7 Principles of Awesome Service Supply Chain at Zappos

Service supply chain has become more important even to manufacturing sector. Here you will learn how to streamline service supply chain that wows like Zappos.

Service Supply Chain Case Study

Service supply chain has recently emerged as the new research area. In general, it focuses on supply chain management of non-manufacturing companies such as those in the logistics and distribution, consulting and hospitality industries.

One of the most notable case study is from a company called Zappos.com. Founded in 1999, it is an online retailer selling shoes via a drop-shipping business model. In early 2004, they noticed that customer service was the biggest problem. So they had to adapt in order to survive in the bad economy. Of course, they stumbled and fell and learn from mistakes. Nevertheless, they hit a very important milestone of reaching $1 billion in gross sales in 2008.

To determine how they did it, we study many materials as below,

- Stanford Graduate School of Business Case no. GS-65
- Stanford Graduate School of Business Case no. M-333
- Zappos’s CEO on Going to Extremes for Customers on Harvard Business Review
- Delivering Happiness: A Path to Profits, Passion, and Purpose by Tony Hsieh (CEO of Zappos)

These materials are carefully reviewed and presented in the infographic as below,

service supply chain

Principles of Outstanding Service Supply Chain

1. Make service a priority
This may sound a bit typical because every quality system says that the internal customer is also important. However, Zappos brings the service priority to the next level. the below is the exact wording from Zappos's team,

"At Zappos, it all begins with the Golden Rule: Treat others as you’d like to be treated. When vendors fly to visit our offices in Las Vegas, they are greeted at the airport by one of our Zappos shuttles. When they arrive at our offices, their buyer welcomes them as we take their sample bags off their hands so we can deliver them to the meeting room. If it’s their first time visiting our office, we give them a tour. We offer them drinks and snacks, basically anything we can do to make them feel comfortable. This is all far from industry standard, but if we were in their position, I’m sure we wouldn’t mind being treated this way"

It's not about having a nice policy, they actually do it, a service training without training.

2. Find the right people and empower them
They believe that call center is the core competency so they don't outsource this operations. In order to excel in this operations, they try to find the people with positive attitude. The below is the opinion from one of the top executives,

"I attended a conference where someone in the audience asked Starbucks‟ chairman/CEO Howard Schultz why everyone at Starbucks smiled and he said, "We only hire people that smile." We try to do the same thing at Zappos. We only hire happy people and we try to keep them happy. Our philosophy is that you can't have happy customers without having happy employees and you can't have happy employees without having a company where people are inspired by the culture."

3. Measure satisfaction, not productivity
Zappos' don't measure call times, don’t force employees to upsell, and don’t use scripts. And they encourage a long phone conversation with customers if it's useful. If they don't measure call times, how do they handle big amount of calls everyday without letting customers wait too long?

They create the environment that service staffs want to stay. The industry standard of a staff turnover can be as high as 300% but for them it's just mere below 5%. People stays due to many reasons,

- Pay a bit higher than the others

- Promotion happens every 6 months instead of one year or more. So people see how well they are doing.

- Promotion is determined by number of the new skills each staff acquires (company provides training). So staffs are in control of their own career advancement

And when people stay longer, it's like the well-oiled machines without a downtime in contrary to the faster but unreliable machines like those of others.

4. See each contact as business opportunity
Even though people buy products online, they often call service staffs. Then, Zappos analyzes the phone calls extensively to determine customer's changing needs and trends to improve the merchandising.

5. Promise less, delivery more
standard delivery condition is 4-5 days by a ground service. But they some time upgrade the delivery to next day and run the operations on 24/7 basis (when you promise next day delivery, it will be pretty tough to surpass customer's expectation, do you know what I mean!)

6. Partner with 3PL
The reason Zappos can improve the delivery speed is to partner with 3PL. They have a warehouse very close to 3PL's hub. 3PL will automatically upgrade the service from "ground" to "next day delivery" if cargoes volume of next day delivery in particular day is low (in order to drive the economy of scale).

7. Ask vendors for help
Since Zappos treats vendors very nicely, asking for help is not a big deal. Vendors can access the Zappos's inventory level online and may ask buyers to buy more or suggest style changes.


When Zappos says making service a priority, they really mean it. They can achieve the superior result because the whole supply chain is moving into the same direction.