final project paper

Running head: THE SOCIAL SUPPLY CHAIN: UTILIZING SOCIAL MEDIA

The Social Supply Chain: Utilizing Social Media to Improve Supply Chain Management Mariah Delaire & Nolan Winston National University CIS 601 Dr. Farnaz Sharifrazi

May 29, 2016

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THE SOCIAL SUPPLY CHAIN: UTILIZING SOCIAL MEDIA

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Executive Summary Businesses rely on the networks of supply chain management systems to help organize and maintain relationships with customers and suppliers. The longevity of any functioning firm counts on the success of these systems to help suppliers, purchasing firms, distributors, and logistic companies share information. With technology always advancing, new forms of supply chain management are being developed. This paper focuses on the improvements of these systems through the use of social media networks. Using social media to enhance supply chains is being used by businesses because it is a free tool that focuses on building relationships, which is an important aspect of these systems. The company that demonstrates a successful use of a social supply chain is Amazon. Amazon is a great example of a retailer with superior customer engagement, who creates great content for their suppliers and customers, in addition to using social media to stay up to date with changes and trends. From the use of social media alone, Amazon converts 4% of users into sales, bringing in close to 350 million dollars a year from that alone. However, Amazon does have the ability to increase conversion through the use of other systems such as a Partner Relationship Management (PRM) System. This can be used to help gain more information on the types of customers they are not engaging with. Overall, Amazon does a fantastic job maintaining and building relationships with both suppliers and customers through the use of social media. This makes them a great example for what other businesses should do if they want to implement a social supply chain as well.


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The Social Supply Chain: Utilizing Social Media to Improve Supply Chain Management Background Businesses function on the ability to rely on their suppliers in order to provide their companies with goods and services needed to further enhance and grow. The information revolution has allowed companies the use of multiple technologies to better manage operations and their supply chain. Technology has been a driving force behind increasing customer demands and global competition along with giving companies insight on how certain areas can be improved. Businesses focus on the relationships with their customers in addition to their suppliers to ensure the fluidity of supply chain networks. A poor relationship with suppliers can have detrimental effects for other supply chain members, which can lead to problems across the chain, ultimately finding its way to the customer. To avoid this, firms must focus on the management of these relationships with their upstream suppliers as well as their downstream customers. Supply chain management focuses on managing relationships with suppliers by maximizing customer value and achieving a sustainable competitive advantage. These systems are instrumental in helping suppliers, purchasing firms, distributors, and logistic companies share information about orders, production, inventory levels and delivery (Laudon & Laudon, 2014). The goal of supply chain management is providing a quality product in a timely manner that is cost effective for the business. Utilizing a supply chain management system can increase a business’s profitability by lowering costs of moving and making products. It also enables managers to make better decisions in regards to the organization of sourcing, products, and distribution.


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The technology that supply chain management systems have given businesses is extremely valuable and has been an important tool in improving relationships. With technology continuously advancing, there are always new opportunities for businesses to increase customer engagement and experience as well as improve relationships with suppliers. A tool that can be utilized to do this throughout the supply chain is social media. Social media can be used as a tool to gather information from multiple sources, uncover trends and make for better informed decision making. There have been studies that show more than 1.5 billion people use social media, with 70% of businesses investing time into it. Of the Fortune 500 companies, more than 77% use Twitter, 70% use Facebook, and 69% use YouTube to help their businesses grow and improve customer relationships (Rusch, 2014). Social media can benefit the supply chain by enhancing communication with customers, generate demand, reduce operating costs, mitigate risk, enhance marketplace intelligence and increase productivity (Rusch, 2014). Since social media is focused on building relationships, it can be used in a supply chain to help build and grow relationships with suppliers. Social media in a supply chain system has the ability to gather information and knowledge about issues in the supply chain itself, industry, and competition, which gives suppliers and supply chain partners valuable insight (Rusch, 2014). Social media is also valuable to the marketers of companies because its gives them the ability to solicit information from customers, which can be used to make recommendations for improvements. More importantly, social media allows participants in the supply chain to monitor events and transactions such as shipping delays or failed carrier pick-ups. Twitter can be an important source to help indicate arrival and departures of shipments and to help communicate to drivers about accidents or road closures (Rusch, 2014). Social media has profound effects on the


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improvement of the supply chain because it helps minimize disruptions by enabling individuals to take corrective action sooner. A company that has been utilizing a “social” supply chain, and is a prime example of success, is Amazon. Amazon knows first-hand how to engage with their suppliers and customers, they create great content, are strategic, and utilize social media to stay up to date with changes and trends. Many other companies use social media outlets to engage with their customers, however, Amazon focuses on the big picture by being specific with their campaigning. In comparison to other retailers, many would believe Amazon has low efforts in regards to taking on social media. However, their results prove otherwise. Their Facebook posts get an average of 417 comments and 2,916 likes, making them the 12th highest among retailers. On Twitter, they are the 9th highest number of average retweets with 48 retweets per tweet (JOSIC Media, 2013). Currently, Amazon uses Facebook, Twitter and Pinterest, engaging with millions of customers through interactive shopping experiences, customer dialogue to help with specific situations, and even product reviews. Their social media efforts are successful because they have turned it into something interactive for all sorts of users. Amazon’s product pages’ feature “like” and “tweet” buttons, allowing shoppers to share what they are interested in with their social networks. Social media users also have the ability to review and give product feedback from their networks, engaging with even more customers. Along with sharing reviews, users have the ability to share wish list items via social media, enabling other users to discover items they may have not been exposed to otherwise. Social media also makes the purchasing and shipping processes much more efficient by giving real time updates to customers and suppliers, allowing both parties to view and track purchased items easily. Amazon’s social media attempts are unique in that they concentrate more


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on the efforts of crowd-sourced product information and algorithms that personalize the shopping experience rather than brand to fan engagement (JOSIC Media, 2013). Innovation The supply chain management process is generally quite complex and involves networks of information, which is critical to the successful management of this system. The primary purpose of a supply chain is to deliver a product to a customer through a large network of different participants. As more participants are added to a network, the required information and flow becomes even more complex, requiring more decision making capabilities. Social media outlets are being used to alleviate the complexity of these vast networks to help managers make better informed decisions. Social networks such as Facebook, Twitter, YouTube and Pinterest are being used more and more by Fortune 500 companies to help monitor their supply chain production needs. Social supply chains can be used for tracking logistical updates, sharing data, and monitoring progress (Moores, 2013). This allows for disaster control if any issues should arise because they can be dealt with quickly and effectively by compiling resources and ideas from all over the network of suppliers. An example that could improve productivity would be implementing iPads on a production floor of a manufacturer, increasing mobilization and communication between employees and their managers. When the company Industrial Mold and Machine used this technology, productivity improved with a 20% increase in “cut time” and a 40% decrease in labor hours (Moores, 2013). Coordinating activities with the use of an iPad in the warehouse solved communication issues, creating a more efficient workflow. The use of different social media platforms enables businesses to share best practices with one another, build and improve relationships, and effortlessly share data and knowledge (Moores, 2013).


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SWOT Analysis Strengths: Billions of people use social media outlets to converse, check out trending topics, and share relevant information. By leveraging the use of social media platforms, businesses can meet or exceed objectives within their supply chain. Currently businesses use social media in a number of ways. One way is as a marketing tool to reach their customer base to explain current incentives, discounts, and updates on upcoming events. Social media platforms are free, so businesses are able to talk to customers around the world without paying for publications to be sent out to them. This enables businesses to cut costs but still be very productive in reaching out and engaging with their customers. People are always using their devices such as cell phones, iPads, and laptops. This allows businesses to reach customer needs outside of the standalone store with mobile shopping. If a customer does have an issue using a product, they can be reached with a tweet on twitter, direct messages on Instagram, or a post on Facebook to answer any questions. Businesses are able to use pictures, videos, and blogs to showcase what a customer may need or want. Amazon specifically uses a customer relation management system to interact with customers by using touch points. Touch points are used to send customers who use their service email notifications, Facebook promotions, and Instagram photos (Laudon & Laudon, 2014). Amazon markets special sales on items over social media for customers to see, which in the past was normally used for sharing photos with friends and family. Amazon has utilized the resources from social media to open up new channels of engagement with customers financially and emotionally. Financially, Amazon has connected customers with new products and services such as “Amazon Prime”. Amazon Prime is a multi-tiered subscription service that enables customers who subscribe with free shipping on all purchases. By paying Amazon a subscription


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fee of $80 dollars per year, you get free shipping guaranteed within 2-5 days and also a streaming video service. Emotionally, Amazon has catered heavily to what customers expect from the company by relying on customer feedback from online reviews. Amazon was able to achieve great success due to their social customer relation management tool. The tool enables the company to interact with customers through social media sites. It helps by keeping customers engaged with what promotions are available and new company innovations to look forward to. Great customer engagement has resulted in Amazon receiving impressive reviews online, leading to an increase in sales. (Laudon & Laudon, 2014). Weaknesses: The inability to control any of the social media platforms themselves. For example, if issues were to arise with coding, computer bugs can occur as a result. Bugs can hinder the text or features of the site, which can lead to losses in sales revenue. Businesses are always going to be under the umbrella of what the platform wants to do. If the platform decides on any changes to the site or mobile application, customers may disapprove with the new changes. This could lead customers to decide to remove the application, causing the customer to no longer be engaged in the company's services. Another weakness is if social media platforms start charging businesses for posting a certain amount of material. Senior management would then need to run a cost benefit analysis to see if sales from social media are worth the cost. Lastly, if customers feel as though businesses are reaching out too aggressively, they can choose to turn off notifications on their devices, limiting activity. Opportunities: Billions of people are using so many different platforms of social media. Supply chain management is able to use the resources from social media to fit a package around the services they provide. They can build services that give customers pictures, videos, and notifications all at their fingertips to stay notified about their current purchases. There are a


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variety of platforms, such as Facebook, Instagram, Snapchat, Flickr, Pinterest, and many more. Companies will have to dive in and figure out which platform they can utilize to get the best results in order to increase sales and customer engagement. Threats: Hackers are a major threat to businesses using social media. They can create fake web pages copying every aspect of a business in a process called spoofing. (Laudon & Laudon, 2014). They have the ability to put up identical information from any company's website, which can lead to customers inputting information into the hacker's fraudulent database. Many hackers use spoofing tactics to steal credit card information as well. When this happens, purchases that customers have not made appear, turning the situation into an identity theft crisis. Due to sites being completely open on social media, competitors will have a full range of business models to emulate their effectiveness. Lastly, after building a strong customer base on any particular social media platform, the platform itself could potentially not be profitable enough to stay in business. This would cost companies time and money to rebuild the online customer relations piece of their business. Project Goal The project goal is to show how social media has become a positive attribute to the supply chain at Amazon. The second part of the goal is to give examples of why businesses around the world should use social media to increase productivity online, improve sales, customer relations, and company outlook. Through examining the supply chain of Amazon, the plan is to deliver result-based-data on how Amazon was effected during their increased social media exposure.


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Solution Amazon’s social media presence has given them the ability to interact with customers all over the globe. Only about 4% of customer traffic is coming from major social media outlets such as Facebook, Twitter, and Pinterest. Amazon makes nearly $350 million dollars in sales from the 4% of customers they are selling to through social media. Looking towards the future, Amazon needs to increase the amount of interaction through social media with customers. They can do this by developing a partner relations management (PRM) system that will analyze the type of customers that are purchasing through social media. By using touch points, they can keep social media customers engaged, and gain leads from social media platforms to increase the conversion rate for sales. Conclusion Amazon currently uses social media outlets like Facebook, Twitter, and Pinterest to showcase sales and promotions for customers. From the amount of customers they engage with through social media, they earn about $350 million dollars in sales. The problem is that only 4% of their customers are coming from social media outlets, where billions of potential customers are still waiting to be engaged by their products and services. To increase their customers base, Amazon should partner with social media outlets and create a new partner relationship management (PRM) system to accumulate more information on the types of customers that are not being engaged. A new PRM system will enable Amazon to find the types of products that customers want, and showcase those products to them on their favorite social media sites. With the new partnership, Amazon could increase the current 4% of sales from social media to potentially double that value. If they were able to attract just another 4% of customers through these social media channels, they could increase sales from $350 million dollars to $700


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million dollars. Social media will continue to grow and Amazon has done a good job attaining sales, but they can do better. With more emerging social media outlets such as Snapchat, Amazon will need to partner up and figure out how to reach the billions of potential customers that use social media every day. If they are able to create a great partnership, they could potentially increase sales while continuing their great customer engagement.


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References Handfield, R. (2011, Janurary 11). Why Do You Need To Know About Supply Chain Management (SCM)? . Retrieved from NC State Poole College of Management: https://scm.ncsu.edu/scm-articles/article/why-do-you-need-to-know-about-scm JOSIC Media. (2013, Decemeber 12). Amazon's Approach to Social Media. Retrieved from JOSIC Media: http://www.josic.com/amazons-approach-to949-social-media Laudon, K. C., & Laudon, J. P. (2014). Mangement Information Systems: Managing a Digital Firm. Upper Saddle River, N.J.: Pearson. Moores, N. (2013, August 1). Effective Supply Chain Management Through Social Networking. Retrieved from NC State Poole College of Management: https://scm.ncsu.edu/blog/2013/08/01/effective-supply-chain-management-throughsocial-networking-guest-blog-by-nicholas-moores/ Rusch, E. (2014, August 6). Using Social Media in the Supply Chain. Retrieved from Manufacturing Business Technology: http://www.mbtmag.com/article/2014/08/usingsocial-media-supply-chain

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