Amazon Inc.’s Supply Chain Improvements
Amazon is one of the most notable online stores, constantly innovating and changing standards for retailers. The organization is loyal to its customers and continuously improves for the sake of their comfort. Non-standard ideas, determination to take risks and investment finance in development contribute to rapid growth. The company’s supply chain is one of the conditions for its success. Despite the current high achievements, Amazon continues to invest many resources and efforts in improving its supply chain and continues to be ahead of competitors.
Supply chain management is an essential part of an enterprise’s work that affects its efficiency. It includes warehouse and inventory control, delivery methods and speed, suppliers, and other elements. Amazon’s uniqueness in chain management begins with two types of goods fulfillment that the company offers sellers working on the platform – Fulfillment by Merchant (FBM) and Fulfillment by Amazon (FBA) (Dunne, 2020).
With the first approach, sellers independently manage orders, pack them, and take care of their delivery. Under the FBA, Amazon assumes these obligations, and the seller only needs to provide the necessary goods to the company’s warehouses. Thus, there is the outsourcing of inventory management and insourcing of logistics management (LeBlanc, 2020). Understanding the unreliability of other delivery providers and the importance of the speed of arrival of purchase to customers, the company took over the management of this responsible process.
FBA services are pretty beneficial for sellers, and it may seem that their provision is not profitable for Amazon. For a relatively small payment, sellers do not care about packing the goods or sorting them, problems that can arise during delivery returns, and a high-quality service raises sellers’ competitiveness (Lai et al., 2018). However, Lai et al. (2018) found that despite increasing competitiveness, the FBA can also “mitigate the price competition between the two parties” (p. 22). As a result, the use of FBA and paying for these services from sellers is still beneficial for Amazon.
To achieve a competitive advantage and popularity among consumers, Amazon promised the fastest delivery to its clients. Their desire is reflected in the mission and goals of the company, which according to the founder Jeff Bezos are as follows: “Our goal is to be earth’s most customer-centric company” (Thieuleux, 2018, para. 2). As a result, trying to meet the different needs of buyers, the platform introduced options for delivery types – from prime to free super-saver delivery (LeBlanc, 2020). Different types affect the delivery time, which can even be 2 hours.
Another unique quality of Amazon is the management of the inventory and warehouses in which it is stored. The strategic location of warehouses allows Amazon to manage deliveries most efficiently and regulate their time. By predicting the demand for specific products in certain regions, employees place them according to popularity. Following LeBlanc (2020), prime pallet storage has products that are in high demand, case flow prime storage – products in demand but in smaller quantities, and reserve storage and random storage areas are – goods less in demand. This effective management helped reduce finance waste and contributed to better service delivery.
Amazon is constantly expanding and changing, optimizing operations and introducing innovations. Since its foundation as an online bookstore, the company has been growing annually by 20% and is developing in new areas up to streaming platforms (LeBlanc, 2020). Thanks to them, e-commerce began to gain popularity and the company also significantly changed the traditions of supply chain management using digitalization (Herold et al., 2021). In particular, automated systems from the supplier Kiva Systems, acquired by the company, and renamed Amazon Robotics, operate in warehouses (LeBlanc, 2020). Moreover, the company has invested in air delivery, drone use, truck improvement, and other new delivery methods (Banker, 2021). Thus, the use of technology and creative management strategies contributes to Amazon’s leadership among competitors.
The Amazon supply chain is quite optimized and uses many capabilities up to artificial intelligence. The main recommendations at the moment for the company may be to increase the opportunities for delivery to hard-to-reach areas. Moreover, significant business trends are attention in the environmental aspects, and the company needs to optimize work accordingly. The risks to the company are also the potential unreliability of sellers that they use their services – the goods provided and the purchases by customers may be of poor quality. For this reason, it is crucial to improve the processes of checking the product and collaborating with particular sellers.
Thus, Amazon’s supply chain management has changed e-commerce and retail trade forever. From a strategic point of view, the company’s supply chain has significant strengths, including fast delivery, popularity among customers, the use of automation, and the strategic location of warehouses. Moreover, Amazon uses new development opportunities – it introduces innovative technologies, like drones and new trucks, and improves existing ones. Weaknesses and opportunities for development at the moment are the inaccessibility of services for some regions. Risks and threats for Amazon are unreliable goods provided by sellers. However, Amazon has a strong strategy, which allows the company to develop and constantly expand its activities.
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Dunne, C. (2020). How the Amazon supply chain works. Business 2 Community. Web.
Herold, D. M., Ćwiklicki, M., Pilch, K., & Mikl, J. (2021). The emergence and adoption of digitalization in the logistics and supply chain industry: an institutional perspective. Journal of Enterprise Information Management, ahead-of-print, 1-22. Web.
Lai, G., Liu, H., & Xiao, W. (2018). ‘Fulfilled by Amazon’: A strategic perspective of competition at the e-commerce platform. Social Science Research Network (SSRN) Electronic Journal, 1-24. Web.
LeBlanc, R. (2020). How Amazon is changing supply chain management. The Balance: Small Business. Web.
Thieuleux, E. (2018). Amazon supply chain & logistics secrets. Abc Supply Chain. Web.