Amazon supply chain case study

Amazon over view

 Amazon.com is American based multinational electronic commerce company.
 Amazon was founded in 1994 by Jeff Bezos. Launched online in 1995 It started as an. On line
bookstore. With 2 5 million titles it became the earth's biggest bookstore
 Amazon.com offer Web users the entire selection of titles at discounts of 30 percent or more.
The company has since diversified into the sale of new, used, refurbished and collectible items
in diverse categories.
 In 2008, Amazon had eight warehouses in the U.S. and another fifteen in the rest of the world.

Amazon supply chain portfolio

 Amazon.com sells books, music, and other items over the Internet.
 It is one of the largest e-commerce firms, with a market capitalization of more than $20
billion.
 Amazon.com operates 7 websites that support their business operation globally and offers 20
million items for sale

 Amazon takes a Six Sigma approach to its distribution operations, and applies lean
manufacturing and Total Quality Management methodologies to its processes.

 Amazon Conducting business on an international scale (the e-tailor ships to more than 200
countries)

 Amazon use a global trade management solution to provide customers in more than 40
countries details on the full cost of orders, including country-specific duties, taxes, tariffs and
licenses.

 Part of Amazon's supply chain proficiency is based on its operations philosophy, which is
more reminiscent of industrial manufacturing than traditional retail

Amazon supply chain key issues

 Downstream supply chain flexibility.
 Amazon knew what to do with the Internet.
 Amazon is a master of the supply chain.
 Amazon uses few distribution centers the E-commerce allows Amazon to centralize the stocks
 Inventory centralization pays off most for expensive, slow moving products with high demand
variability
 Many more books can be held on stock centrally (100.000 vs. 10.000 in a store)
 Inventory savings have to be balanced against higher transportation costs.
Amazon supply chain characteristics
 Amazon.com used pull systems (1996-1999) no inventory, Amazon.com used Ingram to meet
most demand
 Amazon.com used push-pull systems from1999-present
 Amazon.com may still use a pure pull strategy for slower items
 Amazon.com uses 7 warehouses, 3M sq. ft.
 Multi-Tier Inventory Model Inventory aggregation respond to fluctuation in demand with lower
level of safety stock

Amazon Supply Chain

Greater Product range

Customer Lower (no retail infrastructure)

Customer Facilities
Pull cost
Pull
Higher distribution cost Transport and
Amazon Retailer
Significant part of the total price/cost Distribution cost

Distributor
Warehouse hour service -24

Publisher
Amazon supply chain features
Publisher

 Amazon.com has world’s largest Linux Database, with a total capacity of 7.8 terabytes, 18.5
TB and 24.7 TB respectively.
 Amazon continually upgraded its search engine capabilities in order to outstrip emerging
competitors
 The Central Amazon Data warehouse is made up of 28 Hewlett Packard servers, with four
CPUs per node, running Oracle 9i database software.
 The architecture handles millions of back-end operations and third party seller queries
 Amazon.com has five international stores in Canada, France, UK, Japan, and Germany
 Amazon.com carries high-demand title in inventory, whereas it purchases low-demand titles
from distributor in response to a customer orders.
 Reduction in various costs like inventory cost , facility cost ,transportation costs and
information costs
 Amazon managed nine inventory turns per year
 Amazon has continued to expand the set of products that it sells online. Besides books and music,
Amazon has added many product categories such as toys, apparel, electronics, jewelry, and shoes.
After several years of losses, Amazon has been profitable since 2003