Supply Chain Management of Amazon.com. Traditional vs. New Supply Chain, Multi-tier supply chain, Key competitive advantages, Automate everything.

1. Amazon.com
Supply Chain
Management

2. Company background
Amazon is an American commerce company based in Seattle, Washington, USA. The company
used to be only a bookstore, but now it diversified into different type of products. The goal of
Amazon is to provide one stop shop experience where the customer can find everything on
Amazon as earth’s biggest selection.
Amazon operates as a pure internet retailer that does not have retail store at all while the
delivery will be done through Amazon’s networks of distribution centres.
Amazon balances between cost of distributions and level of services by having the efficient
distribution centres and multi-tier inventory networks.
However, there is a competition from substitution brands that provided the same service as
Amazon, which are eBay and Walmart.

3. Traditional vs. New Supply Change

4. Amazon Supply Chain: Warehousing
A big part of Amazon’s success lies in its expert warehousing strategy, which ensures products
are easily accessible from pretty much everywhere in the world.
All the company’s warehouses are strategically placed near big metros and population hubs, and
inventory is spread amongst them to ensure supply can meet demand. There are even mini-
warehouses in smaller areas to ensure orders can be sent and delivered fast, no matter what is
being purchased.
Warehouses are also optimized internally. Each with five unique storage areas, the organization
strategy allows team members and pick-and-pack robots to pull products almost instantly and
move them toward delivery.

5. Amazon Supply Chain: Delivery
One of the biggest differentiators between the Amazon supply chain strategy and other online
retailers’ is the plethora of delivery options offered.
those options include the free, two-day Prime deliveries and even the Prime Now option, which
gets products from point A to point B in two hours of less.
The retailer also leverages existing delivery routes via FedEx and UPS, too.
These wide-ranging strategies allow the company to get orders out faster, easier and more
efficiently to basically everywhere in the world – even remote and rural areas not served by
traditional options.

6. Amazon Supply Chain: Technology
The Amazon supply chain management approach is to embrace technology. The company
utilizes countless automation and robotic solutions, both to pick and pack orders as well as
stacking and storing inventory.
These tools not only up the company’s efficiency and delivery speeds, but they also cut down on
warehouse and staffing costs – freeing up funds for other logistics or supply chain needs.

7. Amazon Supply Chain: Manufacturing
Amazon still allows third-party sellers, but the company seems to have learned that many of those third-
party products can be made for much cheaper – and more profitably. The retailer has taken to
manufacturing its own lower-cost products, as well as white-labeling products from other sellers.
Amazon offers branded lines in everything from household products. This allows Amazon to own the
whole lifecycle of its products – from creation to marketing to storage to shipment.

8. Multi-tier supply chain
Products may be in one of Amazon’s own
warehouses. In this case, it will be directly
shipped to the customer
Items may come from a middle
tier consisting of wholesalers and other
intermediaries. Depending on a number of
factors, these products may be shipped
directly to the customer or via Amazon to
the customer
And there is a first tier that may send
directly or through one of the subsequent
tiers to the customer

10. Amazon fulfillment centres
The expansive network of centers that store, pack, ship, and provide customer service for
products is crucial to Amazon’s business model, which requires quick delivery throughout the
country.
The sharp rise in fulfillment centers corresponds with the 2005 introduction of Amazon Prime, in
which subscribers pay an annual fee for two-day shipping and other benefits.
The 2006 launch of Fulfillment by Amazon, in which participating sellers have their items stored,
packed, and shipped by Amazon.

11. AMAZON'S key competitive advantages
Amazon’s technological innovation specifically,
the Internet was able to build a different
integration in the value chain:
Amazon integrated wholesale purchasing and
fulfillment centers with Amazon.com, relying on
modularized delivery services for
distribution; this provided a moat of superior
selection and, at the beginning, lower prices,
and with Prime, superior convenience, for non-
perishable goods.

12. AMAZON'S key competitive advantages
In compare to this is what Walmart’s
traditional value chain looked like:
Walmart was able to integrate wholesale
purchasing with an expansive network of
stores; this provided a moat of sustainably
lower prices for customer driven by
purchasing power over suppliers.

13. AMAZON'S key competitive advantages
Low cost structure, the largest merchandise selection and
a huge number of third party sellers
Amazon is the largest online retailer in the world.
In 2017, the company earned US$108.35 millions purely
from online sales, more than any other retailer in the
world.

14. AMAZON'S key competitive advantages
Synergies between Marketplace, Amazon Web Services and Prime
Amazon is involved in 3 key businesses:
◦ Amazon Marketplace
◦ Amazon Web Services (AWS)
◦ Amazon Prime
All three Amazon offerings
◦ support each other and
◦ create benefits that would not be
◦ achieved if the businesses
◦ operated independently.

15. Amazon Growth Highlights
Amazon Prime has over 100 million users.
Amazon Prime generated $9.72 billion in subscription revenue.
More than 5 billion items shipped worldwide with Amazon Prime.
Amazon now has 566,000 employees.

16. Quantify amazon's ability to generate
value from its SC
Amazon works from the perspective of the customer to come up with ideas that will legitimately
generate value.
Value is captured from customers up front in exchange for a year's worth of free two-day
shipping, among other added benefits. Even if it were to break-even on the individual
purchase, Amazon is able to capture the value in the scale of wholesale pricing and distribution
networks.
Amazon’s key customer value propositions-
◦ Low prices
◦ Fast delivery speed (often same day and with options of free 2-hour delivery) and a
◦ Vast selection (“Earth’s biggest selection”)

17. Analyze the effects of opportunities amazon
faces in its growth and evaluation
Various opportunities to improve Amazon’s business performance and service quality.
External factors that the company can use to enhance its business, such as through growth in the
international e-commerce market.
◦ Expansion in developing markets
◦ Expansion of brick-and-mortar business operations
◦ New partnerships with other firms, especially in developing markets
Partnerships with businesses that have a strong corporate citizenship image can improve the
effects of Amazon’s corporate social responsibility strategy and stakeholder management efforts.

18. Challenges amazon faces in its growth
and evaluation
Inventory has to be optimized. If accomplished, optimized inventory will help lower shipping
costs from fulfillment centers and increase margins.
Good terms are crucial with shipping companies. Since Amazon depends on third-party
shipping companies to deliver packages bearing its name, it relies on a cost-effective agreement,
reliable delivery, and good service from those providers through a contractual agreement with
well-defined terms.
Channel Expansion and High-Growth Pains. As Amazon continues to quickly scale up operations
and diversify with new products, services, and verticals (like its acquisition of Whole Foods, for
example), its rapid growth presents a unique set of challenges –– and places the company in a
position that may be more vulnerable to risk.
Optimization of Data & Fulfillment Centers. Along with Amazon’s rapid growth have come a
particular set of challenges relating to the optimization of its data and fulfillment centers. This is
a very relatable concern for any ecommerce retailer that’s growing quickly.

19. Game-Changing Delivery Strategy
Back in 2005, Amazon launched its Amazon Prime service. By paying an annual membership fee,
customers received guaranteed two-day shipping on hundreds of thousands of products.

20. Identify potential opportunities and
challenges for amazon in improving its SC.
Opportunities -
Improve Inventory management - Organizations have to strike the correct balance between minimizing their stock and the
stomach to meet customer demands.
Improve distribution network - The distribution network of your company is the operational fulcrum around which your supply
chain management system is built.
Challenges -
Poor supply chain management
◦ Supplier mistakes
◦ Inefficiencies in the process
Running out of stock
◦ Not considering your sales velocity
◦ Not monitoring all sales outlets
◦ Getting carried away with sales
◦ Not factoring in holidays or seasons

21. Solution - Automate everything

22. Automate everything
Faster - Product distribution reduce the delivery time
More flexible - Ad hoc and real-time planning allows a flexible reaction to changing demand or
supply situations.
More granular - The demand of customers for more and more individualized products is
continuously increasing. New transport concepts, such as drone delivery, allow companies to
manage the last mile efficiently for single and high-value dense packages.
More accurate - Today’s generation of performance management systems provides real-time,
end-to-end transparency throughout the supply chain.
More efficient - Efficiency in the supply chain is boosted by the automation of both physical
tasks and planning.