Differentiating a product or service in the highly competitive market of today, not only must the producer be able to leverage a host of strategies in the highly competitive market of today and be extremely adaptive to the customers’ ever changing requirements, while so doing, the values must be delivered and resonate with the customers while demand last, also. To retain that distinguished status from everything else being offered on the shelves, starstruck contestants realize often too late that a strong and practical Research and Development team is required to champion the long run, and that – costs a lot of money. An R&D team that restlessly studies and evaluates the market, the products, both peripheral and central competitors, and most of all, the market target groups that define the key characteristics of what needs to be delivered to them. Whatever it is, it must work to succeed. As short of a span it may be for such a heavy load, AMWAY seems to have been cruising along with ease doing just that, day in day out over the decades.
AMWAY Corporation (AMWAY) was founded in 2502 (1959), in the State of Michigan, United States, producing and carrying out distribution operations through Direct Sale. AMWAY products vary from country to country depending on local consumption patterns, the convenience to meet customer requirements and the Terms and Conditions stipulation in each country. Product range primarily include health supplements such as food supplements, water filters and air filters, etc., external physical care such as cosmetics and beauty care products, etc., and domestic and household products such as modern appliances and kitchenware. With up to 65 research laboratories and product research centers around the globe, over 500 scientists have developed a staggering 700 certified patents. A science-led market concept taken to another level wouldn’t be an overstatement.
While the US accounts for a mere 10%, AMWAY’s strong hold is in Asia with the largest market being in China. Although 3 major manufacturing hubs are in the United States, 80% of production costs is allocated to extensively prescreened raw materials with a remaining portion to labor and transportation.
The AMWAY business strategy is nothing surprising. Aside from profound R&D practices, the key success principle is to truly understand its own business and effective Supply Chain Management. As AMWAY relies heavily on a direct sales business model, the products must have differentiate-table characteristics to the general market to make it work. Thus, differentiated quality and value is the primary factor when it comes to the customer’s decision making to go with AMWAY. The most influential marketing campaign, as we all know, is the word of mouth; the proliferation of success stories through thin air like feathers in the wind. Should it be the target group, as well, all the more power to the maker. By, not only looking out for the customers’ interest beyond its own, but also constantly looking for ways to improve the customer’s lives with cutting edge products and services through hardwired standard operating procedures that actually reinforces the mission statement – develops a sense of confidence in the brand’s code of ethics. And that – is what informed customers make an effort to consideration first, pay the premium for, and more than happy to spread the word about. Good products on the store shelf are, therefore, not always good for direct sales. On the flip side, a company’s strong R&D foundation can be its best marketing strength.
That said, AMWAY has come a long way to arrive where it is today, having learned on the go from both good and bad choices. Nowadays, the AMWAY team brainstorms and goes through extensive check lists of what operations are best carried out themselves and what are best outsourced. Not all on the list are easily determined but one key success factor they conclude with certainty is the location of the manufacturing plant. It is of crucial importance in shaping subsequent strategies for different types of operations.
For health supplements which accounts for 50% of inventory, safety and reliability are at the heart of the product’s success. The sales proportion in Asia is a testament to the importance of being Made in USA in this particular line of products. Aside from safety, it is indicative of traceability back to the manufacturing process in the United States. As most popular health supplements are mostly from either the US, France, Japan or Korea rather than developing parts of the world, outsourcing the manufacturing department to save costs would be a big mistake. Supply Chain Management for different product lines are evaluated individually and designed based on what the customers’ consider valuable, accordingly. Thus, the rationale behind the decision to either outsource or run its own manufacturing operation.
Contingent to customer satisfaction, transportation economics is another key aspect that determines manufacturing location. Where transpiration can account for a mere 0.1% of total product cost, e.g., household products, transporting products with heavy liquid contents, on the other hand, incurs around 15% of the total product cost. As consumers consider price as the primary determining factor for purchasing, opting to have the product manufactured in the US and transported around the world is a double edged sword, with high traceable quality on the one hand and a massive logistics operation on the other, reflected on the higher price tag. Another obvious example of the dilemma where AMWAY endures exponential costs as a tradeoff for quality is the water purifier where the quality is highly popular among customers in Asia. Trust based on the company’s strong code of ethics, again, is the crucial success value that transpires purchases in the particular target group. AMWAY has fostered a mentality of good neighbors taking care of each other; and as a result, takes the R&D operations in the US and therefore the consistent quality of its products very seriously. To Green customers’ delight, while research is carried out in the US, manufacturing on the other hand takes place in Malaysia, a strong AMWAY partner that has proven to yield unmatched quality when it comes to production standards. The strategic geographical decision has also proven to enhance competitiveness in the area, as well, because, as demand for a particular product soars as fast as it becomes available, the otherwise long lead time of 130 days from the US to Asia required for cross-continent logistics would simply translate to a massive opportunity lost, not to mention the inappropriately high price tag as a result of unnecessary overseas haul.
Key strategies would simply not work without another strong foundation it enjoys today – Analytical Power. AMWAY employs a wide range of engineers from a variety of disciplines in conjunction with the Supply Chain Management team to analyze and decisively determine key strategies including what to produce and what to outsource, sources of raw material and where to produce everything from up to downstream.
Before AMWAY builds a production plant, Supply Chains for each product is thoroughly analyzed and designed. For example, the creation of organic farms in the US, Brazil and Mexico, the upstream component of the Supply Chain, to serve major exports of raw materials. The categories range from herbs to cherry farms, for vital extracts that are used as raw material for AMWAY products or distributed to other producers, respectively. Looking at the operations AMWAY undertakes on the global scale in order to deliver a particular product, the exemplary quality control is of no surprise regardless of where it is being sold.
All businesses produce goods and services with a common objective – to maximize customer satisfaction. Any organization in the business of getting a tangible package in the customers’ hands that figures out the logistics side of the equation is half way there to success. The operating Supply Chain system is of massive importance. Every part of the mechanism plays a role in assisting other parts in meeting timelines in the most effective and efficient (2Es) way possible. On the flip side, understanding what drives customer satisfaction determines how far the product needs to travel from up to downstream, and so, is of equal importance, if not more. To retain such information on a continual basis could be either hard or easy depending on how much value is put on Customer-Centric, or, engaging and learning from the customers, objectively, i.e., from their standpoint.
Compiled by BLOG.SCGLogistics
References and photos by forbes.com, wikipedia.org