A case study of Amazon on its supply chain management

Topics: Supply chain management, Inventory, Supply chain Pages: 8 (2664 words) Published: April 25, 2014
INTRODUCTION

Every company has their own supply chain in order to sort or produce goods. However, the company needs to manage supply chain to maximize its highest benefits. By having effective supply chain management, the company can ensure that the right product or service will be available at the time to the right place and at the right price (Kamal 2007). Amazon is one of the companies that have best supply chain practices in order to respond high level of responsiveness for the customers. Thereby, this paper explains about Amazon Company, analysis of Amazon’s supply chain, recommendations and barriers to implement will be discussed.

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 difference 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 (Warman 2012). Amazon operates as a pure internet retailers that does not have retail store at all while the delivery will be done through Amazon’s networks of distribution centres. This operation makes the company is able to provide wider range of goods and lower cost of products with high quality. Moreover, it is also increase customer satisfaction as it supports customer convenience.

An effective supply chain strategy makes the company is able to respond high level of responsiveness. 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. Currently, eฺBay is pushing shipping fee to the seller in order to reduce cost for the buyers while Walmart introduced free shipping to the customers but buyers have to pick up the item at the store (Amazon strategies 2010). ANALYSIS OF AMAZON SUPPLY CHAIN

Most of the companies need successful supply chain management to create sustainable competitive advantages. There are various benefits from having an effective supply chain management such as inventory reduction, delivery service improvement and shorter product life cycles (Fawcett et al 2008). This part provides the scenario of Amazon’s supply chain strategy, how Amazon manages in wider context, factors influencing its supply chain, and strategic and operational implications will be evaluated.

Supply chain strategy of Amazon
Strategic fits
According to Chopra and Meindl (2007), supply chain strategy and competitive strategy should have aligned goals. Amazon has identified their customers as highly responsiveness. In order to respond with high uncertainty demand and availability of products, the four main components drive the outcome of Amazon are having several distribution centres as a storage facilities, multi-tier inventory management, highly efficiency transportation and implement information systems to provide real time information within its supply chain. All of these factors explain how both strategies of Amazon are fit together and that makes Amazon’s supply chain successful. Inventory outsourcing

The advantage of outsourcing is to help the company to focus on its core activities and cost savings (Bucki N.D.). Amazon is one of the companies that need to gain those benefits from inventory outsourcing. However, there is another side of outsourcing deals as well. Chandra (2008) argued that the company should not outsource even it was not their core activities when the demand level is increasing. The company is able to optimize the service if the stock is owned and managed efficiently. So Amazon decided to outsource only some part of its inventory in order to mitigate risks and optimize services. The products that are frequently purchased or popular were keeping and managing in-house while other products are stocked by...
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