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Introduction

Amazon.com, Inc. or (Amazon.com), came into existence on May 28, 1996, serves the
consumers through its tremendous retail websites and moreover focus on the excellent price,
selection and convenience. The Company offers a wide range of programs that actually
enables many sellers to sell their desired products on its Web sites and even their own
branded Web sites and to accomplish orders through them, and programs that actually allow
musicians, filmmakers, authors, application developers, and others sell and publish content.
The Company operates in two different segments that is North America and on International
basis. The Company actually serves customers through its professional retail websites, and
focus on price, selection and convenience. The Company designs its entire pool of websites
to enable millions of their products to be sold by the company itself and by the third parties
across more than dozens of product categories

Case Description
This case describes how Amazon's distribution system grows from the company's overall
inception. In 2003, Amazon Europe must make a decision how to restructure its distribution
network in light of predictable growth, products explosion, and current geographical
expansion in Europe. Moreover, it also examines how distinctiveness of customers and
various suppliers differ across the markets, which are actually served by Amazon in Europe.
The central character must consider the degree of centralization quiet appropriate for the
entire European network, where supply should be held, what fulfillment models and solution
should be used, and how to handle the risks of supply disruption which occur on a daily
basis.
Tom Taylor, Amazon.com's, Director of the overall European Supply Chain management has
to take a call on the modifications Amazon needs to make to maintain its growth in the
European market place. Although they were doing a good job, but Amazon Europe is faced
with numerous expansion options:

imitate the broad collection of product lines, Amazon offered in the United States



Tom's boss has actually set an objective for him to assist Amazon Europe catch up with
Amazon US in the next 5 years, which he be expected to do in a year or by 2004. The vital
decision that Tom needed to craft was how to put together, the distribution network strategies
that would most suitably support Amazon Europe's growth. Tom's early focal point in Europe
was to look for maximum consistency and synergies among operations procedures across the
three dissimilar European countries that Amazon Europe actually served. During this span of
time, Amazon Europe pursued a decentralized fulfillment model which seemed to offer
chances for cost savings and rationalization. Tom saw an enormous potential in developing a
European Distribution Network (EDN) where the overall location of supply will be
strategically, rather than geographically determined. Intrigued by this excellent opportunity,
Tom has laid out promising payback to Amazon Europe.

Amazon international comprising of Amazon Japan and Amazon Europe gives 35% of the
total revenue earned by the Amazon. These both segments were the fastest growing segments
of the entire company. Since the market is getting competitive, therefore the company
started facing issues related to expanding opportunities and handling of their excellent supply
chain. It could somehow replicate, the broad range of product lines which is offered by
Amazon in specifically U.S, can launch new activities in the market and can expand into
other European countries as well. First the Amazon Europe needs to build their infrastructure
to support their valuable vision in an optimistic manner. Mr. Tom was transferred to London
back in 2002 to look after these issues effectively. The decision needs to be taken by tom that
which infrastructure should be supportive to the Amazon in Europe.

There are multiple problems in the case. For example, they were in a dilemma that should
they build a new European distribution network (EDN) where the location of the supply
would be determined on a strategic basis rather than geographic basis or they should need
completely independent DCs in Germany, UK and France. Moreover company should also
be worried about that out of several potential alternatives to plan European distribution
network (EDN), which alternative should be given importance over another. Another issue
could be the linking problem that either these different sites should be linked with a single
European distribution network (EDN) or to keep the three distribution network for these
purposes. Moreover, it is also a possibility that they might go for only two DCs, out of
which one would serve the south European customers and another one would serve north
European customers.
By the implementation of European distribution network (EDN) there would be a massive
impact on transportation. This would for sure reduce the delivery service level and more over
the issues related to the customer's satisfaction. Moreover the issue related to the cross
functional coordination among the department. Some network optimization issues may also
occur in the operations department of the company. There was another concern which needs
to be given some importance is that the allocation of employees to the different and new
locations



Amazon Europe should take on having DCs in each of these three current countries in
combination with an integrated supply management system and a general integrated IT
interface. This will actually permit for an ease of development into other European countries.
In order to preserve global leadership growth in other European countries like Austria, Italy,
Switzerland, Luxembourg and Belgium is well-known. Growth options that Amazon Europe
needs to bring into consideration
Initiate broad market research in each of the desired counties. This will help Amazon to
spawn a fair idea about the overall demand, competitors, market size and etc.
They should definitely contemplate growth in countries like the Netherlands, Sweden, Italy
and its where a huge potential for sales exist.
They should work together with national players for entering the overseas markets.
In order to accommodate the smaller countries (Central Europe, ) they can preserve
common DCs and also put into practice the trans-shipment options.
To accommodate these smaller customer bases they can setup marketing and sales offices
for special countries. Here they can construct specific websites and archives catering to local
and national demand. Desired title scan, then be sourced from the nearby DC. While Amazon
is at present live in the EU markets of Germany, France and Great Britain, they should
consider expanding to a wider targeted audience by introducing the perception of a
marketplace.Marketplace is defined as a cluster of different countries with a sole catalog
and served by a sole DC. The current DC in France could also expand into a bunch
containing Belgium, France and Luxembourg. Germany could turn out to be a cluster that
actually contains Austria, Switzerland and Germany itself. The British installation could
include all of Ireland and Great Britain. In adding together the above mentioned clusters,
Amazon company can further introduce several DCs for additional bunches with Italy
catering to Southeast European terror-tries like Greece, Hungary and Bulgaria. Poland
catering to the Ukraine, Czech Republic & Belarus and Sweden running the Scandinavian
countries like Finland, Norway and etc. Thus all-encompassing the whole European Union.
Setting up Amazon.com as a focus on point for third-party marketing activities involving a
variety of private dealers, would also be a suggestion worth considering. It will actually
facilitate third-party sellers to present their goods alongside Amazons offerings. These will
consequence in increased viewership of the site as well result in enhanced customer data
base.

At the current moment, Amazon has autonomous units working independently for each of the
3 Countries i.e. France, United Kingdom and Germany. The business, however envisions
operational explanation and cost savings by enhancing infrastructure and services across the
entire Europe. They have an alternative to either go in for highly centralized system or may
be decentralized one. There is though a variety of strategies that the company can consider
adopting as per their overall distribution network configuration:
1. Single European distribution network (EDN) and Centralized Distribution network with
the single central DC.
2. Keeping up to date DCs and the adaptation of transshipment under a single centralized
management system.
3. Separate all DCs and decentralized management for the South and North Europe
respectively. Discussed below are the pros and cons of each of these strategies in order to
acquire the best possible solutions.
1. Single European distribution network (EDN) -Centralized Distribution network with a
central DC: Possible Advantages

Reduction in whole inventory costs.
Reduction in demand dissimilarity across the supply chain management of the account of a
sole central DC.
Reduction in total cost of multi-item orders on general account of order pooling.
Improvement in demand-supply mismatching issues.
Improvement of the Bullwhip effect because of boost in information sharing.
Relatively easier integration of the supply chain management system.
No difficulty in implementation.

Disadvantages:
Boost in lead times to customers and thus decrease in Service Levels.
Greater than before distance of customers and suppliers to the central DC resulting in a boost
in inbound and outbound transportation cost.
The loose elasticity by not being able to meet diversifying needs of a diversified customer
base in the entire Europe.
Usually requires new investment in total for setting up relatively new infrastructure.

Keeping up to date DCs and adopting transshipment under a single centralized management
system:
Possible Advantages
Reduction in overall demand unpredictability across the entire supply chain due to effective
pooling.
Decline in total inventory and some associated costs.
Improvement of demand-supply mismatch issues.
Improvement of the Bullwhip effect.
No need for a new infrastructure.
Flexibility due to load balancing across entirely separate DCs.
Somehow reduces risk of relying on a sole DC.
Relieve of expansion issues in other countries.
Disadvantages:
Combined supply greater than that of an individual DC.
Higher difficulty in coordination and need for refined IT tools.
Boost in lead times to customers in some rare cases
Based on all the advantages and disadvantages of the above strategies, one can easily
conclude that maintaining the DCs in each of these three target countries in combination
with an integrated inventory or supply management system and almost having just a single
supply chain actually allows us to collect the possible advantages of the location.
Lead time pooling leaking considerable boost in space between customer and supplier
actually combined with an insignificant decrease in overall service levels (lead times to
customers). Amazon will be able to simultaneously develop the profitable advantages
mentioned on top to the fullest, reduce inventory to a great degree and reduce overall
transportation costs radically. Thus, it would be suitable that Amazon puts into practice a
Centralized management system all along with the these three existing DCs and a general
integrated IT interface.


Recommendations and Solution Analysis

As far as the decision related to the implementation of the European distribution network
(EDN) is concerned, so it can be recommended that this system should be implemented and
its location should be determined on a strategic basis rather than geographic.To grow their
business from all aspects the Amazon must expand their business operations to other
European countries in a fast manner. There is no doubt that to set up an independent business
unit in the other country could be relatively expensive for the Amazon. As per the case when
the company opens its DC in the new location so its net income falls dramatically. But there
is the fact that if Amazon completely implements the plan of establishing the European
distribution network (EDN) so there would be immense chances of expansion by maintains
the cost control in an effective manner. Another growth strategy which needs to bring into
special consideration is that they must start offering the wide range of products in each and
every marketplace where they have already and even about to start the operations. It can been
seen from the information presented in the case that many products which are offered in the
UK and Germany, are not available to the customer in France. As per the case it can be
observed that Amazon company is quite sure that under the European distribution network
(EDN), their procurement department would be easily able to centralize its purchase and can
also extract higher volume of discounts from their value able suppliers. These discounts
would play an optimistic part in lowering down the total cost and will play its part in
increasing the total net income. As per the historical analysis, it can be seen that each of the
European DC has at least once faced the failure. Additionally, the European distribution
network (EDN) would for sure reduce the risk of relying completely on a single DC to serve
a huge amount of customers database. Most importantly the implementation of the European
distribution network (EDN) would help in distributing the load of the DCs. As per these
valuable arguments and analysis the implementation of European distribution network (EDN)
looks feasible for the Amazon Company.
Out of the three alternatives it can be said that the Amazon Europe should consider fully
integrating with three sites supply physically mixed on the different basis which includes the
demand pattern, transportation cost and inventory management. It is also recommended that
Amazon must enhance the cross functional team based approach for better results and
effective supply chain management. Moreover the Amazon Europe should develop a detail
HR plan for effective management and hiring of new employees for more efficient
performance. They must also make sure that customers should be satisfied with all aspects
which most importantly include the lead time management and availability of the desired
product with reasonable cost. Hence it is recommended that European distribution network
should be implemented with extremely well operational excellence. Moreover a centralized
distribution network must introduce the high volume discounts, so that maximum customers
can be brought into the circle. The biggest advantage of the Amazon is that they have a
trusted brand name across the globe and people trust them with the closed eyes. All they need
to focus on is the excellent supply chain management by keeping on adding the latest and up
to date inventory. They already have a well organized setup, but what they need to do is to
cater the European market with more effective and enhanced distribution network. Moreover,
it is highly recommended that they could also adopt the centralized and effective operations
management system and also go about creating the cross docking (enabled) warehouses. Last
but not the least Amazon must also try to reduce the shipping cost so that their profits could
also increase by getting more and more orders.

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