Logistic Amazon

Topics: Supply chain management, Amazon.com, Inventory Pages: 9 (2420 words) Published: October 28, 2010

The flow of inventory2

The improvement of logistics2

Inventory Cost3

Delivery Process4

Other company initiatives to Gain Profitability4

Launching Amazon in the UK and Germany4

Launching Amazon in France4

Amazon’s challenges5

Globalization and localization5


Integrated Supply Chain7


Supply Chain Issues9



The flow of inventory

At the first beginning, Amazon had hold the modest inventories and rely on the wholesalers – primarily Ingram Book Company and Baker & Taylor – to build its online book catalogue and source its huge market. It offered 2.5 million titles. 2,000 of them are stock in its own warehouse which is facility in Seattle and others were sourced on only if the customers placed an order. After receive the order, it would submit the purchase order to the wholesaler. The wholesaler will then ship the stock to the Amazon’s distribution center. Once the titles have reached the warehouse, Amazon employees would pick and pack the order and ship it to the customer.

The improvement of logistics

Growth of the Seattle distribution center capacity has enabled Amazon increased the number of titles held in the center. It also launched a second distribution center in Delaware to decrease order fulfilment lead times and lessen its dependence on its main supplier Ingram. Besides, Amazon, as well, develops new software to support its back-office operations. Furthermore, Amazon has adapted its supply chain and distribution network to support the new product lines and features transformation and its projected triple-digit growth. It has turned the executives to outside experts and used i2 Technologies’ Supply Chain Strategist software package to consider for its distribution facilities. It is based on factors such as supplier and customer locations, inbound and outbound freight rates, warehousing expenses, labour, and other cost factors. It also offered vary different characteristic of merchandise to its customers. For distribution centers, “pick-to-light” system is equipped. It shows workers which items to pick next and the amount. In addition, the distribution centers were equipped with radio-frequency technology, which the warehouse locations can send to the worker’s handheld terminal via radio signals. Amazon also maintained “pick profiles” for fast selling items. It brings conveniences for employees that specified optimal combinations of customer orders for picking and shipping. To measure workers performance, in order to maintain high level of quality and productivity in its distribution centers, Amazon development key metrics. It also used Six Sigma DMAIC (Define, Measure, Analyze, Improve, and Control) to reduce variation and defects. Nevertheless, Amazon encouraged staff to simulate holiday season condition which led it to create a new “Flow Manager” position in order make the titles easier to locate, sort and ship customer orders. Lastly, arrangements of additional storage capacity are been added to the system during the holiday season to support the storage and fulfilment functions of the US distribution centers.

Inventory Cost

Another focus of Wilke’s team was inventory optimization in the fulfilment network. Having the product in the right place, right amount and right time would decrease Amazon’s inventory carrying cost and prevent split shipments. To improve the inventory management, firstly, Wilke’s team refined the software to forecast customers demand to reduce the risk of underestimating merchandise. Besides, they established buying rules to better allocate volumes among wholesaler and direct vendors. Furthermore, they integrated its suppliers’ management system. They also implement a set of “cascading” buying rules that determine which supplier offered the best price and delivery options....
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