Jan 24 2022
In 2019, Christoph Roser posted six articles on his blog about the inner workings of Amazon Fulfillment Centers, based on visits to locations in the US and Germany. His blog is called AllAboutLean but the word “Lean” appears nowhere in his articles about Amazon. “Six Sigma” does not appear either, and Christoph does not mention meeting any black belt.
In addition, in Working Backwards: Insights, Stories, and Secrets from Inside Amazon (2021), Amazon alumni Colin Bryar and Bill Carr make no reference to Lean, and all they report about Six Sigma is using DMAIC to define metrics.
Yet you find some published descriptions of Amazon as a showcase for Lean, Six Sigma, or Lean Six Sigma but, if you consider them without confirmation bias, the evidence is underwhelming. The keywords appear, along with a few more, like “Operational Excellence” or “Scrum.”
Based on the small amount of published data, the leaders of Amazon, starting with Jeff Bezos, “learned a bunch of techniques, like Six Sigma and lean manufacturing and other incredibly useful approaches.”
In other words, they learned everything they could get their hands on while staking out uncharted territory. Then they developed their own system. Now they are sharing with outsiders a few homilies but no details, as is their privilege. Their system is to retail as Toyota’s is to manufacturing. It’s not reducible to Lean, Six Sigma, or Lean Six Sigma.
Amazon, Toyota, and Alibaba by the Numbers
Why does it matter? Based on public data on Wikipedia, the following table compares Amazon with Toyota, the company whose system inspired Lean, and with its largest direct competitor, Alibaba of China:
|Amazon (2020)||Toyota (FY21)||Alibaba (2021)|
• Cloud Computing
• Artificial Intelligence
• Consumer electronics
• Digital Distribution
• Self-driving cars
|• Automotive||• E-commerce
• Cloud computing
• Artificial intelligence
• Mobile commerce
• Mobile media
• TV shows
No Overlap In Activities Between Amazon And Toyota
The first observation is that there is no overlap between the activities of Amazon and Toyota, with the possible exception of self-driving cars. On the other hand, Amazon and Alibaba are close parallels. The main difference is that Amazon operates in 100 countries while Alibaba is mainly in China, with some presence in Southeast Asia. In revenue, Amazon is 50% larger than Toyota and 3 times larger than Alibaba.
Differences In Financials
In terms of income, Amazon earns slightly less than Toyota. One oddity in these numbers for both Toyota and Alibaba is that the reported figures for net income are larger than for income, which is counterintuitive and suggests differences in reporting methods. Perhaps, net income does not mean the same in the US, Japan, and China. Toyota has 74% more assets than Amazon, as expected from a manufacturing company.
Differences In Numbers Of Employees
The most remarkable number, however, is the number of employees. Amazon has 4 times as many as Toyota and almost 6 times as many as Alibaba. These figures make the Revenue and Income per Employee look better for Alibaba, which raises other questions about possible differences in the way people are classified as employees.
The inescapable conclusion, in any case, is that Amazon is bigger than Toyota, that there is value in learning its practices in both management and technology. Amazon isn’t exactly forthcoming in sharing these but they have no obligation to. They have the right to treat them as trade secrets.
Homilies About Lean
Let us examine a few of the statements that are made to describe Amazon as a case of Lean.
“Customer obsession” as a core value is not much of a distinguishing feature. To every rug merchant in every bazaar, “the customer is king.” By itself, this kind of statement is just an obligatory recitation. Taking care of customers is just good business, and Amazon’s success may in fact be due to its superior ability to do so. It’s neither a surprise nor a revelation if you have bought anything online in the past 25 years.
Regarding continuous improvement, we learn that Jeff Bezos has had all of senior management work in customer service at least one day a year. It sounds great but it falls short of explaining how you organize continuous improvement in an organization of 1.5 million people.
From Amazon job postings, we can tell that “Program Manager, Continuous Improvement” is a job title and that part of this job is to “plan, lead, and facilitate improvement projects.” We also know that there is an “Amazon Customer Excellence System” (ACES) team of qualified individuals whose goal is to ensure quality control and continuous improvement.
A story Jeff Bezos included in a 2009 letter to shareholders is how a Kaizen consultant told him “I’m in favor of a clean fulfillment center, but why are you cleaning? Why don’t you eliminate the source of dirt?” It’s a great anecdote but where do you go from there?
For example, an espresso machine that takes prepackaged doses has a small footprint and makes no mess but it makes you spend five times more on doses than on beans for a classical machine. Yes, the classical machine takes up more space and spills grounds on your counter but the recurring costs make you think twice about eliminating this source of dirt.
The “Customer Service Andon Cord” is presented as an example of Lean at Amazon. As reported by Marc Onetto in When Toyota met e-commerce: Lean at Amazon, “the process begins when a service agent gets a phone call from a customer explaining that there is a problem with the product he or she has just received from us. If it’s a repetitive defect, we empower the customer-service agent to ‘stop the line,’ which means taking the product off the website until we fix the defect. The objective is to start the line again with the defect resolved. We created an entire background process to identify, track, and resolve these defects.”
It sounds like a useful procedure but calling it an “Andon Cord” is intellectually acrobatic. An actual Andon Cord runs over an assembly line like the cords in buses passengers use to tell the driver they want to get off at the next stop.
Operators are expected to use the Andon Cord while making the product, pulling it when witnessing something wrong. It doesn’t involve a customer complaint, and it doesn’t require the operator to judge whether the defect is repetitive.
The point of this tool is to prevent the assembly line building cripples — that is, almost finished units that you can’t ship because they’re defective. Rapid response to quality problems reports from the field is a different challenge.
Amazon and Six Sigma
Per The Leadership Network, a provider of masterclasses based in the UK, “in the early 2000s, the leaders of Amazon’s fulfillment and operations capabilities decided to implement Six Sigma, a data-driven five-step approach for eliminating defects in a process. Define, measure, analyze, implement, and control—or as it is referred to in Six Sigma, DMAIC. This is the root improvement cycle in Six Sigma and sets up the methodical, measured steps and mindset to squeeze out defects, costs, and cycle times.”
Jeff Bezos read about Six Sigma, and it’s occasionally mentioned in job postings as a useful background or even a required skill. On the other hand, I couldn’t find any evidence that Amazon uses DMAIC, Black Belts, or Six Sigma DOE/analytics. Amazon, however, has a team called “Supply Chain Optimization Technology” (SCOT) that uses data science at a higher level than anything in Six Sigma. Their data scientists are expected to analyze big data from the supply chain and develop new machine learning methods.
Jeff Bezos’s Own Words
In his Shmula blog, Pete Abilla has a number of posts about Jeff Bezos’s thinking:
- 12 books that inspired Jeff Bezos (2017)
- Customer Service Andon Cord: Jeff Bezos and Customer Experience (2013)
- Root Cause Analysis (2009)
- Kaizen: The Source of Dirt (2008)
- Interview: He Discusses Defect Reduction and Lean and Six Sigma (2007)