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COVID-19 Disruption: eCommerce Logistics

Philippe Hemard
Former VP, Amazon Logistics Europe

Learning outcomes

  • Why COVID19 disruption will lead many companies approach inventory management differently and build in greater redundancy
  • Why COVID19 disruption will likely impact the structure of retail supply chains
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Executive Bio

Philippe Hemard

Former VP, Amazon Logistics Europe

Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at Amazon.com. He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to Amazon.co.uk (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university. Read more

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Interview Transcript

Just to ask quite a specific question relating to the business environment, currently. If the disruption that we’ve seen from Covid and questions that are now arising the role of redundancy, where we’ve had these very tightly coupled, highly-efficient systems for distribution and sourcing, where people have been holding less and less inventory, which on the bright side, frees up capital, do you see some of these ideas being challenged? I appreciate, it’s a very broad question, so maybe we could make it specific to either a business that you are experiencing, right now, or to Amazon’s case or, more broadly, for retail. What do you think the current disruption in trade, means for that kind of system?

There will be a challenge. It’s difficult to speak about the whole industry, but I’ve been out of Amazon for two years and I’m supporting companies all around. Therefore, I’m gathering experience of what they do and don’t do and what are good practices and bad practices. I can look at how Amazon was doing and how those companies are doing.

What we can see, based on what you said about inventory management, I think, yes, there will be a trend. I think this crisis has, absolutely, shone a big light on how weak the inventory management was. Maybe it was too lean, too small and it was not leaving any room for risk. We’ve seen this with many things. Clearly, with medical supplies, is more obvious, but we’ve seen it in things such as toilet paper, as well. Of course, those are extreme, the issue with toilet paper not yet being understood, with medical supplies clearly being understood. They are extreme, but there was no room – and there is still no room, as those supply chains are still disrupted – for any variation which was a little bit beyond that historical data. I believe, people will start to put it back.

Does that mean will go back and everybody will increase their inventory? No, because there will types of products, sensitive products, which people will be more concerned about. Yes, I think the level of inventory will increase, globally, and people will, despite having freed up some money by reducing their inventory, they will put some of the money back to the inventory, to manage this risk.

The second part that I also believe will change slightly, is that people are going to rechallenge the globalization part, which has also been extreme. If it was good to make the product in a certain country, which was in the Far East, for example, or South America, everybody was putting all their eggs in the same basket and thinking that they were saving money, because the labor is cheaper and the technology is cheaper. I believe people will rethink that too. Multi-sourcing, for example, or having some local supply. I don’t know if it is the same in the UK, but for France, there is a lot of talk about, for example, we should make the protection masks in France, because they all come from China. Obviously, as China had a major disruption early in the year, that has impacted our supply, in our country, in all countries. All that kind of thinking will be integrated, more and more, in the overall end to end supply chain. We were speaking about that at the beginning, as well, that people will integrate more and more of their end to end.

In order to coordinate, I think companies are going to spend a bit more time in understanding their supply chain and put some more documentation or automation in their supply chain. I think what we will see, as well, is that people are going to invest a bit more, to really understand what their Tier 1, Tier 2 or Tier 3 suppliers are. Not only the guy that they buy from, but who this guy is buying his product from and where the other one is fulfilling or sourcing his product, in order to be in control and make sure that they can address any disruption, really quickly. Obviously, this has been extreme, which I hope, as soon as we get over, we will not see again in our whole life. But first, it is going to take a long time, because it’s only just starting and we will not get over it in a few weeks. It’s going to take months, at least, to get over this.

It’s going to impact on people, very strongly, and I think people will adapt and will decide where they have to change behavior and where it doesn’t matter. However, when you speak about the overall macro-economic element, those are not bad anywhere, so the multi-sourcing will be good anyway, in any case, when you start to manage unrest in some countries or those kind of things. I think people will invest, because of course, this Covid-19 crisis is a big one, but there are a lot of crises which will be addressed with the same processes, or at least in the same way, over time, even if they are more local.

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