1.1 INTRODUCTIONSupplychain management also known as (SCM) is the information, oversight of materialsand the finances as the process from the producer, also known as the suppliesto the manufacturer, which then is sent to the wholesaler, following retailerand finally reaching the customer. It involves combined coordination whichflows both among the companies. “The application of Internet has propelled theSupply Chain Management to new dimension.
The power of Internet to synchronizethe channel functions into single, scalable “virtual” enterprise, capable ofoptimizing resources anywhere and anytime in the supply chain to meet marketopportunities.”1 In year 1994, the company established, and was found byJeffrey Bezos. He realized that internet provided a popular scope for onlineshopping. However, back then the society was not familiar with internetservices and therefore did not appreciate his idea, comparing to now. Amazonwas the biggest launching online book store in the world, ever since. Amazonallows people to buy products online, and started expanding their diversifyingseveral other products to improve their sales and shows people that one can buyliterally anything from Amazon (Esscortment 2011). This essay will give abrief research about supply chain practices of Amazon.
com includes itshistorical development, Global network planning and logistics , Productionplanning, Inventory management, Use of information and information technology,Customer service and pricing, Ethical and environmental policy. 1.2 Historical development of the companyAmazoninitially launched as pure online book retailer in 1995. The fastest success ofthe company made them to built up its structure and systems and started toincrease their distribution centre. Four years after the launch, in 1998 Amazonrelied on same procurement model and started selling CD and DVD.
RobertSpector introduced something called a “Get big Fast” 2 strategy, which Bezosfollowed to reach the customers through their central websites as the beginningwhich was already in the form of PC’s and internet. This is when they startedadding new features and products. In year2000, it was Amazons year.
It launched 3PL business, a new logo which is thecurrent one the arrow running from A to Z, which reflects to have everything inAmazon store. Amazon signs partnership deal in 2001 to take over running ofBorders.com to provide Amazon customers picking up products in Borders storesnationwide. This is aHistoric timeline: from 2002 to 2015 In 2002, Amazon launched its website on e-commerce which is a cloud computing platform which took over its biggest competitors, like eBay, Wal-Mart. In 2005, Amazon prime, its annual membership was made introduced in USA, two years later in UK. In 2006 ,Amazon Fresh is the online fresh food delivery, launched in Seattle, USA.
In 2007, launches Amazon kindle, eBook reader where all books, Magazines can be purchased as pdf. In 2012, Acquired kiva a robotics company for $775 million. In 2013, Amazon reveals the plan of drone delivery system. In 2015, Amazon celebrates its 20th birthday with capitalization of $245 billion.10 1.3 Amazon supply chain1.3.
1 Global network planning and logisticsCompanieslike Amazon concentrated on the structure of their global locations and assignproducts, technologies and investment. Adding to this, they studied aboutcentralized and local governance and ultimately which set up manufacturing andlogistics at new locations, across the world. Referring to AlanRuston:”logistics network planning relies on following major points: The roleof DC’s and warehouse; Distribution cost factors and relationship; amethodology for planning a distribution structure; an overview of differentmodeling techniques; qualitative assessment; DC site considerations.” 3Role of distribution centre and Warehouse: Source: https://services.amazon.com/global-selling/overview.
html/ref=asus_ags_snav_over A methodology for planning a distributionstructure Source: copyright 2014,2011 John Wiley and sonsDistributioncost factors and relationship of Amazon source:http://www.scdigest.com/firstthoughts/17-03-02.php?cid=12028 An overview of modelling techniqueAmazonhave been planning on launching it own-account logistics network. They wantthis because this will make them rely less on third-party logistics providerslike DHL and UPS. However, this does not mean that Amazon is intending tocompete against these carriers.
Amazon want to proceed this so they can developa network to gain the ability to react faster when third do not complete theirwishes. They want to use own trucks to move goods out of its warehouses. Furthermore, as analyzed by Oreskovic, “Amazon has recently leasedairplanes which will mainly operate in the United States in order to ensurefast deliveries..
” (Oreskovic, 2016).Dc siteconsiderations Amazonstarted to adapt its supply chain and distribution network. Amazon first haveto decide how many DC should be built and where to locate them. According to(simchi levi pg 211) the Amazon started using ‘i2 technologies’ thesupply chain strategist software package. This software helped to identify thelocation by considering factors based on suppliers and customer location,warehouse expenses, freight rates, labor and other cost.
1.3.2 Production planning and designTheplanning of manufacturing and production modules in a company is said toproduction planning. In the process of Amazon production planning utilizes theresource allocation of raw materials ,activities of staff, and necessarymaterials are procured and creating the finished product according to theproduction capacity and schedule specified, in order to distribute severalcustomers. Push andPull strategy Accordingto Martin Chrsitopher follows the strategy of reorder point, which is theconventional approach about meeting the customer requirements based upon someform of statistical inventory control and a length of lead time. This imageexplains the push and pull strategy.
(Martin Chrsitopher 2015) source:https://www.linkedin.com/pulse/push-pull-manufacturing-process-wilson-goncalves-silvaAmazon provides customers shipping in threetypes of ways, standard shipping, same day shipping and prime now shipping. Theprocesses of these three deliveries are explained below. Source : https://smbp.uwaterloo.
ca/2016/06/amazon-automating-the-supply-chain-using-mobile-technology Omni channelapproach Retailingindustry involves towards a complicated Omni channel retailing experience, thedistinctions between physical and online will disappear, and will turn theworld into a showroom. The retail industry will shift a concierge model gearedtowards helping consumers, and not just focus on tractions and deliveries. Anexample would be the physical retail space for, which can be accessed on smartphones. The Whole Foods gets company into grocery market through a massive wayand comes back after a test concept for its store, and then can be click andcollected from many locations. 15There arestores within a store concept which are part of Amazon’s strategy, since itrecently has been executed something similar at Kohl’s locations.
Amazon,struck a partnership with Kohl’s which dedicated space in some stores was for”The Amazon Smart Home Experience”, which gave Amazon sales a good income. Omnichannel fulfillment for a lower costs and faster delivery times, which is adetail benefits for difficulties which are involved with specific services likeclick-and-collect, ship-to-store, and ship-from-store. 16 1.3.3 Inventory managementAccordingto (simchi levi,pg 30) “The goal of effective inventory management in thesupply chain is to have correct inventory at the right place at the right timeto minimize the cost while satisfying customer service requirements”. Thus forthe giant like Amazon, managing inventory in the complex supply chain isdifficult. Although they are the best example for taking inventory relateddecisions which can have significant impact on making excellent customerservice and with efficient supply chain cost.
Inaddition, Amazon faced huge problems and challenges of maintaining itshuge inventory in line with the efficiency rate is rapidly increasing. Most thewarehouses were too large therefore had to at one point that the company had tofind a better way of managing the inventory. Result was that the organizationdid drop shipping system.
Drop shipping model is a method of supply chainmanagement where the original retailer does not have its stock item or itsproduct to purchased by the customer but the actual retailer transfers theorder placed by the customer to the manufacturer or a wholesaler of the productwho, the actual retailer has already have an agreement over its profit shareand commissions. In general the retailer only enlists or displays the itemsavailable with different manufacturers or wholesaler or in some cases itprovides the catalogue of the items or products available with the manufacturerretailer has tied up with. This is a drop shipping Model Cycle of delivery: Source:https://cdn.salehoo.com/files/image/blog/benefits-of-free-amazon-shipping-for-dropshippers-01.
png?id=2Amazonhas started out referencing parts of its management and resigning itswarehouses by introducing their “Chaotic storage” (Schofield, 2016). Warehousesnow are highly managed and arranged based on product categories or its level ofdemands. However, the company decided to distance itself from the rearrangingconstant to complete isles in case of new product and introductions, or evenits large deliveries quantities of items are an issue. Methods such asorganizations make a purchase straight to the manufacturers when a customermakes an order. Business are run this way because there are no moreintermediaries partake in making a transaction and organization are able tosave a lot of money and time when making a purchases .
Company develop simplegrid of items which are randomly assigned to isle, sections and shelf and canbe easily identified for the user’s purchase. By having a barcode for eachitem, products can be easily located and found for more efficiently and mustfaster finding. The registration system which these barcodes are based on isable to update item availability. The cost of maintaining warehouses greatlydecreases and furthers more the company.
The warehouses are still operating atits lowest cost, and stocks are still put in the order of their barcodes.(Michalski 2009). Amazon’s Management and inventory and not to forget theirAmazon Marketplace, is well supported by the Appath cloud software. On Appath’swebsite, it shows that selling on Amazon is beneficial for many companies. It’snot easy to manage the selling platform of Amazon.7 1.
3.4 Amazon’s use of information andinformation technologyInformationsand data analysis play a big role in supply chain management as inventory,pricing, sourcing, transportation and facilities are based on an accurateinformations. Factors are to be discussed and considered when managinginformations.
8 Mobile technologyPowerfulcloud-based applications will increase gradually towards mobile platforms,according to Hamerlinck. “Mobile devices are not only becoming more mainstream,but more powerful. They have more storage, more computing power and moregraphics possibilities…The cloud will get more and more important”, he alsoincluded he will be inviting his partners to build some new features. 9Amazon’s cloud computingBiggernumber of manufacturers and retailers are deciding to streamline theirworldwide supply chains for the long haul by making a signature forpay-as-you-go logistics services available through the internet the cloud.
Services will reduce the supply-chain costs by making it faster and easier toshare information about shipping with their suppliers, transportation and theend users. Processing informations with the latest most powerful tools. 11Amazonfocus on attracting customers by selling “cloud infrastructure services”.Amazin are able to use their own data and processing requirements to turn whatsomething would normally cost into a profitable division. They are successfullysale and manage a big project which placed them a leading market in cloudservice. 12 Automated Warehouses using KIVA RobotsIn Orderto make the shipping progress as fast as possible they use robots, which is newtechnology. Amazon acquired a maker of a robotics systems. These robots speedrun the entire warehouse moving inventory from shelves to workers to accelerateorder flow.
The company changed its name ti Amazon Robotics LLC in late 2015.This was done like this because it was able to perform many tasks at the same time,and did not require and breaks it was more efficient the humans. The primarytask of the robot performs is the identification of items which have beenordered and attached to the transports for the pickup. When someone orders fromAmazon, a robot gets the informations to its system and will proceed itsrequirements and will identify the location of the product.
13Bezonshas confirmed to invest heavily into the IT development from the beginning ofthe company’s operations. In the past years, Amazon has implemented servicesand systems in the fields of website management’s, customer interactions,search, and many other things. These services will require a good amount ofinvestments and an extremely well developed technological infrastructure. Amazoncurrently possesses the largest quantity of online retailing technologies(Laudon et al., 2014). 1.3.5 Customer service and pricingAmazonintroduced a strategy called “Put yourself in customer’s shoes”, which showsthey care about the customers so much.
The word “empty chair” becomes a symbolof customers centric business from inside the Amazon company. 17Customer Relationship with retailersAmazonintroduces its products by making them available on the net, and new items orservices happens much faster comparing to retailers that use physical channelthis is called “Time to Market”. It is easy to return for E-Business.
Thisrepresents another trade-off for everyone. However, there are risks for thereturn of products which have been purchased online, which means customerscan’t have physical touch before buying the item. So they will be depending onits description from the website. Simply speaking, returning items to retailstores is much easier comparing to online. Customer ExperienceCustomerreviews were introduced early on the production of Amazon.com.
Many peoplethought amazon was crazy for people to post their negatives reviews on productsfor sale on Amazon.com. Nowadays, customer reviews are a big part of Amazon. Itshows the relationship and its confidence of the products. Customers can nowupload images, answer other customers question on the product and rate eachother’s reviews.
https://www.amazon.com/p/feature/xwcf5prt9req576customer pricingSinceAmazon are the leading market across everyone, they still try to cut down oncustomers prices. Amazon is successful in changing and adjusting its prices anddemand new methods to response to seasonality. (Chopra et al.
, 2007). Manyretailer are facing this seasonal peak and are facing many problems ofunavailability or an extended lead time and thereby late their deliveries. Thisis why Amazon regularly offers “off-peak discounting”, which is a benefit formany customers. This will be most beneficial during Christmas-peak. Chopra,S. and Meindl, P. (2007). Supply chain management.
Upper Saddle River, N.J.:Pearson Prentice Hall. 1.3.6 Ethical and environmental policy Accordingto Martin Christopher, Creating a sustainable supply chain depends on “TheTriple Bottom Line” concepts which are Environment, Economy and Society. Amazonemployees should always stick to the law, and its company’s policies, and nottheir personal demands. This is the code of business conduct and Ethics, whichis also known as the “Code of Conduct”.
Employees who are unsure about the lawor any other legal they should contact the Legal Department. Conflicts ofinterest include such as insider trading policy, discrimination and harassment,health and safety, price fixing, bribery, recordkeeping, reporting andfinancial integrity, questions; reporting violations and periodicCertification.http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-govconduct 1.1.
1 ConclusionAll countries are not provided with Internetaccess around the world. Internet connection is much needed to access Amazonthrough mobile application and website.so working with telecommunicationproviders would help improve the growth of company and many customers can enjoyservice of Amazon.Amazons great achievement in supply chain wouldbe reductions of depending on third party by building its own logisticsnetwork. This can make company an enormous competitive advantage when comparingwith competitors’. Amazon should implement recycling package and energysaving standards because company currently is not environmently friendly.
Focusingon green retailing would make them sustainable