Amazon.Com’s Inventory Management Essay Example

supply chain or build warehouses for inventory management (Hof, 1999). Amazon then focused on building warehouses to store inventory, expanding its product range, and reducing logistics costs (Choen et al., 2004). Figure 2 illustrates that Amazon procured items from its distributors and stored them in its warehouses during this second stage of the logistics process.

Amazon optimizes storage and reduces logistics costs by delivering orders made by customers. Yet, handling a vast inventory and costly warehouse maintenance present challenges, leaving Amazon with two choix: to improve sales efficiency in their warehouses or to outsource inventory management.

In the third stage of their logistic process, Amazon decided to enter into partnerships with distributors. Although this decision carried a risk of damaging their reputation for superior customer service, it allowed Amazon to focus more on their core activities and reduce their need for warehouses. The drop-shipment model provided greater flexibility in product range, enabling Amazon to listen to the market and react quickly to customers' desires by adding new products. This approach involved no capital investment and eliminated the risk of having a warehouse full of outdated items. (Saunders, 2001) Figure 3 illustrates the drop-shipment model of logistics.

According to Julie et al. (2004), Figure 3 illustrates the functioning of drop shipment, which Amazon aimed to implement across all categories. However, the company faced challenges due to split shipments, resulting from the use of both drop-shippers and their own warehouses. Approximately 35% of Amazon orders were affected by this issue, causing a decline in overall efficiency.

Amazon advanced to the fourth stage by collaborating with retailers, as demonstrated in Figure 4. This allowed them to diversify their product

offerings and reduce expenses related to shipping and managing warehouses. To facilitate this stage, Amazon utilized strategies learned from eBay, detailed in Figure 5.

Figure 5: eBay's Best Practices and Further Analysis

In this previous discussion, we examined the different stages of Amazon's business strategy and how they impacted their logistical management. We discovered that Amazon modified their logistics management for various reasons during each transition from one stage to another. One example was when they shifted from having no inventory to constructing warehouses, with the objective of expanding their business and providing customers with a more extensive product selection.

Amazon's strategy involved forming partnerships with distributors and retailers to enhance logistics efficiency and expand their product range on the website. This move allowed Amazon to grow the company and display even more products. Since the case study date, Amazon has continued to increase their product variety and improve operations.

Amazon has implemented the Six Sigma method in its distribution operations and applied lean manufacturing and Total Quality Management practices to its processes, resulting in the ability to ship to over 200 countries. To enhance customer experience, Amazon is leveraging a global trade management solution to provide more information and is also acting as a drop shipper, managing inventory and shipping for other e-businesses.

In the past, Amazon did not consider increasing their inventory as it would lead to higher costs. However, Jeff Bezos recognized the advantages of expanding inventory due to Amazon's expertise in managing logistics and inventory, making it difficult for other e-businesses to overlook. II-Conclusions and Recommendations 1. Conclusions The examination of Amazon's case provides crucial insights into the logistics management of e-businesses. Firstly, impeccable logistics

and fulfilment are crucial factors in customer retention and long-term profitability.

Just like Amazon, every other e-commerce company should prioritize customer satisfaction and maintaining a positive profit margin. The 3R's - providing the right product, at the right time and place - are crucial for meeting customers' needs while ensuring profitability. However, delivering both successfully is the key challenge for e-businesses.

To focus on their core activities, other e-businesses can consider outsourcing certain tasks. Amazon took this approach and was able to concentrate on marketing its brand. However, when Amazon reached the fourth stage, they encountered a major issue with their reverse logistics process. This led to customer frustration with returning products, and the handling of returned items was not efficient.

Due to the negative impact on their profits, a solution should be created to address the issue of Amazon's lengthy reverse logistics procedure. Allocating significant resources to ensure its efficient operation detracts from attending to their primary activities, such as product fulfilment.

In Figure 6, Amazon's reverse logistics process is illustrated. The recommendation is for Amazon to outsource its reverse logistics to a third-party provider, and if this strategy is chosen, certain factors must be considered (Rao, 1994). These factors are listed as follows: 1.

Amazon needs to evaluate whether it is equipped to manage a substantial inventory, while also considering the nature of its offered products and the necessary level of customer service to provide.

Amazon may want to assess whether reverse logistics is classified as a fundamental function within the organization. We have provided answers to these inquiries to determine the suitability of our suggestion for Amazon. Firstly, the volume of products they manage

is staggering and they receive an immense quantity of daily orders.

In 2007, Amazon.com completed its 13th holiday season. On December 10th of that year, it recorded the highest sales volume with customers purchasing over 5.4 million items, equivalent to 62 items per second (Chaffey, 2008).

It is unavoidable that there will be a significant amount of returns, as stated in Amazon's mission to provide customers with everything they might want through Earth's largest product selection. In addition, Amazon deals with products of varying shapes and sizes.

To avoid taking up valuable space, Amazon must prioritize smaller items. Additionally, providing good customer service is crucial for retaining first time buyers. If returns are difficult and responses are slow, customers may become dissatisfied and Amazon's efforts could fail.

Upon closer examination of Amazon, it became apparent that the company prioritizes delivering products to customers in an efficient manner, making forward logistics a core activity. However, reverse logistics is not seen as a core activity. Outsourcing their reverse logistics would allow Amazon to focus on their core activities. (Bibliography 1)

The article titled "Amazon.com Way – Secrets of the World's Most Astonishing Web Business" was written by Saunders R in 2001 and published by Capstone. In addition, Jeff Bezos delivered a speech titled "A Bookstore By Any Other Name" in 1998, which can be accessed through the link http://www.commonwealthclub.org/archive/98/98-07bezos-speech as of March 20, 2008. These sources provide insights into the success of Amazon.com as a web business. The text is enclosed within .The following text, including and their contents, has beenand unified:

html> 3. In the book titled "The Industrial Dynamics of the New Digital Economy" published by Edward Elgar Publishing

in 2003, Jens C. and Peter M. discuss relevant topics. Additionally, in an article written by R. Hof in 1999 titled "What's With All the Warehouses?", the author raises interesting arguments. This information was viewed on March 18th, 2008 at http://www.

In 1999, businessweek.com published an article at the URL b3653046.htm. On March 26, 2008, a page about purchasing from vendors was displayed on amazon.com.

Visit https://www.amazon.com/gp/help/customer/display.html?nodeId=537794 for more information on strategic supply chain management, as described in the book by Choen and Roussel (2004) from McGraw-Hill.

The website "http://www.accenture" was viewed on March 27, 2008, and it featured the work of Julie A. Sokol and Robert J. Thomas in their 2004 publication titled "State of the art." The information was presented within a paragraph tag.The link to the StateOfTheArt webpage on com/Global/Research_and_Insights/Outlook/By_Alphabet/ is referenced along with the names of K. Rao and R. R. Young.

(1994) In the International Journal of Physical Distribution and Logistics Management, Volume 24, the outsourcing of logistics functions is explored, with attention to factors that influence global supply chains.

The book "Amazon" was authored by D Chaffey in 2008.

On March 20, 2008, a case study about Amazon's e-commerce and internet marketing was viewed on the website http://www.davechaffey.com/E-commerce-Internet-marketing-case-studies/Amazon-case-study. The original text was contained within HTML

tags.