Amazon is committed to reducing waste as part of its efforts to reduce costs to the customer.  When Amazon first began, it believed that most problems could be solved with technology.  Yet, as the company has grown, it now realizes that it needs to engage all of its employees in order to continuously improve.  In the early stages of Amazon, the company tried to automate all of the functions of the fulfillment center, but that doesn’t work for all products.  The company realized that it had to reinvent automation, following the lean principle of “autonomation.”  Autonomation means keeping the humans for high-value work and using machines to support that work.  Autonomation allows humans to use their creativity and flexibility while reducing the number of errors and defects.

Amazon also realized that it needed to standardize its standardized work.  Amazon noticed when it began that even its most standard tasks were still vague and employees were often left to figure things out for themselves.  So, Amazon created a “well-defined” standard process and assigned kaizen teams to eliminate all abnormalities.  Kaizen is the “philosophy of continually improving the products, processes, and activities of a business to meet or exceed changing customer requirements.”

There are plenty of kaizen examples within Amazon.  For example, one day, Jeff Bezos opened a box of shampoo and all the bottles were broken and spilled all over him.  Based on this experience, Bezos implemented a “three strikes” packing process for merchants.  After the third incident of a packing problem, merchants no longer have a relationship with Amazon.

Bezos also talks about implementing the andon cord which is an innovation adopted from Toyota where frontline employees are empowered to address quality or other issues by stopping production.  Customer service agents are empowered to “stop the line” when they receive multiple complaints about a defective product.   The andon cord has been very impactful and eliminated tens of thousands of defects per year.

Amazon’s next innovations in lean-management principles will likely focus on software creation as Bezos believes that software engineers have yet to prevent defects in real-time.  Amazon is also excited about 3-D printing and the implications for lean management.

Discussion Question:

What does Amazon do to streamline its supply chain?

 

Source: Marc Onetto, February 2014, McKinsey Quarterly