Introduction
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).
Amazon and Supply Chain Management
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 marvellous 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 fulfilment 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
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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.
QUESTIONS:
1. What is Supply Chain Management? Analyse the importance of Supply Chain in
an E-Commerce business model like Amazon.
2. Explain the Supply Chain Management process used by Amazon.
3. What are the Critical Success Factors (CSF’s) in the Amazon SCM model.
Explain the role and importance of each one of them
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