Amazon FY16 Results
February 3, 2017.
Amazon, the world’s largest supply chain, released their year end earnings and announced several updates to their supply chain initiatives. Here are a few financial highlights:
- Over all cash flow increased 38% to $16.4B.
- Net sales increased 27% to 136B.
- Operating income was $4.2B, compared to $2.2B in 2015.
Despite these amazing financial results – results that most organizations would love to emulate – industry analysts were critical because Amazon numbers were short of industry projections and consensus.
So, how can such amazing results not be enough to satisfy analysts? Amazon shares, as of the writing of this posting, are down 3%. Even so, most of these analysts continued to give Amazon an outperform rating and a recommendation to buy their stock.
It is not the fault of the financial analyst, in one respect. Financial analysts use math formulas to calculate strict measurements on all kinds of statistical things that are probably meaningful to somebody.
However, in my view, these analysts miss seeing the tree because of the forest.
Mathematical statistical variances don’t adequately illustrate the more important and valid supply chain story:
Amazon’s impact on a global supply chain is like a high tide lifting all boats. It goes well beyond their reported financial numbers.
A key fact overlooked by financial analysts, and one that they can’t easily calculate, is the total financial growth value and human impact on all of the active sellers that use Amazon to serve their global consumer base.
For consumers, the convenience impact alone is priceless!
Consider the following supply chain impacts announced by Amazon:
Products Moved and Supply Chains Impacted
- Fulfillment by Amazon (FBA) delivered more than two billion units on behalf of sellers in 2016, and the number of active sellers using FBA grew more than 70%. Using the FBA service, Amazon sellers from more than 130 countries fulfilled orders to customers in 185 countries.
- Amazon introduced Amazon Go in Seattle, a new kind of store with no checkout required. With Just Walk Out Shopping, customers simply take the products they want, and go. Our checkout-free shopping experience is made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning.
Supply Chains thrive in the AWS Cloud
- AWS accelerated its infrastructure expansion in 2016, opening eleven Availability Zones across five geographic regions in the U.S., Korea, India, and most recently, Canada and the U.K. AWS now operates 42 Availability Zones across 16 infrastructure regions globally and plans to open an additional five Availability Zones in two regions (France and a second region in China) in the coming months.
- AWS announced that customers migrated more than 18,000 databases using the AWS Database Migration Service in 2016.
- AWS continues to accelerate its pace of innovation with the release of 308 significant new services and features in the fourth quarter, bringing the total number of launches in 2016 to 1,017.
- With millions of active customers, AWS continues to grow, and enterprise customers have committed to migrating tens of thousands of applications to AWS, including: Workday selected AWS as its preferred public cloud infrastructure provider for customer production workloads; Capital One selected AWS as its predominant cloud infrastructure provider; shipping carrier Matson has closed all of its data centers, completing an “all-in” migration to AWS; McDonald’s is transforming its digital-facing properties with AWS; the Financial Industry Regulatory Authority (FINRA) is going “all-in” on AWS for their data analytics platform, which analyzes up to 75 billion market events daily; and Enel has already moved more than 5,000 servers to AWS as it transforms its technology infrastructure on AWS.
My $.02 Analysis
There are key lessons that can be learned from the Amazon business model:
- Customer service, delivery convenience, and product availability are keys to growth.
- ASW allows technology growth to happen far easier than traditional on-premise bricks and mortar data centers. Company CIOs want to get away from operating data centers.
Today, no one can compete with Amazon’s end-to-end supply chain. There are very few alternatives to compare.
So who will be next to try to step-up into the same supply chain level as Amazon?
Is Wal-Mart a contender? They certainly have the logistical resources to move products on a global scale; but, will they also provide similar Cloud technology that Amazon does?
Should be interesting to watch.