Amazon Supply Chain
Amazon Corporation is in the business of offering online shopping and shipping services. The founder, Jeffery Bezos established the firm in nineteen ninety-four of which then the idea was taken up slowly due to limited internet access. The aim of Bezos back then was for Amazon to become one of the best online bookstores. Bezos had the knowledge of how to run a virtual shop on the Internet, and this played a significant role in his success. Bezos had a vision of diversifying and expanding the service and product catalog in future, and this was possible due to the adapted model from the beginning. To date, you can find virtually anything on Amazon, and the public has rated Amazon as their best one stop shop for purchasing any goods or services online. For this success, Amazon focused on management practices which have played a significant role. Amazon operates purely online and does not own even a single shop but does deliveries via their distribution networks. This strategy is profitable and provides customer satisfaction from the convenience experienced.
The company is guided by some principles which have seen to its success. Always striving to outdo customer expectations thus the need to understand the customers’ needs and expectations. Amazon also focuses on their core business thus not letting competition become a hindrance. Moreover, the organization always ensures that it sticks to its objectives and goals and is always aiming to be a leader in the industry. The structure at Amazon is multidivisional which gives a clear picture of how the structure of the organization is in harmony with the supply chain structure. This structure is efficient in labor division and specialization with the potentiality for efficiency and quality.
Any company that is operational ought to have a working supply chain to ensure goods are produced and sort. The primary function of a business entity is to maximize profits and thus the need for a supply chain which provides right products at the right price, time and place (Wisner, Tan, & Leong, 2015). Amazon is rated as one of the companies having the best supply chain which is a facilitator to high customer responsiveness. The paper will address supply chain strategies at Amazon and how they can manage the factors which influence its supply chain and evaluate the operational and strategic implications.
Supply chain management at Amazon is guided by a number of strategies. These are the strategies that the management employees utilize to ensure organization goals are achieved, and all activities are conducted with close attention to the supply chain management. This is essential since it creates a basis for competitive advantages over the market (Wisner, Tan, & Leong, 2015). The various benefits accrued include a reduction in inventory, improved delivery service, and reduced product life cycles.
Outsourcing inventory is an important aspect of the supply chain since it ensures the company’s focus embarks on the core business and cost saving. Amazon has worked on the way to accrue benefits from outsourcing inventory. However, outsourcing should not be an option if there is no increase in demand since a company can optimize service and manage and stock efficiently (Wisner, Tan, & Leong, 2015). Amazon resulted in the outsourcing strategy with the aim of optimizing services and mitigate risks. Frequently purchased products are maintained and kept in-house whereas the less popular are handed to distributors to stock. Goods are shipped only after a request from Amazon, and this saves costs from holding a lot of inventory improving customer service due to efficiency.
Differentiation of clients with pricing is another aspect of the supply chain. Different customers need services that are different and at prices that are different thus customers can be differentiated using the option of dispatch and delivery. Amazon has adopted various types of costs in deliveries such as first class, one day or super saver delivery with each type reflecting on how fast a customer receives his request. Therefore if a client needs a commodity urgently, the price has to be higher and buyers are willing to bear the price. Amazon has come up with customer segments that match inventory strategy with distribution systems with a bid to control service level and cost. This approach has seen Amazon increase flexibility.
Push-pull strategy is a strategy included in the supply chain and has yielded results. The company initially began with pull systems where there was no overhead, warehouse or inventory. The company acted as a middleman whose primary responsibility was taking orders and filling them with Ingram book group. With time the company has grown forcing it to at least hold inventory to enable them to become responsive to customer orders by engaging distribution centers. Thus the company adapted the push-pull strategy where the stock is held by pull strategy and dispatched using push strategy. This distribution centers has increased holding costs but have had great customer satisfaction (Wisner, Tan, & Leong, 2015).
Amazon utilizes the inventory segmentation in its supply chain by including inventory network which is multi-tier composed of three tiers. This has helped the organization in planning and offering optimization that is real time to reduce the inventory needs required to attain the service level. This network has enabled Amazon to have an unlimited selection. However, each tier is treated differently, and the information is not shared. The tires are divided into distribution centers, wholesale and partners and finally manufacturers, publishers, third party sellers, and vendors. These parties play their role of providing an extensive selection of the products and services.
Some of the factors affecting amazons supply chain include transportation and order sourcing. Amazon has a myriad of choices in delivery to balance the service offered to the cost of shipping. The company receives clients who order in small quantities, therefore, cannot manage to fill a truck thus the option to free shipping in a bid to achieving longer lead times. This also has the benefit of economies of scale reducing significantly on cost (Wisner, Tan, & Leong, 2015). Improved responsiveness has come at a cost even though clients pay more to get the product or service sooner thus the need for Amazon to design a supply chain that addresses this challenge and minimizes costs. The biggest problem being faced by Amazon is deciding the party responsible for dealing with the customer order between external partnerships or the internal warehouse. Immediately an order is placed, it is the core business of the company to ensure it’s received on time. The challenge arises since products are located in different locations and cannot be incorporated to a single delivery. The company has adopted the use of warehouse management systems to facilitate the supply chain.
Amazon is always striving to achieve more and this is usually by forecasting demand with the aim of being always up to date. There should be deployment of algorithms that will forecast new trends or products to always keep up with the competition. Moreover, Amazon should aim at reducing waste in the supply chain by developing practices that ensure sustainability and efficiency. This is because of their entrance in the cereals and perishable commodities.
Amazon Corporation is a leader in online shopping services because of providing preferential products to customers. The corporation’s vision has driven it up the ladder from a small online bookstore to being one of the biggest online shopping stores. Supply chain management has played a vital role in its success. This is as a result of partner cooperation and emphasis on multi-tier inventory systems (Wisner, Tan, & Leong, 2015). However, there is need to ensure distribution networks are efficient for on time deliveries. This is a clear reflection of the impact of supply chain strategy. Amazon has maximized return on investment in number of ways by having a well-designed supply chain. The benefits accrued are Efficiency, Asset utilization and Customer response where there has been reduction in cost as focus will shift to reduction in operating costs and improvement in productivity.
Wisner, J. D., Tan, K.-C., & Leong, G. K. (2015). Principles of Supply Chain Management. Boston, MA: Cengage Learning.