all items on Amazon. But the service is extending.

Supply Chain in the Pharmaceutical industry.

Reading a bit about what is happening now in Venezuela and its major supply problems I encountered the critical situation in the pharmaceutical industry due to lack of inputs. This industry must maintain exemplary performance because lives depend on it.

The pharmaceutical industry is the part of the healthcare sector that deals with medications. The industry comprises different subfields pertaining to the development, production, and marketing of medications. These more or less interdependent subfields consist of drug manufacturers, drug marketers, and biotechnology companies.

Image 1 blog Logistics

The main goal of the pharmaceutical industry is to provide drugs that prevent infections, maintain health, and cure diseases. This industry directly affects the global population, so a number of international regulatory bodies monitor things like drug safety, patents, quality, and pricing.

Supply chain

The supply chain of the pharmaceutical industry is similar to that of any other industry in the manufacturing sector. However, in the US, the pharmaceutical industry has only two drug distribution channels: prescription and OTC (over-the-counter). The US Food and Drug Administration regulates both of these channels.

Here is a typical pharma industry supply chain:

Image 2 blog Logistics

Because pharmaceuticals directly affect millions of people’s health, industry manufacturers are very strict about ensuring the safety and quality of drugs at each level of the supply chain. These companies use fixed, regulator-certified suppliers of raw materials. Companies also store the raw and packaging materials in separate warehouses.

After a company processes the raw materials, it makes the final drug at the manufacturing unit. A company that has a single manufacturing unit uses only one warehouse, while a company with multiple manufacturing units stores its drugs in central and regional warehouses.

Next, distributors and super stockists receive the drugs and supply them to entities in the retail segment:

  • Hospitals
  • Pharmacy stores
  • Health care centers
  • Clinics

Then, retailers sell OTC drugs directly to consumers. A prescription drug purchase requires authorization from a qualified doctor.

If you want to read more about how this industry works, the rest of the article is here:



Apple’s key to success

Apple’s innovative technology, design and world-class marketing have created loyal customers who have made their products some of the most iconic in history. But there is another aspect to Apple’s success – outstanding supply chain management. In fact, Apple’s supply chain has been ranked #1 by Gartner, five years in a row.

Apple is a logistics success, but repeated annual success doesn’t happen by accident.

1) Focusing on Doing One Thing Really Well

Apple have a relatively small variety of products. This is a departure from how things looked in 1997 when the late Steve Jobs took over at Apple. Jobs reduced the number of products offered by the company from 350 to just 10. It was a bold move, but in terms of managing the supply chain, it was very impactful.

Today’s current number of Apple products is just five with 15 variations of each. Those products share many common components which further streamlines the supply chain.

2) Technology at Work

It’s no surprise that a company known for innovative technology would embrace the use of technology in managing its supply chain. Apple does an outstanding job in this area. Through supply chain monitoring technology, Apple can divert products from assembly origin in China to wherever it is needed based on sales. This is a good example of the value that can be derived by utilizing available software to monitor the movement of cargo. Knowing where your inventory at all times allows for continuous adjustments based on need.

3) Trusted Suppliers

There are some 200 suppliers providing some 97 percent of the materials used in Apple’s manufacturing process. When you consider Apple’s size, this isn’t a particularly large number. By keeping the list relatively small, Apple is able to guarantee their suppliers certain production volumes in terms of materials purchased to meet their demands. They have built a strong relationship with their suppliers and maintain a close control of standards.

4) Securing Air Space

Apple has ensured the space needed to move their product, and at the same time they effectively prevent competitors from moving their handheld devices until later in the season.

More than four million iPhone 6s were sold in pre-order within the first 24 hours alone. In the first quarter of 2014, Apple marked the sale of the 500 millionth iPhone. With Apple CEO Tim Cook’s eyes set on China as the largest market for Apple, the stat certainly leaves room for Apple aficionados to speculate how long will it take for the billionth iPhone to sell.
One bet is likely, though. In the end, Apple will still have a well-managed supply chain to boast.

To resume, i could say that Apple is a good example of how logisticks should work on practice, Apple is a successful company, but they couldn’t reach that success without a perfectly planned supply chain.

I recommend you to read that example and also checked the video, that explain really clearly how works a logistics in apple.

Here there is a link

Zara’s logistics

Spanish population used to buy clothes with frequency even when they not necessarily need them. When we get inside a shop we just try to find something that we like and if we are agree with the price we limit to buy it but, do we really know what is behind all this? This is the question that I formulated to myself. Therefore, to understand a little more which are the processes needed to create and bring the clothes that I buy later in the shops, I decided to focus in Zara which is one of the brands that I like but more importantly, is one of the companies widely known by the efficiency of its logistic. To sum up, below you will be able to read a und understand better how it works a retail company.

Zara is a retailer which belongs to the INDITEX group.  It was created in 1975 in La Coruña and founded by Amancio Ortega.  Afterward, during the eighties, it was implemented a logistic system which fitted with the company and with its future projection.  Since then, the 3 important keys for their business are production, logistic and sales. This leads to them to be a good example of success, helping them to grow up as a company and expand around the globe.  Nowadays, Zara counts with more than 2000 shops distributed in 88 countries.

In addition, in Zara every distribution unit acts as an independent strategic business unit where each has its own goals and resources while the central services i.e. Business Support Area and Corporate Department and the governance are left to the hub. However, Zara keeps the control over the whole international chain with property stores, production plants and also almost every business partner and supplier.

zara headquarter

Image 1. Zara’s headquarter in Arteixo

In first place, in 2006 it was implemented a Store Management Terminals (TGT) composed by an informatics program which makes the information flow easily. Through this program, the store staff has access to every kind of information about the products, the warehouse and it is connected with other stores and their logistic center. Because of this, Zara knows at every moment what is going on in the stores around the world. It can obtain information about every piece that is sold and returned and even the stock available. As they know about the preferences of the consumers of each store basing on in which sizes, colors and pieces they sell more, they can stablish a rotation chain where the stores exchange products with others. The fast reposition leads to a reduction of the financial costs related to the storage and its maintaining.

After an order takes place, the products are disposed in boxes and introduced in a lorry which goes to the corresponding store.  Zara also counts with agreements with airlines to transport to the farthest places the pieces. In addition, the shipments are dispatched from the distribution center twice a week.  It passes only 24-48 hours to arrive to the store or 72 if the location of the store is more problematic. The sophisticated warehouses and a high delivery frequency with short lead times, are some of the factors that characterized Zara’s successful history.

Once the pieces arrive to the shop, the shop assistant has to place every piece in its place and ensure the correct disposition.

Another interesting point to be mentioned about clothes, is that Zara use fabric rather than yarn dyeing. This fact allows to postpone the uncertainty generated by the colors demand. Therefore, a wide color range can be offered with a short lead time.

In conclusion, Zara has been able to reduce the lead time by giving a quick response, achieving a close relationship between their different chains by the execution of integration strategies and to have the control of its suppliers. Moreover, Zara’s success is given by the strength of its chain of production and for the highly responsive logistic system. The logistic system is the link between the different processes of sales, production, design, supply and clothes rotation. In addition, their supply chain strategy is based in a fast response, acting instead of predicting which clothes will be more successfully sold and producing low quantities which lead to more options and a lower lead time.

To conclude, I´d like to recommend you to watch in La Sexta the tv program Salvados where it is exposed the other face of the retail industry. Below is the link of the whole program.




Agulló Fernández, I., 2012. Producir y consumir: la logística, clave del éxito de una cadena de moda. Política y Sociedad, 49(1), pp. 179-191.

Wageningen: Wageningen Academic Publishers, 2008. Proceedings of the 8th International Conference on management in Agrifood Chains and Networks, 28-30 May 2008, The Netherlands.

Mercadona’s case (second part)

Dear all,

According to the Mercadona’s case, I only want to share with you an interesting article that I have read today about a Data Centre that Mercadona built in Albalat dels Sorells. This centre has a huge computer that monitors all the information that comes out from each supermarket (like de number of sales for each product or even the information from the balances in which fruits and vegetables are weighted!) in order to be able to respond fast and provide each supermarket with the proper number of goods.

This case shows a combination between logistics and big data, because the technicians that are working in that centre are receiving the information that allows them to launch orders to suppliers to send products to the chosen supermarkets.

Actually, the aim of this centre is that a big company like Mercadona could has a fast response like use to have smaller companies.

You can read the article in the following link (but I am afraid that is only published in Spanish).

Joaquín Sánchez Planelles

Why Is Continuous Improvement in Logistics Important?

My post of this weeks it relationated with an article that I have read about the improvements in logistics .

This article called ¨ Why is Continuous Improvement in Logistic important ?¨   impresed me because it said that logistics supply a business with the materials and other resources it needs to produce goods for sale. Improvements in logistics allow a firm to utilize the fullest extent of its production capacity.

In my daily activity at work I can see how important it´s the improvement and how each day you have to find new ways to gain advatages in terms of cost savings.

Quality is a major element of business logistics. Having access to the right materials at the right time is of little use to a business if the materials are of poor quality and unusable. Continuous improvement in logistics strives to supply firms with rising percentages of quality resources. This is especially important for specialty goods, where there is a low tolerance for error and customer returns or rejected products are costly.

This article was talking about another interest thing : the KISS method in Logistic Process Improvement.  “Keep it simple AND stupid.”

logistics process

People resist simplicity because they fear it. A simple idea makes us feel strange, especially when we are surrounded by peers who rely on complexity to mask their ignorance. We should be thinking in straightforward terms. You have to start cutting through ridiculous jargon. When asked to “dimensionalize a management decision’” you and your team cansimply……create a plan.

The KISS method, naturally, is effective in simplifying and making the logistics process more productive.

Simplicity in Manufacturing and Distribution is displayed in “A place for everything and everything in its place.” This simplistic statement is replaced by 5S and complex study of a LEAN initiative: Sort-Set In Order-Shine-Standardize and Sustain. A “Pull” System becomes Kanban a sophisticated, complex system using signal cards to minimize inventory to meet customer requirements.

To think in simple, common sense terms for logistics process improvement, you must begin to follow these guidelines:

  • Get your ego out of the situation: good judgment is based on reality.
  • You’ve got to avoid wishful thinking: stay in tune with the way things are really going: it is what it is.
  • You’ve got to be better at listening: common sense by definition is based on what others think.
  • Good common sense is based on the experiences of many, not the wishful thinking of some.

Fight against “fog” and gain clarity:

  • Keep sentences short
  • Pick the simple word over a complex word (Remember logistics process involves a LOT of communication!).

Examples of Possible Complex Phrases in the Logistics Process, With a “Simple” Replacement 

  • accurate: use correct, exact, right;
  • allocate: use divide;
  • demonstrate: use prove, show;
  • discontinue: use drop, stop;
  • expiration: use end;
  • forfeit: use give up, lose;
  • implement: use carry out, start;
  • promulgate: use issue, publish

Guideline to Choosing the “Simplest” Word for Logistics Process

  • Choose the familiar word
  • Avoid unnecessary words
  • Put action in your verbs
  • Write like you talk (I’m talking in this article now…and hence the rise of blogs!)
  • Use terms those in the process of logistics (or those handling your freight and receiving) can picture
  • Tie in with your freight players’ experience
  • Write to express, not to impress

The Problem with Too Much Information and Too Complex (And how it Can Hurt Effective Logistics Process)

When people get overloaded with too much information, there are four (4) specific behavior changes that you can expect to happen:

  1. logistics process keep it simple or they get boredCan’t respond.
    People get to a point where they can’t respond anymore.  It’s almost as if you can see the doors closing behind their eyes as they tune out.  If you are really bad you can see their eyes close as they fight off going to sleep (imagine if a drive was unable to remember your specific instructions because you over complicated your communication?!)
  2. Irritated or bored.
    People who are overloaded with too much information go into one of two emotional states: either get irritated or they get bored. Can you imagine two worse emotional states to put prospects in? We all know you want to engage your prospects on an emotional level, but those are not the two emotions you want. (When working with suppliers on inbound logistics, you want them to be engaged in order to drive long term value!)
  3. “So what?”
    When you give your prospects too much information they begin to ask “so what?” Why are you telling me all this?  Is there really any value to what you are saying? (And like irritated or bored, in the logistics process, instead of collaboration which yields improvement, you get the tuned out effect.)
  4. No action.
    The worst thing that can happen when you overload your prospects with too much information is that they can no longer make a decision.  And that is the biggest killer when you are trying to sell something, plan anything, or aim for a specific result.

It´s very important to make the things as simple as possible because everyone will understand you better and you´ll obtain better result, I see it every day in my work. Every person it´s different and gets the things different so THE SIMPLER IS BETTER :)!


Mercadona case

Installations in Mercadona logistics centres in Abrera and Ciempozuelos

This week I’m learnt about Mercadona case. Mercadona is a supermarket company with a mandate to fully satisfy the food and beverages, cleaning, personal hygiene and pet care needs of its customers.

One of the most relevant logistic center it’s emplaced in Riba-roja de Túria (Valencia). I’m interested in his business model based on Total Quality Management (TQM).

A great place for job! A valencian example of good performance and excellence service.

Project description:

Inside Mercadona: