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Amazon Case Study

1. a. Objective Function: Maximize efficiency in Europe to catch the US capabilities in 5 years b. Decision Variables: Build an EDN or not, quantity of DCs c. Constraints: Delivery time satisfied, storage capacity, satisfy customer demand, non-negativity 2. a. Opportunities: significantly expand product selection, facilitate global sourcing from lowest cost vendors, reduced risk by not relying on single DC, improve customer experience by shortening lead time, supply future European countries from the current DCs instead of setting up local distribution b. Challenges: centralization would increase delivery time to customer, not all markets are the same cant buy for smaller markets when centralize, learning curve in potential new DCs, each country has different selling regulations 1. 2. 3. a. Yes, they have the infrastructure and past experience necessary to successfully expand. They can model after other recent European expansions and pursue the same goal of catching up to US model in 5 years. 4. (top of page 55) a. Option 1: link different sites to single distribution center b. Option 2: keep all three and allow them to serve all countries c. Option 3: two distribution centers for northern and southern Europe i. Our recommendation: Option 1 is against core competencies because increases shipping times. Option 3 would create problem of servicing UK because of water d. New Option 1: continue holding inventory in all DCs (same amount of everything in each) e. New Option 2: selectively share inventory to reduce holding costs (categorized by DC)

f. New Option 3: full integration (mix in each DC based on demand in each region) i. Our recommendation: New option 3 because abides by core competencies and have capabilities to do so 5. a. USA: all DCs (8 of them) carry all different product categories but based on demand per region (certain specifications on page 45-46), wholesalers ship directly to customer (without going to amazon DCs), partners with other companies (toys r us) to split responsibilities (ex: amazon does online and supply chain while toys r us does merchandising and buying pg 49), electronic data interchange (EDI) b. Europe: no wholesalers (relationships with publishers and then ship books from there further discounted but less efficient/fast), fax and email, use national postal service (same as US but better system), does not offer cross border logistical services (further reason to keep all three DCs) 6. Amazon should select to expand into other countries. Most efficient way to meet growth targets. Surrounding countries have untapped demand, creating DCs there can be beneficial since capabilities already present

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