Amazon.com’s Supply Chain Management Practices Subject- SCM MBA(Marketing Management) IMS Supply Chain Management Assignments and Presentations

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INSTITUTE OF MANAGEMENT STUDIES
Supply Chain Management Assignment
April ‘15
Amazon.com’s Supply Chain Management
Practices
Submitted By:
Aditi Kothari
MBA(MM) II Sem
Sec “B”
Submitted To:
Dr. Piyush Kendurkar

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Table of Contents
1. Abstract ………………………………………………………………………………… 3
2. Introduction ……………………………………………………………………………..4
3. Issues in Supply Chain ………………………………………………………………….5

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Abstract
The case provides an overview of Amazon.com's inventory management. Jeffrey Preston Bezos the
founder of Amazon.com launched the company when he realized that Internet provided immense scope
for online trading. Although the site was originally launched as an online bookstore it eventually offered
severalother products to keep abreast of the competition. The case takes a look at the different products
and features offered on the site. The case also discusses Amazon's value propositions and its criteria for
choosing strategic partners. It then elaborates on the strategies adopted by Amazon for managing its
inventory.It also explains Amazon's decision to outsource inventory management to distributors. The case
takes a look at Amazon's decision to sell the products of competing retailers on its site. It concludes with
a brief note on the future challenges in Amazon's warehouse management.

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Introduction
Amazon.com (Amazon) is one of the first online shopping sites launched in 1995. Since its inception, it
has been consistently ranked as one of the best retail sites on the Internet and is regarded as the universal
model for successfulInternet retailing. In March 1998, Amazon was ranked among the top 20 internet
sites in almost all the major market surveys.
According to an analyst, “When you think of web shopping, you think of Amazon first.” The
ForresterPower Rankingsin 2000, ranked Amazon as the best online shopping site. Amazon owed a large
part of its popularity to its excellent customer service,which was due to its exemplary inventory
management.Amazon realized that there were a lot of players in the e-tailing industry and therefore it
needed to consolidate its position as one of the best online shopping sites. Accordingly, it took several
measures. In order to increase its revenue, it added severalnew products to its site. In 1999, on an
average,it added a new product on its site once in every six weeks.It entered into strategic alliances with
severalcompanies to increase the range of products available on its site. Later,it strengthened its
Customer Fulfilment Network by obtaining products directly from the distributors rather than stocking all
the goods in its warehouse. Amazon was popular among its customers for shipping the goods within the
estimated time, leading to satisfied customers, improved market share and repeat business. By the end of
2002, Amazon had 22.3 million registered users on its site. By 2003, Amazon became the biggest book,
music and video retailer on the Internet and offered more than 4.7 million books, videos, music CDs,
DVDs,computer games and other products.
Further, Amazon had the distinction of being the first e-commerce site to use collaborative filtering
technology. Amazon's immediate business goal was to 'get big fast' which reflected the driving force
behind the company's growth.

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Objectives of Amazon.com

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1) Put yourselfin customer's shoes: at Amazon,they care so much about customers and this is not just
something fancy to say. In many internal meetings, Bezos leaves one empty chair next to him and tell
people that they should also think on behalf of one important customer who can't manage to be there.
Then the word "empty chair" becomes a symbol of customer centric business practices inside Amazon.
Also, many executives have to attend call center training so they can know customer's feedback,good or
bad, firsthand.
Update 9 Sep 2013:I just come across one interesting discussion on Quora saying that Amazon actually
named one of its building "Wainwright"after its first customer and this customer still have the original
book and packing slip with him. This is something remarkable!
2) Don't be distracted by the competition: many companies focus on benchmarking performance
against competitors but this is not the case for Amazon. Bezos believes that the pace of industry change is
too fast so it's not good to make knee jerk reaction after competitors do something new. What Amazon
does is to acknowledge what happens but keep focusing on it customer's needs.
3) Keep an eye on the ball: "culture of metrics" is the word used to described the obsession over the
performance measurement. They're currently tracking about 500 KPIs and 80% of them are customer
related.
4) Go extra mile: Bezos once insisted on using better quality box so customer can reuse it. And when
Amazon's brand is on every box, it's the free publicity. He also pushed many executives at DCs to extend
order closing time to 6pm or 7pm, even though this means over-time cost to Amazon.
5) Plant seeds and watch them grow: the example of this philosophy is that Amazon invests in many
hardware technologies that don't make any short-term gain just to make sure that they build Kindle that
people love.
6) Learn to improvise: Amazon asks candidates to make action plans, outside their comfort zone, with
the assumption that there will be no budget for such plan, to test how each candidate react to unfamiliar
business issues. As mentioned earlier, the pace of industry change is fast so they need people who can
think outside the box.
7) Build the dream team: Amazon believes small work team is more efficient. To determine the right
size of each team, they've developed a "rule of thumb". If it needs more than 2 pizzas to feed the team,
that team is too big (so I name it "2-Pizza Heuristics").