Amazon Supply Chain Management-Case Study

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In the current era of technology and the internet, the business has become very complicated and complex. With the advent of globalization, the sector of business and management has been completely revolutionized and transformed as compared to the traditional methods of conducting business operations. It has lead to more and more competition between a big and well-known business organization that operates its business activities all over the world. In this context, the factor of supply chain management remains at the center of the topic. It occupies the central position of the overall regulation of business management because it has a major role in accelerating the quality and sales rate of the companies. However, poor management of supply chains has drastic implications on the business organization in terms of customer dissatisfaction, loss of trust, poor quality of product and services, loss of reputation, and increased market competition (Sahu, 2017). Therefore, supply chain management has a central role in achieving a high productivity rate in the competitive market, globally (Yu et al, 2017). 

The purpose of this essay is to understand the real meaning of supply chain management in the context of one of the most well-known and prominent e-commerce business organizations- Amazon.com. The paper aims to establish the internal strategic decisions of this big online business organization in relation to supply chain management and how it is successfully fulfilling the demands of every customer all around the world. 

Therefore, firstly, this essay will explore the background of Amazon.com, and then it will analyze how this big e-commerce business organization is managing its supply chain in such a dynamic environment of contemporary business. Towards the end, it will discuss critical success factors of supply chain management strategies adopted by Amazon.com. And finally, in the last section, the final takeaways will be discussed about the overall analysis of Amazon supply chain management. 

In order to explore the strategies of Amazon.com for supply chain management, it is important to understand its importance in the context of the contemporary business environment. The contemporary business environment can be characterized as excessively competitive and dynamic. Case study assignment help experts suggested an Increased market opportunities, competitors, outsourcing of production, the satisfaction of the customer, and others have become prime importance for the current business organization. In all these scenarios, managing supply chains has become a crucial task. The supply chain can be defined as a network of business organizations and processes to select raw materials and transform them into a finished product. It also involves its distribution to the customers (dos Reis et al, 2014). Supply chain management helps the business organization to decide when and what to produce, enhance communication system to place an order, and tracks the current status of the placed order. Along with this, it also helps the business firms to check inventory and the availability of stock products. Moreover, it also reduces the cost of inventory, transpiration, and warehousing. Besides this, it helps the firm’s manager to fulfill the actual demand of the customers by placing the right order at right time (Snyder, 2013). 

It is a known fact that supply chain management and logistics have greatly influenced the business activities on an online platform. The advancement in the internet and technologies has provided immense opportunities to entrepreneurs to develop new business strategies for conducting business activities on an online platform. Online business is commonly known as E-commerce pr electronic-commerce. E-commerce business can be defined as the purchase and sale of products and services with the help of the internet. It is a virtual business platform. E-commerce business relies on technologies and the internet only, it has very minimum involvement of human physically, unlike in the traditional business model (Kwilinski et al, 2019). One of the classic examples of e-commerce business is Amazon.com. One of the fundamental approaches of Amazon that took the company at zenith is its strategic supply chain management processes. 

Background Of Amazon Company 

Amazon is one of the dominant retail companies in the world which is conducting its extensive business operation by adopting an E-commerce business model. It is an American company, which was started by Jeff Bezos in the year 1995. The company is based in Seattle, Washington. In the initial phase of the company, it was a bookstore. Eventually, it started to diversify its products and become one of the biggest e-commerce retail companies in the world. In terms of objectives and mission, Amazon has given primary importance to its brand name. Along with this, it aims to provide marvelous value and a superior shopping experience to the customers and clients (Majed et al, 2018). Thus, it is a customer-centric business organization that gives values and quality products to the customers. 

As per the analysis of the research study of Lai et al (2018), Amazon has hundreds of millions of merchandise, and half of them are sold by a third-party seller. In terms of net profits, the graph is increasing every year. The year 2016 and 2017 saw the highest profitability of Amazon. In the year 2018 also, the levels of profits of Amazon has reached new heights, hence, it has made the company the second-most valuable company in the world, after Apple. 

Figure 1: Stock Price Of Amazon
(Source: Wells et al, 2018)
Figure 2: Revenue profit of Amazon
(Source: Wells et al, 2018)
Figure 3: Operating profit of Amazon
(Source: Wells et al, 2018)

In the above three figures, the representations of the graph depict that the Amazon E-commerce company has a remarkable growth and profits in recent years. Moreover, it is a known fact that supply chain management plays an important role for E-commerce companies. Since e-commerce companies totally rely on their logistic system, therefore, effective management of the supply chain can significantly boost the sales and profit rates of the company. Therefore, it can be easily understood that Amazon must have developed some effective and powerful strategies to manage supply chains that is ultimately resulting in tremendous profitability and success of this E-commerce company. However, Wal-Mart is one of the fierce competitors of Amazon (Collis et al, 2018). But overall, Amazon has managed to overcome the competition of Wal-Mart by establishing efficient inventory networks and distribution centers. To know more about Wal-Mart supply chain management, contact my assignment help experts of SourceEssay.

Analysis Of Supply Chain Management Of Amazon.Inc 

The supply chain process of Amazon includes warehousing of products, management of inventory, pricing, and logistic. This E-commerce business organization has optimized all these elements efficiently to ensure a smooth supply chain. In order to maximize the supply of products, Amazon has provided two fulfillment options to the consumers (Dunne, 2020). These two fulfillment options are categorized as fulfillment by Amazon and fulfillment by the merchant. The first option, that is fulfillment by Amazon, provides services of storage, packing, and shipping orders to those who prefer a hands-off approach. 

Figure 4: Fulfillment by Amazon process
(Source: Johnson, 2020)

On the other hand, in the second approach, consumers can themselves do storing, packing, and shipping of the products. In addition to this, to increase supply efficiency, Amazon has adopted high-tech equipment for picking and packing the products. For this, the company has acquired the Kiva system (a kind of robot). By the end of the year 2017, the company has installed approximately forty-five thousand Kiva robots to achieve fast and effective packing of products. The study of Collis et al (2018) reflects that Kiva robots have successfully able to reduce the timing from sixty-five minutes to fifteen minutes from receiving the order to shipping the order. Moreover, it uses FedEx and UPS to ship the products globally via plane or van for local delivery.

Since Amazon has an independent sales website, which operates its virtual business in several countries around the world. These countries are the U.S.A, the U.K, France, Germany, Italy, India, Brazil, and many more.  One of the most strategic for saving a lot of storage cost is to integrate the inventories in DCs and partner’s warehouses. Amazon has adopted this strategy that helps the company to save a lot of storage costs. As opined by case study writing help professional it reduces the cost of inventory physical retail stores. Hence, there is no need for Amazon to spend its cost on physical retail stores for the purpose of inventories (Yu et al, 2017). All the warehouses of Amazon are situated near large population hubs. All the warehouses of Amazon have a well-developed communication system and logistic networks that help them to transport the product from one place to another without making any mistakes or errors.  As per the study of Hook and Wright (2015), the support of technologies inside the warehouses of Amazon has been a key advantage and helped the company to develop more than one hundred and twenty giant warehouses around the world. to strengthen its delivery services, Amazon has built more than two dozen Prime Now Delivery hubs across the cities. Along with this, the company has also incorporated a drone system to deliver the products within a limited range of areas in the city. Under the proposal of Amazon Prime Air, the company promises the customers to deliver the products within thirty minutes by using drones (Singireddy and Daim, 2018). It helps the company to reduce delivery costs and makes the delivery faster and smoother. Along with this, it also enables the company to manage its corporate social responsibility effectively.    In addition to this, this giant e-commerce company has also developed a new network of midsized distribution centers. This is also known as a sortation center that acts as a link between the giant warehouses and local post offices.

Another strategic move adopted by Amazon to improve its supply chain management process is efficient transportation. As per the analysis of the research study of Allen (2017), efficient transportation management plays a vital role in achieving efficient supply chains. End-to-end visibility in the transportation of products helps the company to tackle challenges related to shorter lead times, absence of drivers, increased freight costs, and many more. In this scenario, Amazon’s powerful step to strengthen its logistics is very crucial. The company decides to remain independent in terms of logistics. Amazon understands that depending on a third party for delivery will only delay the delivery timing of the products. This will only lead to customer dissatisfaction and loss of trust. Now, Amazon’s own logistics has made it possible to deliver the product within twenty-four hours of placing the order. In addition to this, this giant e-commerce business organization has also introduced motorcycle delivery services in some countries of the world, including India. Moreover, the allowance of paying cash after delivery has attracted a large number of customers from all over the world.  In other areas of the world such as U.S metro areas, Amazon has successfully launched a new supply chain services in the year 2015. One of these supply chain services is one-day services that have attracted a lot of customers to order products of urgent need (Shranya and Nair, 2018).

Another reason behind Amazon’s success in the field of supply chain management is related to pricing schemes. Cost-effectiveness is one of the crucial parts of the supply chain management of Amazon. As per the analysis of the study of Dunne (2020), Amazon has cleverly differentiated its customer base. This strategy has helped the company to save a lot of delivery charges. In differentiating customers on the basis of the prime customer and standard customers, the company has offered different delivery options to both segments of customers. For example, in such a pricing scheme of product delivery, the prime customer may have to pay more for the product but receives free and super-fast delivery. On the other hand, standard customers of Amazon may pay the normal price of the product but receives slow delivery.

In the context of inventory management, Amazon has developed a three-tier system for the flow of information and products (Bharadwaj, 2019). In the below figure, the three-tier system of inventory segmentation represents the flow of information from Tier 1 to Tier 3 or vice-versa. In the first phase, which is the website of Amazon’s e-commerce and IT system, there is direct contact with the customers.  This phase passes the information to the three tiers in the supply chain. Hence, it can be seen that there is a flow of information from Tier 1 to Tier 3. On the other hand, the flow of goods or products is from Tier 3 to Tier 1. To know more get free assistance from cheap assignment help experts of SourceEssay.

Figure 5: Inventory segmentation of Amazon
(Source: Bharadwaj, 2019)

With respect to sourcing, Amazon has multiple partners that belong to different countries. For example, Ashford.com is one of the pioneer partners of Amazon which is an online retailing of luxury and premium products. Other partners are Della.com, Gear.com, HomeGrocer.com, and many more. Partnerships also help Amazon to operate its business activities efficiently and effectively all around the world. Another strategy adopted by Amazon company to manage its supply chain is 

Thus, it has been acutely analyzed that how Amazon Company has emerged as a giant and powerful retail e-commerce business organization by effectively managing its supply chains. E-commerce is largely reliant on its supply chain management and if the company has implemented its strategic decision in terms of supply chain management, then, it will receive maximum output and profits. 

Critical Success Factors Of Amazon In Relation To Supply Chain Management 

The above analysis of Amazon’s supply chain management strategies reflects that it is the key to achieving a desirable outcome. Due to its robust and appropriate supply management strategy, Amazon is witnessing immense popularity and growth and enjoys excessive competitive advantages. It is successful in leaving behind the two rivalries, eBay and Wal-Mart by bringing constant innovation in the field of supply chains. As of 2918, Amazon has around two-hundred and eight distribution and fulfillment centers in the USA only. Along with this, it has more than thirty-two Boeing, around eight hundred aircraft, and thousands of trucks to ship the products globally (Yu et al, 2017).

The critical success factors in the field of supply chain management can be categorized as budget reliability, market competence, good logistic system planning, well-designed distribution system, effective communication, fairness, trust, application of technologies, and many more (Ab Talib and Hamid, 2014). 

The first critical success factor of Amazon’s supply chain management is its logistic system. It acts as a weapon for Amazon to compete confidently with its rivalry in terms of speed, reliability, and cost. The enhanced logistic function of Amazon has helped the customers of this business organization receive fast and correct delivery of products. The company is using predictive analytics tools to examine customer’s shopping history, choices, patterns, and preferences. This helps the company to predict the shopping behavior of the customers and acts accordingly to maintain and manage supply chains. Well-managed logistics improve the efficiency of supply chain management of Amazon. In ocean freight, a lot of organizations and paper works are involved. In addition to this, a lot of works are done manually, chances of error and mistakes are high. It also results in delayed delivery of products. However, by leveraging blockchain technology, all the updated information and documents can be verified easily within a short span of time. Hence as said by assignment writing service experts this helps Amazon and involving parties to conduct fair and transparent business activities without any delay (Groenfeldt, 2017). 

Another critical success factor of Amazon’s supply chain is the technological factor. Implementing robotic technology to manage warehouse for picking and packing the products can be regarded as one of the most influential success factors in adding value to the supply chain management effectiveness. The installation of robots has brought many significant advantages in terms of reducing delays, increasing efficiency, productivity, assisting customers, and reduces labor cost (cost-saving) (Jain and Sharma, 2017). In the context of reduced delays, the study of Daniels (2015) states that the use of robotic technologies in the firm will help it to achieve positive outcomes. In the same way, the installation of robots helps the Amazon Company to avoid huge initial investments. Thus, this will also reduce the operating cost of the company. In addition to this, it deducts labor costs by replacing human workers with robots that ultimately serves as a cost-saving mechanism for Amazon. Free assistance is being rendered by SourceEssay native writers for preparing tuition assignments.

The overall purpose of the present essay seems to be fulfilled by analyzing the supply chain management strategies adopted by one of the biggest and powerful online retail company-Amazon. The current paper has discussed the main advantages of focusing on and improving supply chain management for a firm. Especially, in the context of e-commerce business organization, the essay has analyzed that the supply chain is the only and major source of achieving maximum profits and customer loyalty. The overall business of e-commerce relies on its supply chain management. Next, the essay has provided a deep insight into the background of Amazon Company and how this company has managed to spread its dominancy from a bookstore to the overall empire of the world of business. It has vividly represented the stock price, revenue profits, and operating profits of Amazon and understood that this company has effectively managed its supply chain process to reach heights. Further, the essay tries to dive deep into the main areas of supply chain management in which Amazon has significantly applied its strategic planning. It has been observed that logistics, technologies, transportation, pricing, were the main areas in which this retail company has given primary focus. It has brought several innovations and schemes to make an efficient and smooth supply of products from one location to another location around the world. Be it the decision of remaining independent in logistics, or pricing schemes, the company has shown remarkable progress and growth in every aspect of supply chain management. A further section of the essay has explored critical success factors and concluded that logistics and technological implications are the main critical success factors of Amazon.

Thus, in order to conclude, it can be said the Amazon has evolved greatly as per the external environmental situations of modern business. It will continue to evolve and grow if it maintains the same level of consistency in terms of supply chain management.

References

Ab Talib, M.S. and Hamid, A.B.A., 2014. Application of critical success factors in supply chain management. International Journal of Supply Chain Management3(1), pp.21-33.

Bharadwaj, S., 2019. The Engineering Behind A Successful Supply Chain Management Strategy: An Insight Into Amazon. Com. International Journal of Scientific and Technology Research8(10), pp.281-286.

Collis, D.A.V.I.D., Wu, A.N.D.Y., Koning, R.E.M.B.R.A.N.D. and Sun, H.C., 2018. Walmart Inc. takes on Amazon. com. Harv. Bus. Sch. Publ, p.30.

Daniels, J., 2015. Robots move beyond warehouses, into retail stores. Retrieved from www.cnbc.com/2015/11/18/robots-move-beyond-warehouses-into-retail

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Johnson, T., 2020. How the Amazon Supply Chain Strategy Works. Retrieved from: https://tinuiti.com/blog/amazon/amazon-supply-chain/

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Shranya& Nair, S.V., 2018. Supply Chain Management System of Amazon. International Journal of Latest Technology in Engineering, Management & Applied Science, 7 (1).

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