Slide 1
Amazon.com has come a long way since its founder and chief
executive officer, Jeff Bezos, envisioned the company as a virtual
bookstore. It has evolved into an online retail giant that
generated US $74.45 billion in revenues in 2013, much of that
coming from its support of more than two million companies that
used Amazon to sell their products online and distribute them to
customers. Under the company's various programs, Amazon not only
provides its customers with a means of advertising and selling
their products, but also offers to store those products in its
fulfillment centers; pick, pack, and ship them; and provide
customer service, including handling returns.Amazon keeps the most
popular products in inventory. This gives Amazon an advantage that
its rivals find hard to replicate.Manages and ships not only its
own inventory but that of other retailers such as Eddie Bauer and
Target, giving it an economy of scale that dwarfs its rivals. As it
stands, Amazon can currently ship some 10 million products,
compared with Walmart's 500,000In the process of developing its
network to support those services, Amazon has built out an
infrastructure that by one recent account now includes 145
warehouses around the world (84 in the United States, four in
Canada, 29 in Europe, 15 in China, 10 in Japan, and seven in
India), which collectively account for more than 40 million square
feet of space. Amazon has also has made substantialINVESTMENTSin
material handling systems, including the acquisition of Kiva
Systems for $775 million in 2012.1Kiva, now a wholly owned
subsidiary of Amazon, designs robots, software, workstations, and
other hardware that has been used in the distribution facilities of
companies such as Staples, Office Depot, and The Gap. The systems
produced by Kiva are expected to be an integral part of the
distribution network now being developed by Amazon. Amazon has also
made majorINVESTMENTSin cloud computing. At the same time, the
company has been developing transportation capabilities to support
its Amazon Fresh same-day grocery business.Much of Amazon's recent
growth has been fueled by its Amazon Prime program and Amazon
Supply operations. Amazon Prime, which offers "free" two-day
delivery to its more than 27 million subscribers for US $99 dollars
per year, doesn't come close to recovering Amazon's related
transportation costs, but on average Amazon Prime customers buy
twice as much merchandise per year as do other customers.2Amazon
Supply, which provides a marketplace for thousands of industrial
suppliers, represents a major move by the retailer into the
business-to-business space. Amazon advertises it as offering
750,000 "essential" products for business and industry, with free
two-day shipping for orders of US $50 or more and a 365-day return
policy. Amazon's increasing presence in this industrial space poses
a real threat to incumbents such as W.W. Grainger and Fastenal.
warehouse managementtransportation managementinbound and
outbound shipping demand forecasts inventory planningAmazon.com
strategy ofinventory management In 1999, Amazon had ten warehouses
after adding new six warehouses which increased capacity became
over five million square feet.To develop its network, Amazon has
built out an infrastructure that includes 145 warehouses around the
world (84 in the United States, four in Canada, 29 in Europe, 15 in
China, 10 in Japan, and seven in India), which collectively account
for more than 40 mn square ft of space. very well maintained and
fully computerised inventory system which led to easiness in
dealing with management inventory In addition Newton (2001) found
that product distribution from merchant to consumers would
influence consumer decision to order next items.by increasing the
number of inventory, Amazon increased availability to satisfy
customers
4In addition, by adding several new facilities, Amazon could
increase its outbound transport performance by reducing the
distance and delivery time as the warehouses were closely located
to customers' houses or offices.By stocking a wide range of items
and managing its own inventory as well as adding several
warehouses, consequently Amazon could increase cost responsiveness
in order to satisfy customers supply chain responsiveness is a
capability to:a. respond to wide range of demandb. fulfil order in
short lead timesc. manage a huge variety of itemsd. develop highly
innovative itemse. provide a high level of servicef. manage supply
uncertainty
overall, increasing inventory on the basis of speculation and
increasing in the number of warehouses without improvement in
dealing with inventory led Amazon did not achieve successful in
managing the inventory in 1999. In holiday season 2000, Amazon
tried to increase efficiency of inventory management. Pillai (2004)
highlighted several decisions they made such as:a. Reduced the
number of inventory based on demand uncertaintyb. Increased range
of product offeringc. Increased of efficiency of logistic by
deciding which distribution centre should stock particular
inventory by considering demand of distribution centre region.d.
Bought the books from publishers instead distributors to get a good
margine. Developed new software to accommodate region demand to
assist decision which distribution centre should stock products.f.
Reduce split shipment by reducing order which were delivered from
different warehouses and stocking several items which customer
usually buy together in one point.g. Outsourcing shipping
activities
In 2000, Amazon also improved itsinventory management
performance through location postponement. In location
postponement, inventory could be centralized in one strategic
location where it could be transported to possible destinations
when demand is comingWhen holding service levels is steady,
location postponement can reduce safety stockAmazon has reinvented
customer experience and expectations through supply chain
innovation, enabling it to ship packages to customers within
minutes of a received order while realizing significant savings
over a traditional labor-intensive distribution center. By
strategically placing distribution centers and leveraging
revolutionary technology like Kiva Systems, Amazon can
cost-effectively deliver goods to the vast majority of U.S.
households within 48 hours for little to no shipping cost. Amazons
innovation has enabled it to significantly increase its market
share while putting enormous pressure on competitors.
In the supply system of Amazon, there is a unique approach about
how they handle their customers which they describes it as starting
with the customer and moving backwards.as depicted in the diagram
above they are customer focus and they are frugal which means, they
spend much money on things or items customers really like and
lastly they are very innovative in their supplynetworks where they
constantly, brings in new technology to assist with their supply
chain network.
The customer centric nature and the success has also been
partially dependent and their largeness and corporate image. Amazon
from its beginning have acquired some many companies which includes
mdb,
Lexcycle,askville,buy.vip,shelfari,smallparts,woot,cdnow,zappos,alexa,audible,pets.com
and others.The replenishmentstrategyof Amazon reflects mostly with
understanding customers needs first and formost. They do their
stocking and inventory with customer preference than have more
variety of goods and than lower cost.
The diagram above illustrates the total supply networks of the
global retail giant Amazon. Step 1 shows when the customer places
an order in wherever location he may be. The order is than assigned
to the closest of the seven major distribution centers in the
United States of America .The next step is as shown in the diagram
indicates that the order is been shown red in the person whose item
is ordered in the warehouse it than creates ride conveyors through
DC, the items is been sorted out by a bar code and than the creates
arrives at the central point and bar codes of the products matched
with orders, the items sorted are than sorted automatically into ne
of the many boxes chutes into a box. As shown in the diagram the
bar code identifies customers order and than the customer order is
packed taped and weighed. The taped and weighed boxes are shipped
by the United Parcel Services and sent to customer between seven
days.
From Scratch: Amazon Keeps Supply Chain Close To HomeAmazon's
supply-chain applications communicate in real time, a rarity when
most companies have to integrate a variety of software tools and
manual processes such as phone and fax orders.
Amazon's supply chain is so tightly integrated that when an
online customer buys a couple of books and a CD, the
order-management system communicates with inventory- and
warehouse-management systems to find the optimal distribution
center or centers for fulfilling the order. The customer knows in
less than a minute how long it will take to ship the items and
whether they will come in one package or separately.Amazon, which
spends about $200 million a year on business technology, last year
launched a business unit to resell its Web-commerce and back-end
fulfillment services to retailers. And it continues to seek
technical advantages in its supply chain. For instance, certain
Amazon applications can use radio-frequency identification
technology, and the online retailer will turn on the capability
when it's needed, Wilke says. "RFID is most useful when you have
one of a number of conditions: if you have poor inventory accuracy,
if you have a high shrink rate, or if you have a need for more
real-time information." RFID isn't a priority because those aren't
problems for Amazon today."RFID will add the most value to us when
it's used on every item," rather than on cases and pallets, as
Wal-Mart Stores Inc. and Target Corp. are planning. "Then we'll
just position the antennas in our operations."