I’m following Amazon activities for the last few years. I found the topic really interesting. Amazon is eating industries. I recommend you to read recent CBInsight article about Amazon Strategy Teardown. What started as a bookstore is eating business such as grocery, logistics, apparel, startups, etc.
If you run a business, the question many companies are asking today is simply – Am I Amazon-proff? What are safety zones from future Amazon interest and development. My attention was caught by the article – From Healthcare To Payments: Supposedly ‘Amazon-Proof’ Industries Are Turning Out To Be Vulnerable.
You might think manufacturing is not impacted. The following passage about industrial purchasing will make think think different about Amazon involvement into manufacturing .
But by now, everyone should understand that Amazon has a knack for lessening the time involved in buying almost every product there is — whether that’s a Land Cruiser or your enterprise web services. So while there’s merit to Morgan Stanley’s analysis that lengthy contract negotiations may act an Amazon deterrent, the company’s ever-expanding logistics footprint could support further moves in industrial- and manufacturing-related areas.
Amazon began working directly with manufacturers back in 2013, using the Vendor Flex program (which has since evolved into “Fulfilled by Amazon”) to enter facilities and take control over the online retail logistics for manufacturers. Amazon’s patent activity regarding infrastructure-related initiatives — including applications around intermodal vehicle warehousing and aquatic storage — shows the company could offer such services to manufacturers of large equipment, creating relationships to support further market capture in the space.
And yet again, the inefficiencies of contract-agreement and negotiation processes can be lessened with a single acquisition. With companies like Katerra and Iron Planet (acquired by Ritchie Bros. in Q3’16) bringing the construction management and industrial purchasing processes online, Amazon could easily buy up a foundation to support moves into those and similar areas.
Recent changes in manufacturing shows an increased interest into investment into PLM software. What was originally a piece of software to create 3D models and manage CAD files, now is turning into software capable to run business innovation, planning services and production.
Product complexity has increased over the last decade. Electronics and software is everywhere. Manufacturing companies are facing challenges to manage complexity of product, involvement of suppliers, service product in the field, selling maintenance and insuring compliance. Much more than before, PLM software is involvement into the process of coordination processes across multiple disciplines, coordinating people and organizations. From product design to manufacturing, coordinating purchasing processes becomes a critical issue. Buying software, components, services is a vital part of product design and manufacturing.
Now let me to connect dots. Manufacturing business is evolving around transactions. Buying raw materials, planning supply chain relationships, contractors and engineering services. All together is manufacturing business. The data management by engineering is manufacturing software is fueling these contract and purchasing decisions. Bill of Materials, service plans, maintenance procedures, you name it. Everything is surrounded by contracts and negotiation. If Amazon can simplify the process by selling engineering services together with manufacturing business intelligence, the future trajectory of engineering and manufacturing software can be different.
What is my conclusion? PLM software started as an engineering discipline has a chance to be transformed into networked business managing relationships between contractors, suppliers, service providers and manufacturing shops. The company which will simplify these relationships has a chance to rule the future of manufacturing. Will it be Amazon. I don’t know. Just my thoughts…
Best, Oleg
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Disclaimer: I’m co-founder and CEO of openBoM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain. My opinion can be unintentionally biased.
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