amazon supply chain management assignment

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Amazon.com: Supply Chain Management

By: P. Fraser Johnson, Ken Mark

By early 2018, Seattle-based Amazon.com Inc. (Amazon), one of the world's most valuable companies and the largest online retailer in the world, had grown dramatically since its beginnings in 1994.…

• Length: 19 page(s)
• Publication Date: Jul 26, 2018
• Discipline: Operations Management
• Product #: W18451-PDF-ENG

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By early 2018, Seattle-based Amazon.com Inc. (Amazon), one of the world's most valuable companies and the largest online retailer in the world, had grown dramatically since its beginnings in 1994. The company that had started as an online bookseller now sold merchandise and digital content in more than 30 categories, including electronics, clothing, books, furniture, and streaming music and video. It sold its own products and listed products for sale by over two million third-party sellers. It provided on-demand cloud-computing services and offered fulfillment and shipping services to businesses, and it had recently entered grocery retailing through its purchase of Whole Foods Market. With 2017 shipping costs that exceeded $21 billion, the company was working to establish greater control over its supply chain network and capabilities. Amazon was selling a huge variety of products in many formats, and the chief executive officer needed to determine how to structure the company's supply chain in order to support its strategy and growth objectives. What supply chain capabilities would Amazon need as its business model continued to evolve?

Learning Objectives

This case can be used in an undergraduate or graduate course on operations management, supply chain management, logistics, business strategy, or marketing. After completing the case, students will be able to assess Amazon's supply chain, and identify its key competitive advantages; quantify Amazon's ability to generate value from its supply chain; identify potential opportunities and challenges for Amazon in improving its supply chain; and analyze the effects of the opportunities and challenges facing Amazon on its growth and evolution.

Jul 26, 2018 (Revised: Nov 11, 2021)

Discipline:

Operations Management

Geographies:

United States

Industries:

E-commerce industry, Telecom

Ivey Publishing

W18451-PDF-ENG

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How the Amazon Supply Chain Works

Brian Connolly

October 25, 2021

Amazon Inventory Management , Amazon Seller , Selling on Amazon , Uncategorized

The Amazon Supply Chain is responsible for getting customer orders from point A to point B as quickly and efficiently as possible. 

Between those two points is a lot of moving parts such as receiving inventory, sorting inventory, warehousing, product-picking robots, warehouse associates, truck drivers, Amazon Prime Air, delivery drivers, and so on.

On the customer side, all one needs to do is click a button, then two days later, their order magically appears on their doorstep. 

As an Amazon FBA ( Fulfillment by Amazon) third-party seller, you get to leverage Amazon’s state-of-the-art facilities and processes, giving your business the logistical efficiency that would be impossible to match on your own. In a nutshell, here’s is how the supply chain works :

• You (the Amazon seller) create a shipment in Seller Central specifying how many units or products will be shipped and the size and weight of your shipment, making sure each unit has a scannable barcode.
• An Amazon-partnered carrier or shipping company delivers your bulk product shipment to the Amazon fulfillment center(s) specified in your shipment information.
• Amazon associates unload and receive your shipment by scanning a unique barcode that connects each package to your seller account.
• The units are unloaded from your shipment and scanned individually by an associate to identify each one so it is properly added to your inventory. The product should have either a UPC barcode or an FNSKU, which are unique Amazon barcodes that identify your products.

• Once received Amazon stores and/or distributes your units to other Amazon fulfillment centers.
• When a customer places an order for your product, Amazon robots and associates work together to accurately pick, package, and label the product.
• The product is then sorted and loaded onto a truck and/or plane to reach its delivery station where customer orders are prepared for last-mile delivery.
• One to two days later, the package is delivered to the customer’s doorstep.

To make all of this possible, Amazon’s fulfillment network consists of over a hundred buildings across the country for inventory management and processing millions of orders every single day. 

According to Amazon’s facilities page , this is what the fulfillment network is comprised of:

Sortable fulfillment center

Around 800,000 square feet in size, sortable fulfillment centers can employ more than 1,500 full-time associates. In these buildings, Amazon employees pick, pack, and ship customer orders such as books, toys, and housewares. Thanks to the innovations of Amazon Robotics, associates often work alongside robots, allowing them to learn new skills and help create a more efficient process to meet customer demand.

Non-sortable fulfillment center

Ranging in size from 600,000 to 1 million square feet, non-sortable fulfillment centers employ more than 1,000 full-time associates. In these centers, associates pick, pack, and ship bulky or larger-sized customer items such as patio furniture, outdoor equipment, or rugs.

Sortation centers

At sortation centers, associates sort customer orders by final destination and consolidate them onto trucks for faster delivery. Amazon’s sort center network provides full- and part-time career opportunities and is powering our ability to provide customers with everyday delivery, including Sunday delivery, which customers love.

Receive centers

Amazon’s receive centers support customer fulfillment by taking in large orders of the types of inventory that we expect to quickly sell and allocating it to fulfillment centers within the network. Full- and part-time roles are available in these buildings, which are about 600,000 square feet in size.

Amazon’s fulfillment network support includes additional types of buildings that handle specific categories of items or are pressed into service at peak times of the year such as the holiday season. Many of these buildings feature part-time opportunities with the option to convert to full-time.

Delivery stations

In these buildings, customer orders are prepared for last-mile delivery to customers. Amazon delivery providers enable our fast, everyday shipping.

How Amazon’s Supply Chain benefits Amazon sellers

The average small- or medium-sized online retailer doesn’t have the capacities or sophisticated logistical processes that Amazon has built. Amazon’s supply chain not only benefits them and their customers but also benefits the third-party sellers who sell their products on Amazon. 

Amazon sellers have two options to fulfill their orders: FBM or FBA . 

In FBM (Fulfilled by Merchant), the seller handles all order fulfillment including storing, packaging, and order shipment

While in FBA (Fulfilled by Amazon), sellers send their products to Amazon fulfillment centers and Amazon handles all storage and order fulfillment. On top of that, products become Prime eligible which allows sellers to have orders delivered to their customers within 1-2 days. 

By using FBA, sellers get to use Amazon’s advanced fulfillment network to grow their business. Instead of worrying about where to store your products or how you’re going to package and ship orders, you can let Amazon handle it all.

Amazon fulfillment centers

Amazon has 110 fulfillment centers across the US and over 185 across the world to ensure no matter where customers are located, they receive their orders fast and on time. 

When sellers create a shipment in Seller Central, Amazon will tell them which warehouse or warehouses to send their inventory to. They base this on the demand for your type of product across the US. For example, Amazon may split your shipment between a New Jersey fulfillment center and a Texas fulfillment center.

Sellers do have the option to send all of their inventory to a single fulfillment center. Amazon will then distribute its inventory across multiple fulfillment centers to ensure sellers can meet the two-day Prime shipping promise in any region. 

The fulfillment centers are where all the magic happens! Receiving, quality assurance, storing, packaging, and shipping all take place here.

Fun fact: Did you know that before COVID-19, you were able to tour an Amazon fulfillment center? While you can’t visit one again in person just yet, Amazon does offer virtual tours so you can get a glimpse of what their technology and people do for Amazon. It’s worth watching if you want to see where your products go and come from.

How Amazon customers receive their orders

Once one of your customers orders your product, Amazon quickly processes and ships the order — and you don’t have to do a thing.

When your products leave the fulfillment center, Amazon loads them into a tractor-trailer or an Amazon Air cargo plane to bring your package closer to its final destination. Once Amazon sorts out packages at the delivery station, they load them into one of Amazon’s delivery vehicles and deliver them to your customer. 

It’s pretty incredible to think all of this happens within two days from when a customer placed their order. Next time you order something on Amazon or send inventory to a fulfillment center, think of all the hardworking employees that make these swift deliveries possible.

You know the Amazon delivery vans and trucks you’ve been seeing in your neighborhood? Many of their routes are actually owned and operated by independent contractors through the Amazon Delivery Service Partner program. Anyone can apply to become an Amazon delivery partner with as little as $10,000 and no logistics experience.

Use Jungle Scout to Navigate Amazon

As much as Amazon’s supply chain benefits all sellers, each seller should fortify their own operations on their end. To have a successful business on Amazon, you must be able to properly manage your inventory . 

Without proper inventory management, you run the risk of understocking, causing a loss of sales or overstocking, resulting in costly monthly and long-term storage fees. Overstocking also causes issues with your storage limits in Amazon’s fulfillment centers, taking up the space you could use for faster-selling products. 

With the right tools and strategies in place, you’ll know how to maintain the perfect balance of inventory needed for your business to run smoothly.

Using Jungle Scout’s Inventory Manager tool, you can accurately forecast demand , know when to replenish your inventory, and avoid costly storage fees.

Using this tool in conjunction with your Amazon metrics will allow you to run your FBA smoothly without the worry about overstocking inventory in Amazon’s fulfillment centers. 

Use Amazon’s expertise to run your business

Amazon’s innovation won’t stop here. They will continue to invest in fulfillment centers, advanced technology, and talented people to exceed customer expectations and beat the competition in every aspect.

We hope this article gives you a better understanding of Amazon’s supply chain and how much actually goes into its operations. 

If you have any more questions about Amazon’s supply chain and process, let us know in the comments below!

Brian is a writer and entrepreneur with over 6 years of experience in e-commerce and selling on Amazon.

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Amazon Supply Chain: Understanding how Amazon’s supply chain works

Whether you are a small or medium-sized business looking to scale your eCommerce operations, Amazon is one of the best examples to learn from to improve productivity, expand the reach, and maximize profits. Though several factors make Amazon the eCommerce leader it is today, one of the most critical elements to its success has been Amazon’s state-of-the-art supply chain.

Amazon has one of the biggest and most efficient supply chain operations globally. While the basic model has remained the same since its inception, it has adopted newer technologies over the years to streamline its operations and improve its efficiency.

Below, we explain how Amazon’s supply chain works and look at the key elements contributing to the company’s success.

On this page:

What is the Amazon Supply Chain?

Amazon fba and fbm, how does the amazon supply chain work, what happens when you buy a product on amazon, components of amazon supply chain strategy.

The supply chain of Amazon refers to the entire process on the platform, right from product warehousing and inventory management to pricing and delivery. Over the years, Jeff Bezos and his team have devised new ways to optimize every part of the supply chain process, ensuring everything works efficiently and smoothly to guarantee customer satisfaction.

As third-party sellers contribute up to 55 per cent of the total sales Amazon makes, the company makes sure these sellers using the platform have multiple fulfilment options available.

when it comes to selling on the platform, Amazon sellers have two options:

Fulfilment By Amazon (FBA) – Amazon takes care of logistics and customer support in this model. Sellers send products in bulk to the fulfilment centres from where the company picks, packs, and ships to customers. This fulfilment option is ideal for sellers who handle small and lightweight products or cannot arrange for logistics.

Fulfilment By Merchant (FBM) – With this option, third-party sellers are responsible for listing their products and taking care of storage and fulfilment on their own.

There is also an FBA Onsite option where Amazon uses its warehouse management program to help sellers optimize their operations. Third-party sellers take care of the inventory of the products, but Amazon is responsible for picking the products from the inventory and selecting the best fulfilment method.

Amazon covers all the bases for different seller types by offering these two programs. Sellers who want to store, pack, and ship products on their own can use FBM, while others can go with the FBA.

Related: How to start an Amazon FBA business

Amazon has been known to reduce delivery times and even offer same-day delivery. This is because it recognized the need for super-fast delivery among customers. There are two main components crucial to the success of Amazon’s supply chain – Amazon Fulfilment Centers & Amazon Delivery Fleet.

Amazon Fulfilment Centres

Amazon puts a robust fulfilment and logistics network to complete orders and meet the ultra-fast delivery expectations of over 110 million Prime membership subscribers. At present, it has more than 175 fulfilment centres across the world. Amazon also has approximately 500 warehouses near metropolitan cities globally.

Related: Crucial Tips for Selling on Amazon that every Seller must know

As the eCommerce sector experienced a boom in the past few months, Amazon has shown considerable growth. In ten months, it has hired about 427,000 employees to keep up with the increasing demand.

Third-party sellers have seen up to 60 per cent growth in sales, and the trend is expected to continue in the coming months. To respond to the growing demand, it will also open about 50 new warehouses and fulfilment centres in the United States.

Amazon Delivery Fleet

Amazon uses many logistics and delivery partners to deliver orders to customers on time. Trucks are used to carry boxes from fulfilment centres to sort centres. Then packages are sorted depending on the delivery speed and location. After this, the most efficient transportation mode is chosen to transport the packages.

Amazon uses an airplane fleet to meet the one-and-two-day delivery window offered to Prime members. The company uses vans, trucks, bikes, and even robots to facilitate timely delivery on the land. Amazon is presently working on drones to deliver products to locations near fulfilment centres.

Let us understand how Amazon’s fulfilment centre works to complete an order.

Receiving Products

Products are either stored into pallets manually or handled by machines at these centres. Freight is separated based on where it comes from, whether third-party vendors or Amazon facilities. Over half of the products sold on the platform come from small businesses and solopreneurs.

Product Storage

Amazon does not categorize its storage by type but instead stores everything randomly. There are yellow bins containing random items tracked by computers. The containers are then transported to associates depending on the size.

Picking Orders

When a customer buys a product, a robot brings pods of items to Amazon associates at the pick stations. The pickers read the screen, retrieve the product and place the product in a tote box.

Quality Assurance

A lot of quality assurance is required for the proper working of robots with humans. An item’s physical location should match the computer entries so that robots can function well.

Finally, products are organized and sent to the pack station, where box sizes are chosen, and the amount of tape required to pack them is measured. Items coming from third-party vendors ship out in their original packaging, but Amazon works with them to reduce these costs.

While the process of buying from Amazon seems straightforward, it involves a few crucial elements that come together to ensure a smooth shopping experience.

Warehousing

A big factor behind Amazon’s success, the warehousing strategy the company adopts is smart enough to make sure products are accessible from anywhere in the world. It hosts many warehouses and distribution centres near big metropolitan cities. Currently, there are 175 warehouses globally, the majority of which are located in Europe and North America.

Amazon stores its product inventory across these centres to quickly meet the demand. Such an extensive network of warehouses allows it to deliver orders to customers quickly and cost-efficiently. It also has mini-warehouses in smaller areas to ensure enough supply. All the warehouses are optimized from within, with five storage areas. Employees and robots can quickly find products and get them ready for dispatch.

Amazon’s delivery options are one of the most significant factors differentiating the supply chain from other eCommerce operators. The company offers two-day Prime deliveries, free delivery, and even the Prime Now option that delivers the products within two hours. Amazon uses a host of methods ranging from traditional to high-tech to deliver orders with lightning speeds worldwide.

Amazon has delivery trucks, vans, and even bikes operating in specific areas; it also leverages traditional routes like UPS and FedEx. Such a wide range of delivery strategies enables it to deliver faster, more efficiently, and easily to any location globally, even in rural and remote areas that traditional options don’t cover.

Related: 10 Dropshipping Tips that will drive sales growth

Technology adoption is at the core of the Amazon supply chain strategy, helping it work efficiently and cut costs. The company relies on several automation and robotic solutions to pick, pack and ship orders. Such tools and techniques improve the delivery speeds and cut down the costs associated with warehousing and staffing, saving funds for other processes.

One of the biggest advancements in technology anticipated by Amazon is its Prime Air Drone Delivery. Though still in its development phase, the program will ensure 30-minute deliveries in some areas once operational. Customers with an Amazon-branded landing mat living within 15 miles of the nearest fulfilment centre can qualify for a delivery option.

Manufacturing

Amazon has discovered that it can benefit from manufacturing more popular products to increase its profits and provide cheaper options.

Currently, the company has started white-labelling products from sellers and offering options across categories that include everything from household goods and pet supplies to a lot more. This strategy allows Amazon to keep the entire lifecycle of products, from production to delivery, in-house.

Related: What are the risks of dropshipping, and how do you avoid them?

Cost-effectiveness is one of the most crucial parts of the Amazon supply chain. One of the most innovative strategies is to segment the customers into Prime and Standard, offering varying service options at different prices. By creating additional shipping and delivery windows, Amazon keeps the flow of orders smooth, allowing it to respond to changes in demand without affecting the supply chain as a whole.

Amazon also uses such a pricing strategy for its FBA program. It understands that the large inventory can raise costs and slow down fulfilment. It, therefore, charges high storage fees for long-term usage from FBA sellers. This ensures that sellers only send sufficient inventory to meet the demand, and Amazon’s costs don’t rise.

Global Reach

Amazon operates 11 online marketplaces globally to let sellers grow their business worldwide, regardless of where they are physically based.

Businesses can introduce their products to millions of potential customers with these marketplaces located across Asia, Europe, and North America. When sellers register with one of these marketplaces, they get instant access to loyal customers who trust Amazon’s experience.

Related: Which is the Best Online Marketplace: Selling on Etsy vs eBay vs Amazon

Final Thoughts

The Amazon supply chain works efficiently with its latest innovations to beat the biggest competitors. This retail giant has set an example for eCommerce businesses with its consumer-centric approach and use of technology.

Regardless of the industry it enters next, Amazon’s unique supply chain strategy combined with innovations suggests that it will continue to rule the landscape.

Pia has consulted for a number of digital startups and small businesses in Asia before coming to the UK. Pia writes about a wide range of SaaS and B2B products, including trends and issues on e-commerce, accounting and customer service software. She’s also covered a wide range of topics in business, science, and technology for websites in the U.S., Australia and Singapore.

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The evolution of Amazon’s inventory planning system

How amazon’s scientists developed a first-of-its-kind multi-echelon system for inventory buying and placement..

For every order placed on the Amazon Store, mathematical models developed by Amazon’s Supply Chain Optimization Technologies organization (SCOT) work behind the scenes to ensure that product inventories are best positioned to fulfill the order. 

Forecasting models developed by SCOT predict the demand for every product. Buying systems determine the right level of product to purchase from different suppliers, while large-scale placement systems determine the optimal location for products across the hundreds of facilities belonging to Amazon’s global fulfillment network.

“With hundreds of millions of products sold across multiple geographies, developing automated models to make inventory planning decisions at Amazon scale is one of the most challenging and rewarding parts of our work,” said Deepak Bhatia , vice president of Supply Chain Optimization Technologies at Amazon.

We made the decision to redesign Amazon’s supply chain systems from the ground up.

In the first half of the past decade, Amazon transitioned from a largely manual supply chain management system to an automated one. However, when faced with the need to evolve Amazon’s supply chain to meet customer needs, and the introduction of same day delivery services like Prime Now, the team moved to replace that system with a new one that would better help Amazon fulfill delivery promises made to customers.

“As far back as 2016, we were able to see that the automated system we had at the time wouldn’t help us meet the ever-growing expectations of our customers,” Bhatia recalled. “As a result, we made the decision to redesign Amazon’s supply chain systems from the ground up.”

A global company catering to local needs

“In 2016, Amazon’s supply chain network was designed for scenarios where inventory from any fulfillment center could be shipped to any customer to meet a two-day promise,” said Salal Humair , senior principal research scientist at Amazon who has been with the company for seven years.

This design was inadequate for the new world in which Amazon was operating; one shaped by what Humair calls the “globalization-localization imperative.” Amazon’s expansion included an increasing number of international locations — at the time, the company had 175 fulfillment centers serving customers in 185 countries around the world .

“Meeting the needs of our customer base meant that we needed to serve those customers in multiple geographies,” Humair said.

As Amazon continued to expand internationally, the company also launched one-day and same day delivery windows in local regions for services like Amazon Prime and Amazon Prime Now.

“We quickly realized that in addition to serving customers around the globe, we also had to pivot from functioning as a national network to a local one, where we could position inventory close to our customers,” Humair says.

In addition to the ‘globalization-localization imperative,’ the growing complexity of Amazon’s supply chain network further complicated matters. To meet the increased customer demand for a diverse variety of shipping speeds, Amazon’s fulfillment network was expanding to include an increasing number of building types and sizes: from fulfillment centers (for everyday products) and non-sortable fulfillment centers (for larger items), to smaller fulfillment centers catering to same-day orders, and distribution centers that supplied products to downstream fulfillment centers. The network was increasingly becoming layered, and fulfillment centers in one layer (or echelon) were acting as suppliers to other layers.

“We had to reimagine every aspect of our system to account for this increasing number of echelons,” Humair said.

The science behind multi-echelon inventory planning

The sheer scale of Amazons operations posed a significant challenge from a scientific perspective. Amazon Store orders are fulfilled through complex dynamic optimization processes — where a real-time order assignment system can choose to fulfill an order from the optimal fulfillment center that can meet the customer promise. This real-time order assignment makes inventory planning an incredibly complex problem to solve.

Other inventory-related dependencies further complicate matters: the same pool of inventory is frequently used to serve demand for orders with different shipping speeds. Consider a box of diapers: it can be used to fulfill an order for a two-day Prime delivery. It can also be used to ease the life of harried parents who have placed an order on Prime Now, and need diapers for their baby delivered in a two-hour window.

Amazon’s scientists also have to contend with a high degree of uncertainty. Customer demand for products cannot be perfectly predicted even with the most advanced machine learning models. In addition, lead times from vendors are subject to natural variation due to manufacturing capacity, transportation times, weather, etc., adding another layer of uncertainty.

This required building a custom solution, one that relies on sound scientific principles and rigor, and borrowing ideas from academic literature as building blocks, but with ground-breaking in-house invention.

Humair notes that the scale of Amazon’s operations, the complexity of the network, and the uncertainties associated with the company’s dynamic ordering system make it impossible to even write down a closed-form objective function for the optimization problem the team was trying to solve.

While multi-echelon inventory optimization is a well-researched field, the bulk of literature focused on single-product models, proposed solutions for much simpler networks, or used greatly simplified assumptions for replenishing inventory.

“There is a large body of academic literature on multi-echelon inventory management, and papers typically focus on one or two main aspects of the problem,” noted Alp Muharremoglu , a senior principal scientist in SCOT who spent 15 years as a faculty member at Columbia University and the University of Texas at Dallas. “Amazon’s scale and complexity meant no existing solution was a perfect fit. This required building a custom solution, one that relies on sound scientific principles and rigor, and borrowing ideas from academic literature as building blocks, but with ground-breaking in-house invention to push the boundaries of academic research. It is a thrill to see multi-echelon inventory theory truly in action in such a large scale and dynamic supply chain.”

As a result, the system developed by SCOT (a project whose roots stretch back to 2016) is a significant break from the past. The heart of the model is a multi-product, multi-fulfillment center, capacity-constrained model for optimizing inventory levels for multiple delivery speeds, under a dynamic fulfillment policy. The framework then uses a Lagrangian-type decomposition framework to control and optimize inventory levels across Amazon’s network in near real-time.

Broadly speaking, decomposition is a mathematical technique that breaks a large, complex problem up into smaller and simpler ones. Each of these problems is then solved in parallel or sequentially. The Lagrangian method of decomposition factors complicated constraints into the solution, while providing a ‘cost’ for violating these constraints. This cost makes the problem easier to solve by providing an upper bound to the maximization problem, which is critical when planning for inventory levels at Amazon’s scale. 

“We computed opportunity costs for storage and flows at every fulfillment center,” Humair said. “Using Lagrangean decomposition, we then used these costs to calculate the related inventory positions at these locations. Crucially, we incorporated a stochastic dynamic fulfillment policy in a scalable optimization model, allowing Amazon to calculate inventory levels not at just one location, but at every layer in our fulfillment network.”

Mobilizing the organization

While creating the new multi-echelon system was an imposing scientific challenge, it also represented a significant organizational accomplishment, one that required collaboration across multiple teams.

“Moving multi-echelon from concept to implementation was one of the most difficult organizational challenges we’ve worked through; we had many potential implementations that looked radically different in terms of model capabilities, interfaces, engineering challenges, and long-term implications for how our teams would interact with each other,” said Jeff Maurer , a SCOT vice president who has been instrumental in rolling out the automation of Amazon’s supply chain and oversaw the roll out of the multi-echelon system.

“This was also a case where there wasn’t a great way to decide between them without building and exploring one or more approaches in production. Ultimately, that’s what we did — we picked the best options we could identify, built them out, learned from them, then repeated that process. We learned things by experimenting with real production implementations that we could never have learned from simplified models or simulations alone, given the complexity of the real-world dynamics of our supply chain. But it was hard on the teams — it wasn’t always obvious that the systems the teams were iterating on were the best path, given the high directional ambiguity.”

“Sometimes, the only way to make a massive change is to realize that you have no option but to make that change,” said Yan Xia , principal applied scientist at Amazon. Humair noted that Xia played “a pivotal role” over the four years it took the company to migrate to the new multi-echelon system.

Xia recalled that teams within SCOT were keenly aware of the limitations of the existing system.  However, there was skepticism that the multi-echelon system was the right solution.

“The skepticism was understandable,” Xia said. “It’s one thing to have a big idea. But you also have to be able to present the benefits of your idea in a coherent way.”

Xia gave an example of how he helped convince members from the buying and placement teams about the benefits of the new model.

“One team decides optimal suppliers to source products from, while another team makes decisions on where these products should be placed,” Xia explained. “I was able to show them how the two functions would essentially be unified in the multi-echelon system. Sure, it would change how they worked on a day-to-day basis — but it would do so in a way that made their lives simpler.”

To help ensure that resources were made available for the development of the multi-echelon system, Xia also focused on driving alignment among leaders in SCOT. He developed a simulation based on real-world data. The results clearly demonstrated that the proposed solution for inventory forecasting, buying, and placement would result in a steep decline in shipping costs, which in turn would allow Amazon to keep prices lower for customers.

Teams involved in multi-echelon planning discussions were galvanized after seeing the results of the simulation.

“Everyone bought into the vision,” Xia said. “We began to collaborate in near real-time. If we ran into a problem, we didn’t wait around for a weekly sprint meeting. We just got together in a room, or stood next to a whiteboard and solved it.”

Xia said that this was also when things began to get more complex. 

“An awareness of the complexity of the existing setup began to dawn on us,” says Xia. “We began to realize how every component in the system had multiple dependencies. For example, the buying platforms were tightly integrated with older legacy systems – we now had to factor these dependencies into our solutions.”

Solving a multi-item, multi-echelon with stochastic demand and lead-time and aggregated capacity constraints and differentiated customer service levels. That sort of thing is just unheard of in the academia and the industry.

The team iterated on the multi-echelon solution in a sequence of three in-production experiments (or labs) that spanned 2018 to 2020. The first lab incorporated components of the new system coupled with the old platform. It was a resounding success in terms of reducing costs, even while fulfilling orders associated with higher shipping speeds. The team moved on to testing the subsequent version of the multi-echelon system in the second lab. 

“That wasn’t nearly as good,” Xia recalled. “Most things didn’t work as expected.”

However, the team was encouraged by leadership to keep going. This wasn’t SCOT’s first attempt at taking on big and ambitious projects. The organization had taken three years to deploy the first automated supply chain management system where they overcame various challenges.

“Sure, the failure of the second lab was demotivating,” Xia says. “But we knew from experience that this failure was only to be expected. It was part of the process.”

The team fixed the bugs, and moved on to testing new features in the third lab. These included critical system capabilities, such the ability to model order cut-off times for deliveries within a particular time window.

The system went live in 2020, and over the past year, the multi-echelon system has had a large and statistically significant impact in positioning products closer to customers.

“On a personal level, I am incredibly proud of our team. Having worked in the area of multi-echelon inventory optimization before I joined Amazon, I have a deep appreciation of how difficult it was,” Bhatia noted. “There is a strong sense of pride for the work the team is doing — such as solving a multi-item, multi-echelon with stochastic demand and lead-time and aggregated capacity constraints and differentiated customer service levels. That sort of thing is just unheard of in academia and industry. This is why I find it gratifying to work as a scientist and a leader at Amazon. It gives me a lot of pride, and none of this could have been achieved without the people and the culture we have.”

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Amazon Supply Chain Management-Case Study

In the current era of technology and the internet, the business has become very complicated and complex. With the advent of globalization, the sector of business and management has been completely revolutionized and transformed as compared to the traditional methods of conducting business operations. It has lead to more and more competition between a big and well-known business organization that operates its business activities all over the world. In this context, the factor of supply chain management remains at the center of the topic. It occupies the central position of the overall regulation of business management because it has a major role in accelerating the quality and sales rate of the companies. However, poor management of supply chains has drastic implications on the business organization in terms of customer dissatisfaction, loss of trust, poor quality of product and services, loss of reputation, and increased market competition (Sahu, 2017). Therefore, supply chain management has a central role in achieving a high productivity rate in the competitive market, globally (Yu et al, 2017). 

The purpose of this essay is to understand the real meaning of supply chain management in the context of one of the most well-known and prominent e-commerce business organizations- Amazon.com. The paper aims to establish the internal strategic decisions of this big online business organization in relation to supply chain management and how it is successfully fulfilling the demands of every customer all around the world. 

Therefore, firstly, this essay will explore the background of Amazon.com, and then it will analyze how this big e-commerce business organization is managing its supply chain in such a dynamic environment of contemporary business. Towards the end, it will discuss critical success factors of supply chain management strategies adopted by Amazon.com. And finally, in the last section, the final takeaways will be discussed about the overall analysis of Amazon supply chain management. 

In order to explore the strategies of Amazon.com for supply chain management, it is important to understand its importance in the context of the contemporary business environment. The contemporary business environment can be characterized as excessively competitive and dynamic. Case study assignment help experts suggested an Increased market opportunities, competitors, outsourcing of production, the satisfaction of the customer, and others have become prime importance for the current business organization. In all these scenarios, managing supply chains has become a crucial task. The supply chain can be defined as a network of business organizations and processes to select raw materials and transform them into a finished product. It also involves its distribution to the customers (dos Reis et al, 2014). Supply chain management helps the business organization to decide when and what to produce, enhance communication system to place an order, and tracks the current status of the placed order. Along with this, it also helps the business firms to check inventory and the availability of stock products. Moreover, it also reduces the cost of inventory, transpiration, and warehousing. Besides this, it helps the firm’s manager to fulfill the actual demand of the customers by placing the right order at right time (Snyder, 2013). 

It is a known fact that supply chain management and logistics have greatly influenced the business activities on an online platform. The advancement in the internet and technologies has provided immense opportunities to entrepreneurs to develop new business strategies for conducting business activities on an online platform. Online business is commonly known as E-commerce pr electronic-commerce. E-commerce business can be defined as the purchase and sale of products and services with the help of the internet. It is a virtual business platform. E-commerce business relies on technologies and the internet only, it has very minimum involvement of human physically, unlike in the traditional business model (Kwilinski et al, 2019). One of the classic examples of e-commerce business is Amazon.com. One of the fundamental approaches of Amazon that took the company at zenith is its strategic supply chain management processes. 

Background Of Amazon Company 

Amazon is one of the dominant retail companies in the world which is conducting its extensive business operation by adopting an E-commerce business model. It is an American company, which was started by Jeff Bezos in the year 1995. The company is based in Seattle, Washington. In the initial phase of the company, it was a bookstore. Eventually, it started to diversify its products and become one of the biggest e-commerce retail companies in the world. In terms of objectives and mission, Amazon has given primary importance to its brand name. Along with this, it aims to provide marvelous value and a superior shopping experience to the customers and clients (Majed et al, 2018). Thus, it is a customer-centric business organization that gives values and quality products to the customers. 

As per the analysis of the research study of Lai et al (2018), Amazon has hundreds of millions of merchandise, and half of them are sold by a third-party seller. In terms of net profits, the graph is increasing every year. The year 2016 and 2017 saw the highest profitability of Amazon. In the year 2018 also, the levels of profits of Amazon has reached new heights, hence, it has made the company the second-most valuable company in the world, after Apple. 

In the above three figures, the representations of the graph depict that the Amazon E-commerce company has a remarkable growth and profits in recent years. Moreover, it is a known fact that supply chain management plays an important role for E-commerce companies. Since e-commerce companies totally rely on their logistic system, therefore, effective management of the supply chain can significantly boost the sales and profit rates of the company. Therefore, it can be easily understood that Amazon must have developed some effective and powerful strategies to manage supply chains that is ultimately resulting in tremendous profitability and success of this E-commerce company. However, Wal-Mart is one of the fierce competitors of Amazon (Collis et al, 2018). But overall, Amazon has managed to overcome the competition of Wal-Mart by establishing efficient inventory networks and distribution centers. To know more about Wal-Mart supply chain management, contact my assignment help experts of SourceEssay.

Analysis Of Supply Chain Management Of Amazon.Inc 

The supply chain process of Amazon includes warehousing of products, management of inventory, pricing, and logistic. This E-commerce business organization has optimized all these elements efficiently to ensure a smooth supply chain. In order to maximize the supply of products, Amazon has provided two fulfillment options to the consumers (Dunne, 2020). These two fulfillment options are categorized as fulfillment by Amazon and fulfillment by the merchant. The first option, that is fulfillment by Amazon, provides services of storage, packing, and shipping orders to those who prefer a hands-off approach. 

On the other hand, in the second approach, consumers can themselves do storing, packing, and shipping of the products. In addition to this, to increase supply efficiency, Amazon has adopted high-tech equipment for picking and packing the products. For this, the company has acquired the Kiva system (a kind of robot). By the end of the year 2017, the company has installed approximately forty-five thousand Kiva robots to achieve fast and effective packing of products. The study of Collis et al (2018) reflects that Kiva robots have successfully able to reduce the timing from sixty-five minutes to fifteen minutes from receiving the order to shipping the order. Moreover, it uses FedEx and UPS to ship the products globally via plane or van for local delivery.

Since Amazon has an independent sales website, which operates its virtual business in several countries around the world. These countries are the U.S.A, the U.K, France, Germany, Italy, India, Brazil, and many more.  One of the most strategic for saving a lot of storage cost is to integrate the inventories in DCs and partner’s warehouses. Amazon has adopted this strategy that helps the company to save a lot of storage costs. As opined by case study writing help professional it reduces the cost of inventory physical retail stores. Hence, there is no need for Amazon to spend its cost on physical retail stores for the purpose of inventories (Yu et al, 2017). All the warehouses of Amazon are situated near large population hubs. All the warehouses of Amazon have a well-developed communication system and logistic networks that help them to transport the product from one place to another without making any mistakes or errors.  As per the study of Hook and Wright (2015), the support of technologies inside the warehouses of Amazon has been a key advantage and helped the company to develop more than one hundred and twenty giant warehouses around the world. to strengthen its delivery services, Amazon has built more than two dozen Prime Now Delivery hubs across the cities. Along with this, the company has also incorporated a drone system to deliver the products within a limited range of areas in the city. Under the proposal of Amazon Prime Air, the company promises the customers to deliver the products within thirty minutes by using drones (Singireddy and Daim, 2018). It helps the company to reduce delivery costs and makes the delivery faster and smoother. Along with this, it also enables the company to manage its corporate social responsibility effectively.    In addition to this, this giant e-commerce company has also developed a new network of midsized distribution centers. This is also known as a sortation center that acts as a link between the giant warehouses and local post offices.

Another strategic move adopted by Amazon to improve its supply chain management process is efficient transportation. As per the analysis of the research study of Allen (2017), efficient transportation management plays a vital role in achieving efficient supply chains. End-to-end visibility in the transportation of products helps the company to tackle challenges related to shorter lead times, absence of drivers, increased freight costs, and many more. In this scenario, Amazon’s powerful step to strengthen its logistics is very crucial. The company decides to remain independent in terms of logistics. Amazon understands that depending on a third party for delivery will only delay the delivery timing of the products. This will only lead to customer dissatisfaction and loss of trust. Now, Amazon’s own logistics has made it possible to deliver the product within twenty-four hours of placing the order. In addition to this, this giant e-commerce business organization has also introduced motorcycle delivery services in some countries of the world, including India. Moreover, the allowance of paying cash after delivery has attracted a large number of customers from all over the world.  In other areas of the world such as U.S metro areas, Amazon has successfully launched a new supply chain services in the year 2015. One of these supply chain services is one-day services that have attracted a lot of customers to order products of urgent need (Shranya and Nair, 2018).

Another reason behind Amazon’s success in the field of supply chain management is related to pricing schemes. Cost-effectiveness is one of the crucial parts of the supply chain management of Amazon. As per the analysis of the study of Dunne (2020), Amazon has cleverly differentiated its customer base. This strategy has helped the company to save a lot of delivery charges. In differentiating customers on the basis of the prime customer and standard customers, the company has offered different delivery options to both segments of customers. For example, in such a pricing scheme of product delivery, the prime customer may have to pay more for the product but receives free and super-fast delivery. On the other hand, standard customers of Amazon may pay the normal price of the product but receives slow delivery.

In the context of inventory management, Amazon has developed a three-tier system for the flow of information and products (Bharadwaj, 2019). In the below figure, the three-tier system of inventory segmentation represents the flow of information from Tier 1 to Tier 3 or vice-versa. In the first phase, which is the website of Amazon’s e-commerce and IT system, there is direct contact with the customers.  This phase passes the information to the three tiers in the supply chain. Hence, it can be seen that there is a flow of information from Tier 1 to Tier 3. On the other hand, the flow of goods or products is from Tier 3 to Tier 1. To know more get free assistance from cheap assignment help experts of SourceEssay.

With respect to sourcing, Amazon has multiple partners that belong to different countries. For example, Ashford.com is one of the pioneer partners of Amazon which is an online retailing of luxury and premium products. Other partners are Della.com, Gear.com, HomeGrocer.com, and many more. Partnerships also help Amazon to operate its business activities efficiently and effectively all around the world. Another strategy adopted by Amazon company to manage its supply chain is 

Thus, it has been acutely analyzed that how Amazon Company has emerged as a giant and powerful retail e-commerce business organization by effectively managing its supply chains. E-commerce is largely reliant on its supply chain management and if the company has implemented its strategic decision in terms of supply chain management, then, it will receive maximum output and profits. 

Critical Success Factors Of Amazon In Relation To Supply Chain Management 

The above analysis of Amazon’s supply chain management strategies reflects that it is the key to achieving a desirable outcome. Due to its robust and appropriate supply management strategy, Amazon is witnessing immense popularity and growth and enjoys excessive competitive advantages. It is successful in leaving behind the two rivalries, eBay and Wal-Mart by bringing constant innovation in the field of supply chains. As of 2918, Amazon has around two-hundred and eight distribution and fulfillment centers in the USA only. Along with this, it has more than thirty-two Boeing, around eight hundred aircraft, and thousands of trucks to ship the products globally (Yu et al, 2017).

The critical success factors in the field of supply chain management can be categorized as budget reliability, market competence, good logistic system planning, well-designed distribution system, effective communication, fairness, trust, application of technologies, and many more (Ab Talib and Hamid, 2014). 

The first critical success factor of Amazon’s supply chain management is its logistic system. It acts as a weapon for Amazon to compete confidently with its rivalry in terms of speed, reliability, and cost. The enhanced logistic function of Amazon has helped the customers of this business organization receive fast and correct delivery of products. The company is using predictive analytics tools to examine customer’s shopping history, choices, patterns, and preferences. This helps the company to predict the shopping behavior of the customers and acts accordingly to maintain and manage supply chains. Well-managed logistics improve the efficiency of supply chain management of Amazon. In ocean freight, a lot of organizations and paper works are involved. In addition to this, a lot of works are done manually, chances of error and mistakes are high. It also results in delayed delivery of products. However, by leveraging blockchain technology, all the updated information and documents can be verified easily within a short span of time. Hence as said by assignment writing service experts this helps Amazon and involving parties to conduct fair and transparent business activities without any delay (Groenfeldt, 2017). 

Another critical success factor of Amazon’s supply chain is the technological factor. Implementing robotic technology to manage warehouse for picking and packing the products can be regarded as one of the most influential success factors in adding value to the supply chain management effectiveness. The installation of robots has brought many significant advantages in terms of reducing delays, increasing efficiency, productivity, assisting customers, and reduces labor cost (cost-saving) (Jain and Sharma, 2017). In the context of reduced delays, the study of Daniels (2015) states that the use of robotic technologies in the firm will help it to achieve positive outcomes. In the same way, the installation of robots helps the Amazon Company to avoid huge initial investments. Thus, this will also reduce the operating cost of the company. In addition to this, it deducts labor costs by replacing human workers with robots that ultimately serves as a cost-saving mechanism for Amazon. Free assistance is being rendered by SourceEssay native writers for preparing tuition assignments .

The overall purpose of the present essay seems to be fulfilled by analyzing the supply chain management strategies adopted by one of the biggest and powerful online retail company-Amazon. The current paper has discussed the main advantages of focusing on and improving supply chain management for a firm. Especially, in the context of e-commerce business organization, the essay has analyzed that the supply chain is the only and major source of achieving maximum profits and customer loyalty. The overall business of e-commerce relies on its supply chain management. Next, the essay has provided a deep insight into the background of Amazon Company and how this company has managed to spread its dominancy from a bookstore to the overall empire of the world of business. It has vividly represented the stock price, revenue profits, and operating profits of Amazon and understood that this company has effectively managed its supply chain process to reach heights. Further, the essay tries to dive deep into the main areas of supply chain management in which Amazon has significantly applied its strategic planning. It has been observed that logistics, technologies, transportation, pricing, were the main areas in which this retail company has given primary focus. It has brought several innovations and schemes to make an efficient and smooth supply of products from one location to another location around the world. Be it the decision of remaining independent in logistics, or pricing schemes, the company has shown remarkable progress and growth in every aspect of supply chain management. A further section of the essay has explored critical success factors and concluded that logistics and technological implications are the main critical success factors of Amazon.

Thus, in order to conclude, it can be said the Amazon has evolved greatly as per the external environmental situations of modern business. It will continue to evolve and grow if it maintains the same level of consistency in terms of supply chain management.

Ab Talib, M.S. and Hamid, A.B.A., 2014. Application of critical success factors in supply chain management.  International Journal of Supply Chain Management ,  3 (1), pp.21-33.

Bharadwaj, S., 2019. The Engineering Behind A Successful Supply Chain Management Strategy: An Insight Into Amazon. Com.  International Journal of Scientific and Technology Research ,  8 (10), pp.281-286.

Collis, D.A.V.I.D., Wu, A.N.D.Y., Koning, R.E.M.B.R.A.N.D. and Sun, H.C., 2018. Walmart Inc. takes on Amazon. com.  Harv. Bus. Sch. Publ , p.30.

Dunne, C., 2020. How the Amazon Supply Chain Works. Retrieved from: https://www.business2community.com/brandviews/xsellco/how-the-amazon-supply-chain-works-02359957

Groenfeldt, T., 2017. IBM and Maersk Apply Blockchain to Container Shipping. Forbes.

Hook, L. & Wright, R., 2015. Amazon aims to go it alone with deliveries, Financial Times

Jain, D. and Sharma, Y., 2017. Adoption of next generation robotics: A case study on Amazon.  Perspect. Case Res. J ,  3 , pp.9-23.

Johnson, T., 2020. How the Amazon Supply Chain Strategy Works. Retrieved from: https://tinuiti.com/blog/amazon/amazon-supply-chain/

Kwilinski, A., Volynets, R., Berdnik, I., Holovko, M. and Berzin, P., 2019. E-Commerce: Concept and Legal Regulation in Modern Economic Conditions.  Journal of Legal, Ethical and Regulatory Issues ,  22 , pp.1-6.

Lai, G., Liu, H. and Xiao, W., 2018. ‘Fulfilled by Amazon’: A Strategic Perspective of Competition at the E-commerce Platform.  Available at SSRN 3270958 .

Majed, S.Z., Nuraddin, S.H. and Hama, S.V.S., 2018. Analyzing the amazon success strategies.  Journal of process management. New Technologies ,  6 (4), pp.65-69.

Sahu, M., 2017.  Strengthening Supply Chain for Growth of Organized Retail Industry.

Shranya& Nair, S.V., 2018. Supply Chain Management System of Amazon. International Journal of Latest Technology in Engineering, Management & Applied Science, 7 (1).

Singireddy, S.R.R. and Daim, T.U., 2018. Technology Roadmap: Drone Delivery–Amazon Prime Air. In  Infrastructure and Technology Management  (pp. 387-412). Springer, Cham.

Snyder, R., 2013. E-commerce and supply chain management.  ASBBS Proceedings ,  20 (1), p.237.

Wells, J.R., Danskin, G. and Ellsworth, G., 2018. Amazon. com, 2018.  Harvard Business School Case Study , (716-402).

Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2017. E-commerce logistics in supply chain management.  Industrial Management & Data Systems .

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Amazon: A role model for supply chain innovation in the wake of digitalization

Given that Amazon is an e-commerce company focused on fast, friction-less delivery, there are few better ways to examine digitalization and the supply chain than to look at Amazon. According to company executives, Amazon is singularly focused on consumers answering affirmatively to the following two questions: “Do you have what I want, and can you get it to me when I need it?” (Robischon, 2017). Amazon cares about digitalization and supply chain not only because they have been critical to the company’s success, but also because they are the source of the company’s core value propositions.

In my mind, Amazon is focused on 3 main themes for supply chain innovation: the interaction of digital and brick and mortar, data analytics, and automation in fulfillment. Amazon’s focus on the interaction of digital and brick and mortar has been made obvious by the sheer number of brick and mortar concepts they are testing and/or building out. Amazon’s largest move into brick and mortar was the acquisition of Whole Foods this year, but there are several other initiatives in the works. Amazon is currently testing a concept called “Amazon Go,” a grocery store with “no lines and no checkout.” Customers can check into the store with an app, add items to their digital shopping cart by picking them off the shelf, and pay automatically by walking out of the store (Amazon.com, Inc, 2017). Other concepts include “Amazon Books” and the “Amazon Treasure Truck” (Amazon.com, Inc, 2017), (Amazon.com, 2017). All of these ventures into brick and mortar give consumers immediate access to product without having to wait for delivery, create a space for consumers to touch and feel Amazon products, and provide valuable data to Amazon about consumer shopping behavior (Petro, 2017), (Taylor, 2017).

Amazon has been and will continue to be focused on data analytics to inform the supply chain. Amazon’s digital platforms allow Amazon to collect a wealth of data about their customer’s shopping habits. Amazon’s goal is not only to know what their customer wants, but to predict that need in advance. For example, Amazon has a patent on predictive shipping in which a product is sent to a warehouse to anticipate a customer’s order so that it can be delivered faster (Lomas, 2014). Also, over 25% of Amazon’s revenue is from cross-selling or up-selling techniques based on past customer browsing and purchase history (Cohn, 2015). As more consumers shop through Amazon.com and other channels (Alexa, dash buttons, new brick and mortar locations), better data can inform the supply chain to get the right products to customers faster.

Amazon is also focusing on automation to optimize the supply chain. One example is Amazon Prime Air, a delivery system that will allow Amazon to deliver packages under 5 pounds in 30 minutes or less using drones (Amazon.com, 2017). It could be a more scalable way to build Amazon Prime Now, which has so far been in select geographies with a limited product assortment.

Amazon has been pushing the boundaries of supply chain innovation and has taken the digitalization megatrend head on. However, I was surprised to read that one change Amazon has made to Whole Foods since the acquisition is to lessen the amount of local products offered in stores (Taylor, 2017). Localization is a trend that has been widely discussed among academics and business people alike (the HBR posted an article about localization back in 2006) (Rigby, 2006). In the wake of digitalization, localization has become even more important. Amazon, with its focus on customer shopping behavior as well as its function as a marketplace is positioned well to ride the wave of this trend. Amazon could sell local items and allow consumers to discover these items through its marketplace. It could quickly respond to customer demand for these items through data analytics, and deliver products to the customer using its well established fulfillment network.

Pathways to Just Digital Future

Although Amazon seems to be well positioned for the future, it is yet to be seen how widely Amazon will expand its brick and mortar stores and how successful they will be at merging the digital with the physical shopping worlds. Will they struggle with the same difficulties that other brick and mortar retailers face or be savvy enough to bring together the best of both the digital and physical channels for a seamless customer experience? Amazon’s continued success will also be affected by competitive retailers’ responses to the current environment. Will existing retailers effectively react or will Amazon take over retail as we know it?

Works Cited

Amazon.com. (2017). Prime Air . Retrieved from Amazon: https://www.amazon.com/p/feature/6grqshfrw4gz7tv

Amazon.com. (2017). Treasure Truck . Retrieved from Amazon: https://www.amazon.com/b?node=15020057011

Amazon.com, Inc. (2017). Amazon Books . Retrieved from Amazon: https://www.amazon.com/b?node=13270229011

Amazon.com, Inc. (2017). Amazon Go . Retrieved from Amazon.com: https://www.amazon.com/b?node=16008589011

Cohn, C. (2015, May 5). A Beginner’s Guide To Upselling And Cross-Selling . Retrieved from Forbes: https://www.forbes.com/sites/chuckcohn/2015/05/15/a-beginners-guide-to-upselling-and-cross-selling/#6ad7826e2912

Lomas, N. (2014, January 18). Amazon Patents “Anticipatory” Shipping — To Start Sending Stuff Before You’ve Bought It . Retrieved from Tech Crunch: https://techcrunch.com/2014/01/18/amazon-pre-ships/

Petro, G. (2017, August 2). Investing . Retrieved from Forbes: https://www.forbes.com/sites/gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/

Rigby, V. V. (2006, April). Localization: The Revolution in Consumer Markets . Retrieved from Harvard Business Review: https://hbr.org/2006/04/localization-the-revolution-in-consumer-markets

Robischon, N. (2017, February 13). Most Innovative Companies . Retrieved from Fast Company: https://www.fastcompany.com/3067455/why-amazon-is-the-worlds-most-innovative-company-of-2017

Shen, L. (2017, May 15). Finance . Retrieved from Fortune: http://fortune.com/2017/05/15/amazon-stock-20-years-ipo/

Taylor, K. (2017, September 21). Here are all the changes Amazon is making to Whole Foods . Retrieved from Business Insider: http://www.businessinsider.com/amazon-changes-whole-foods-2017-9/#whole-foods-has-already-cut-prices-1

Student comments on Amazon: A role model for supply chain innovation in the wake of digitalization

Amazon has indeed been moving at the speed of light in terms of supply chain innovation- a fact that has left many of its competitors (and even those who never thought they’d be competing with Amazon one day) worried about a potential monopoly in the B2C space : in a report from October 2017, McKinsey sees the banks of the future at the center of the consumer ecosystem, placing them in direct competition with Amazon and its likes ( https://www.mckinsey.com/industries/financial-services/our-insights/remaking-the-bank-for-an-ecosystem-world ). Are fears of Amazon justified? It depends on how penetrated Amazon is in each market. In countries where Amazon has high penetration (i.e., the US), it is difficult to see an incumbent player threaten the customer ecosystem. However, in countries where Amazon is not as present today, there is an opportunity for local players to collect proprietary data, build data infrastructures, and become more entrenched in its customer lives (for example, Tenscent’s WeChat in Asia).

I was surprised to read that since the acquisition of Whole Foods, Amazon has decreased the number of local goods offered. However, after reflecting, it makes sense for Amazon to do this, and focus on large brands in order to produce scale and exert more power over those companies that distribute through it. With this in mind, I believe that the cycle repeats itself, with local players retaining their niche, while large players (aka Amazon) expand their presence. Meanwhile, retailers are likely to retain their “brick and mortar” dominance in the short term. I say this as adoption of the technologically driven “Amazon Go” model is likely to take time, as has shopping on mobile phones or even shopping online. However, as adoption increases, legacy brick and mortar retail will have to focus on retaining trust and offering quality customer service to compete with the likes of Amazon.

Lexie, thank you for the structured essay observing 3 very complex but synergetic directions of Amazon development.

Answering on your astonishment about non-local brands I would like to assume that they try to achieve 3 effects through working with global brands: A. broader geographical scale + following unified assortment for different locations; B. mutually beneficial higher profits; C. lower inventory by using existing global player’s supply chain. Point A at the very beginning leads to simple client customer analytics and higher level of prediction quality (what also affect on point C as well). Point B takes into account initial higher profits/revenues of global players as well as sufficient number of higher-profit-channels for local players (while preparing my essay I have some calls with HBS alumni and they mentioned that Amazon Fresh has requested up to 50% markup). Point C is pretty straight forward – levels of goods which can be written off are higher for bigger players and that’s why they can afford keep it on the balance at their facilities till the last moment with further selling to any small retailer with 30%-50% discount.

Thinking on seamless experience – I sure that it is one of the biggest head aches for offline retailers right now. They try to introduce “know your client” programs using customer cards/memberships but most of these technologies are already outdated and not for millennials. I see one more direction for Amazon in providing this data for third party retailers for some fee as well as providing this data for initial manufacturer on win-win basis.

Amazon is uniquely positioned to innovate in supply chain digitalization. In particular, their integration of brick and mortar with online is fascinating – clearly, every retailer must operate in multiple channels, as being online only or brick and mortar only both have their disadvantages. As Amazon navigates the brick and mortar space, they will face different challenges than legacy brick and mortar retailers. In particular, the last-mile logistical piece and real estate footprint are challenges that Amazon is still exploring on how to best integrate into their existing system. This is clear in their acquisition of Whole Foods, which puts them closer to the customer in attractive markets. I’m of the belief that Amazon will take over retail (and everything else) as we know it, given Bezos’ strong track record of expanding successfully into a wide variety of segments that seem unrelated at first glance (e.g., retailing and cloud are two very different businesses).

Amazon will take over retail as we know it. Frankly, I think they already have. In aggregation, the three ideas you highlighted are a different business model than traditional retail. You pose a great question about localization. It’s unclear to me that local producers have the scale to keep prices as low as Amazon would like. The costs to this technological approach to retail makes the cost to the retailer (ex. raw goods) much higher at AMZN than at a typical grocery or department store. However by squeezing suppliers (national suppliers with scale and price flexibility) they’re easily able to compete on price while delivering on their core competency, convenience.

Thank you, Lexie, your article is very interesting and very easy to read.

I personally think that Amazon will also win in the offline retail market mainly because of the fact that Amazon is an expert on data monetization.

As you mentioned, Amazon can generate over 25% of its revenue from cross-selling or up-selling techniques based on past customer online browsing and online purchase history. Imagine how much more information Amazon will be able to collect from its brick and mortar store. Covering both offline and online shopping will offer Amazon 360 degree information of a customer. Amazon will be able to know how much the customers make, where do they live, where do they shop, who do they shop with, and much more. Having huge amount of data will enable Amazon to provide very attractive offers to customers, generating more revenue for the company. The scale of data utilization is not achievable by small brick-and-mortar store without online Amazon’s scale of online presence.

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How to Prepare for an Amazon Assessment in 2024 (Study Guide)

Congratulations – you’ve made the first step to further your career by applying for a role at one of the leading retail giants in the world!

With over 700,000 employees, the opportunities (and competition) for a place at Amazon are high.

Before being offered an interview with Amazon, you’ll be given one of Amazon’s online assessments to complete. With the right practice and mindset, there is no need to stress over these assessments!

In this guide, we will help you prepare for the Amazon assessment so that you can go in confident. We will cover:

• What the Amazon Assessment Test is
• Answers to common Amazon assessment test questions
• How the recruitment process works
• How to prepare for the Amazon work simulation test
• The most common Amazon assessment tests
• Common mistakes to avoid.

Let’s get into it!

Table of Contents

What is the Amazon Assessment Test?

When you apply for a role at Amazon, you will likely be sent one or more Amazon online assessments as part of the recruitment process. This helps the company identify the candidates most well-suited to each role. It also aims to give everyone a fairer chance in the hiring process from day one.

The amazon assessment tests are designed to evaluate your characteristics and skills. They will be sent to you during the application process or after you have applied and usually have a time limit in which to complete them.

The two most common types of assessment are the following. Whichever role you apply for your assessment will likely include one or both.

• Workstyle assessment
• Work sample simulation

The work style assessments usually take 10 to 20 minutes to complete and are centered around Amazon’s leadership principles. You can expect to be asked to rank to what extent certain phrases describe you.

The work sample simulation usually takes 20 minutes to an hour and relates to the specific role you are applying for. It may ask you to make decisions based on Amazon’s leadership principles.

Find Answers to Common Amazon Assessment Questions

You will find that there are commonly used questions in the Amazon assessment tests. One of the best ways to prepare for the test is to be aware of what questions recur, and regular themes.

Practice assessments use these recurring questions and allow you to think about your answers well before taking the real test. There are various tests available on Job Test Prep, including:

• Amazon Work Style Assessment – A personality test sent to almost all applicants
• Amazon Work Simulation Assessment – A test that looks at your analytical skills, decision-making ability, and leadership skills.
• Amazon Area Manager Assessment – A practice test covering a wide range of tested topics

Other Amazon Tests-Including Pathway Tests, MBA Assessments, Financial Analytics, and more.

How Does the Amazon Recruitment Process Work?

How does the recruitment process for Amazon work as a whole? Let’s dissect it so you know exactly what to expect at every stage.

• Application form and resume screening
• Assessment test or tests
• Phone Interview
• Virtual interview or on-site assessment center

The recruitment process is fairly long, but also methodical and predictable. If you prepare yourself at each stage and align yourself with Amazon’s core values throughout the Amazon assessment process, you will boost your chances of success.

Prepare for the Amazon Work Simulation Assessment

The Amazon Work Simulation Assessment is considered one of the hardest Amazon​​ tests. The assessment is unique in the fact that it puts you in the shoes of someone who works at Amazon and asks you to resolve various scenarios that may occur.

There are various practice tests that can help you become familiar with the types of questions asked. You can expect 5 modules, which take 50 minutes to complete.

Each module will test your decision-making skills, reasoning, and alignment with Amazon’s Leadership Principles. 

Taking a couple of practice tests, and familiarizing yourself with these leadership principles, are some of the best ways to prepare for the assessment.

What is Amazon looking for?

Ok, so we have seen Amazon’s recruitment process, but what are they looking for in their candidates? Amazon calls itself ‘earth’s most customer-centric company,’ therefore whatever the role, Amazon always highly rates customer-obsessed workers. Of course, the necessary skills will vary depending on the role, but a good rule of thumb is to become very familiar with Amazon’s leadership principles. Amazon uses these principles as the underlying framework against which they evaluate every new hire.

Amazon’s Leadership Principles are:

• Customer Obsession
• Invent and Simplify
• Are Right, A Lot
• Learn and Be Curious
• Hire and Develop the Best
• Insist on the Highest Standards
• Bias for Action
• Have Backbone; Disagree and Commit
• Deliver Results

Amazon’s Most Common Assessment Tests

Let’s take a look at Amazon’s most popular assessment tests. We will go through what to expect with each one and how best to prepare.

Amazon Work Style Assessment

Amazon’s work style assessment is Amazon’s most common assessment. It is designed to assess the personality of the candidate and judge the way that they work. Amazon uses this test to determine how well the candidate will fit in with the company’s unique workplace culture .

You can expect to see a number of pairs of statements and you will be asked to indicate the one that most represents you. Here’s an example of the kind of statements you might see.

a) I am happy to ask for help as soon as I encounter a problem. b) I am happy to ask for help once I have first attempted all ways of resolving the issue myself.

The work style test is judged entirely against Amazon’s leadership principles. Amazon looks for people that will take on and apply the principles in their work. While you should be honest when answering the questions, it can be very helpful to keep your answers aligned to these principles.

Can you prepare for the personality test? Yes, you can certainly familiarize yourself with the formats of pre-employment personality tests . This will help you feel prepared and answer in line with what employers are looking for. Learn more about pre-employment personality tests from Job Test Prep and get in-depth practice, tips, and analysis.

Take Amazon Assessment Test Now

Amazon SDE Online/Coding Assessment

The Amazon Software Development Engineering online test is the exam you will be given for technology-based and coding roles. These can be for internship positions, new graduates or experienced roles. The test usually includes a technical section on coding as well as behavioral assessments.

For the more junior roles like internships and graduates, the assessment usually includes code debugging, a coding test, a technical problem-solving test that simulates hypothetical role-specific situations, as well as a personality test. More experienced software developers will instead be asked to solve two coding questions, a coding approach questionnaire, as well as a work style personality test.

How to prepare? The best way to be fully prepared is to check out some similar practice questions, prep advice, and tips. Check out this prep guide, tips, and inside info by taking the test below to boost your chances of passing the Amazon coding and behavioral assessments. Make sure to learn Amazon’s leadership principles as these will be used to judge the behavioral tests.

Amazon Area Manager Assessment (Manager In Operations)

The assessment for area managers, also known as the Manager in Operations Virtual Job Tryout, is aimed to determine how well-suited your skills, experience, and personality would be to perform in the role. There are 5 different sections to the test which are the following:

• Work scenarios – this section is a situational judgment test that presents you with hypothetical situations you might face in the role. You will need to indicate what you would be most likely to do in response.
• Manage your day – this section involves prioritizing tasks based on their importance.
• Run your area – specific to the area manager role, you will need to answer questions based on information or reports provided.
• Tell us your story – this section is about getting to know you and your past experience and how relevant it is for the role.
• Describe your approach – this section evaluates your personality where you are asked to indicate which statements represent you the most.

The area manager assessment takes around 45 minutes to complete. Some questions can be tricky, for example, work scenario questions may not always have one clear correct choice.

Make sure to be well versed in Amazon’s leadership principles as they will use these to grade your responses. If you would like to see how a real exam looks and do some practice questions with solutions, check out this sample test .

Amazon Maintenance Technician Test

If you are looking to work in a maintenance role, you will probably be given the Amazon maintenance test. It was developed by the Ramsay Corporation, the creator of two of the industry’s most popular mechanical skills tests .

It covers a range of technical topics such as electrical theory and control circuits, tools and equipment, power transmission, preventative maintenance, and print reading. There are 75 questions that are asked back to back so you need to be ready to work under pressure.

It is a tough test that needs highly specialized knowledge, and from when you receive the test invitation you only have 5 days to prepare. Therefore it is vital to prepare well and become totally familiar with the exam format and question types beforehand.

The best way to do this is by taking some simulation practice exams. The Amazon maintenance test PrepPack from Job Test Prep includes very realistic practice questions, exam time limits, and in-depth solutions and descriptions that can help get you ready in no time.

Amazon Control Systems Tech/Lead Test

The Amazon Control Systems Tech/Lead Test is very similar to the Maintenance Technician Test. This exam, however, has a heavier focus on electricity, electronics, and robotics. It is given to candidates applying to be systems technicians and team leads.

The test is a professional knowledge test conducted by Ramsay Corporation, the world’s top provider for technical exams. It tests the technical skills of candidates in a number of different topics listed here:

• Schematics, Electrical Print, Logic Reading
• Mechanical Elements
• Process Control
• Electrical Theory
• Computers, PLCs, DCS
• Power Distribution
• Automation and Robotics

The test generally lasts around 90 minutes and you have five days to complete it after receiving the actual test invitation. The questions will be multiple choice with 4 options each. Learn more about the test here and check out the free sample questions to make sure you are ready to pass with flying colors.

Amazon Financial Analyst Excel Test

Want to become a financial analyst at Amazon? First, you must pass the Excel assessment. This assessment will be sent to you after the initial resume screening or during the interview phase. You will need to show your skills and prove your competency in different features of excel. These include:

• Macro creation
• Document properties

As well as the excel exam, you will also need to do some behavioral and case study interviews. These can be either virtual or in person. The case study interview involves being presented with a hypothetical, realistic workplace dilemma or task. You will need to think about and suggest a solution while explaining the thought process behind your answer.

How do you prepare for the excel exam? It is a good idea to study the features and areas of excel listed above. Make sure you are well versed in formulas and formatting as well as the layout of the program. You can also get specific practice questions and study guides for the Excel assessment for financial analysts with Job Test Prep’s PrepPack .

Amazon Hiring Simulation

This online assessment is about giving you a realistic look at the actual experience of an Amazon employee. You will be given some context into what your simulation will look like, and then be presented with emails and instant messages from your virtual team.

You will be given the information necessary to solve the problems you are given, such as charts, data or spreadsheets. Using this, along with your skills, you will need to answer questions and solve the issues that arise in the simulation.

The questions you are given will usually come with a set of different responses to choose from. You will be evaluated on your skillset and ability to multitask, prioritize and put Amazon’s leadership principles into action.

Amazon Solutions Architect & Cloud Support Associate Assessment

So this exam is for candidates applying for solution architect roles at Amazon Web Services. You will be evaluated on both specific technical skills as well as on behavioral competencies and preferences. The exam has five different sections which are the following:

• Hiring simulation – this section of the exam includes real-life simulation scenarios in the workplace.
• Amazon work style assessment – covered previously this is the personality test in the exam.
• General technical knowledge – this part is to evaluate your role-specific technical skills.
• Proficiency interest survey – here you show your proficiency in four different areas of technology.
• Technical indicator assessment

How do the technical assessments work? The general text focuses on system design, compute, cloud migration, and cloud design and will assess your proficiency across the areas. Proficiency interest will include multiple-choice questions which are objective and situational-based questions.

While the behavioral tests are graded against Amazon’s leadership principles. The Cloud Support Associate assessment follows almost exactly the same format. The exam takes a total of 75 to 90 minutes.

Amazon MBA Online Assessment

If you are an MBA or masters level graduate applying for a full-time role, you will likely be given the Amazon MBA online assessment. This may also be applicable for some internships. The online MBA assessment is broken down into three different sections, each with different question types. These are:

• Work simulation – this section will present you with simulation business cases that you may face when working at Amazon.
• Work style assessment – this section of the exam is a personality test that measures how well suited your characteristics, attitude, and way of working are for the role.
• Career experience survey – this is a questionnaire where you must give your preferences for the MBA roles available.

As always make sure you know Amazon’s leadership principles inside out as your answers will be measured against these.

Amazon Assessment Test for Warehouse

With more than 175 fulfillment centers worldwide, there are a vast variety of jobs to be found in the Amazon warehouse . If you are applying for one of these roles you will probably be asked to take an online exam called the Amazon Associate Game On Virtual Job Tryout.

This assessment is designed to evaluate how effectively you could perform in one of these roles. It also reviews how much your attitude and approach align to Amazon’s core values. The assessment is usually split into two sections which are the following:

• Tell us your story – this part of the test asks candidates about their past personal and professional experiences. It will dig into your background, work ethic, personality, and workplace approach. It consists of 22 questions, each with multiple choice answers. You will also see statements to which you must choose how far you agree or disagree.
• Stow Pro – if you like games, you might enjoy this part of the test. It focuses on the type of work a warehouse associate might do such as packing, sorting, and stocking. The format is three simulation games within a warehouse.

You might have to virtually pack items on shelves, place items into a shopping bag, or load up the correct packages.

Is it possible to prepare for this test? Make sure you have accurately read the job description so you know what kind of tasks you would be expected to do. Make sure you are familiar with Amazon’s leadership principles and think about how your past experience is relevant to the role.

You can find online practice tests to prepare for behavioral & personality assessments. Job Test Prep is also working on a PrepPack practice test and study guide which is coming soon.

Tips for Preparing for the Amazon Assessment

Luckily, there is plenty you can do to prepare for the Amazon Assessment. Here are some of the best ways to prepare for the test, so that you are confident on the day:

1. Research company values:

Amazon has various company values. Knowing what these are, and how to naturally weave these into your answers, is a great place to start.

Amazon is looking for people who will fit their ethos and will be assessing you to see if you are a good fit.

Company values include:

• Customer obsession rather than competitor focus
• Passion for invention
• Commitment to operational excellence
• Long-term thinking.

2. Practicing Behavioral Questions

One of the most challenging assessment questions in the Amazon hiring process are the behavioral questions.

Behavioral questions are designed to assess how candidates have handled specific situations in the past. These questions are based on the belief that past behavior is a good indicator of future behavior.

Amazon is guided by a set of leadership principles. The questions used in the test often align and reflect them. Practicing these questions in practice tests and learning their guiding Leadership Principles are great things to do in preparation.

3. Time Management

Oftentimes, the Amazon Assessments will have some component of time pressure to them. Taking practice tests is a great way to learn how to manage your time, and know when to skip over a question that is taking too long.

Common Mistakes to Avoid

There are undoubtedly some commonly made mistakes that can cost securing an interview at Amazon. Luckily, you can learn from the mistakes of others and ensure you do not repeat them!

Some Common Mistakes to Avoid include:

• Not Reading Instructions Thoroughly: One of the most common mistakes is rushing through instructions. Take the time to read and understand each question or task before attempting to answer! Taking practice tests is a great way to know what to expect, and gauge how much time you have.
• Poor Time Management: Amazon assessments often have time constraints.

Failing to manage your time properly during the assessments can leave you with incomplete sections or rushing answers at the end.

Practice time management with timed tests well in advance to avoid this.

• Lack of Preparation: Some candidates underestimate the importance of preparing for Amazon assessments.

Whether it’s a behavioral interview or a technical test, being unprepared can significantly impact your performance. Read up on Amazon’s guiding principles and commonly asked questions, and take practice tests to avoid being underprepared!

• Ignoring Amazon’s Leadership Principles: Amazon emphasizes its Leadership Principles throughout the hiring process.

Failing to align your responses with these principles during written assessments may be a missed opportunity to showcase your fit with Amazon’s culture.

Now we have covered the most popular online Amazon assessment types and you should be feeling more prepared for what awaits. Whatever your skillset and wherever your sights are set in the world of Amazon, stay calm, prepare and go get ‘em.

Related Study Guide – How to Prepare for Amazon TRMS Assessment?

1. Can you fail Amazon assessment test?

Yes, you can fail the Amazon assessment test . However, the majority of people who take the test pass it.

2. How do I crack the Amazon assessment test?

The Amazon assessment tests are difficult tests that measure your skills and abilities. To crack the test, you need to practice and prepare for it. The best way to do this is by using practice tests and studying the material thoroughly.

3. Are Amazon assessments hard?

Amazon assessments can be hard, but they are also a great opportunity to show your skills and strengths. The best way to prepare for an assessment is to practice as many questions as possible and to be familiar with the types of questions that are typically asked.

4. What is the Amazon assessment?

The Amazon assessment is a test that Amazon gives to potential employees. The test is designed to measure cognitive ability, problem-solving skills, and personality traits.

5. What if I miss Amazon online assessment?

If you miss Amazon’s online assessment, you may not be eligible for the role you are interested in. However, there may be other opportunities at Amazon that you may be interested

6. How long does an Amazon assessment take?

Each test varies in the length of time it takes to complete. Tests such as the Work Simulation tests take about 50 minutes to complete, while other tests such as the Work Style Assessment take 15 minutes to complete.

Sarah is an accomplished educator, researcher and author in the field of testing and assessment. She has worked with various educational institutions and organisations to develop innovative evaluation methods and enhance student learning. Sarah has published numerous articles and books on assessment and learning. Her passion for promoting equity and fairness in the education system fuels her commitment to sharing insights and best practices with educators and policymakers around the world.

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An In-Depth Guide to Amazon Supply Chain Management in 2024

Amazon Supply Chain Management is a comprehensive and automated set of services that facilitates the movement of products from manufacturers to customers worldwide. This system ensures products are always in stock, enables faster and more reliable shipping, and significantly reduces costs.

Here are some  key learnings about Amazon Supply Chain : 

• Amazon’s success hinges on its ability to deliver products quickly and reliably . They achieve this through a complex network of fulfillment centers, sophisticated inventory management systems, and automation wherever possible.
• Amazon constantly seeks new technologies to improve efficiency . This includes robotics in warehouses, data analytics to predict demand, and drone delivery.
• Everything in the Amazon Supply Chain revolves around the customer . They focus on getting products to customers quickly and efficiently, with minimal hassle.

In addition to the key learnings, here’s some information to deepen your understanding of Amazon Supply Chain Management, including: 

• 2 Amazon Supply Chain models : FBA and FBM
• How does the Amazon Supply Chain work : Store products, manage inventory, ship them to fulfillment centers, pick, and pack for delivery.
• 6 key factors of the Amazon Supply Chain : Warehousing, delivery, technology, manufacturing, pricing, international reach.

Let’s get to the details! 

More about 2 Amazon Supply Chain Models

To utilize Amazon Supply Chain, you can choose one of two fulfillment models. That is:

• Fulfillment by Amazon (FBA)
• Fulfilled by Merchant (FBM)

For a detailed breakdown of each model, please continue scrolling.

FBA (Fulfilled by Amazon) 

FBA refers to a program offered by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. When a customer places an order, Amazon takes care of the entire fulfillment process (Picking, packing, shipping, and customer service). 

Pros and cons of this Amazon supply chain strategy :

• Convenience : Amazon handles everything from storage and picking & packing to shipping and customer service. 
• Faster delivery times: Utilizing Amazon’s fulfillment network often leads to faster shipping times and increased customer satisfaction.
• Prime eligibility: Products fulfilled by Amazon are automatically eligible for Prime-free two-day shipping. Learn more about the Prime program at Amazon Business vs Prime .
• Increased sales potential : FBA sellers often get better product placement and win the “ Buy Box ” more frequently, which can lead to more sales.
• Fees: FBA comes with a number of fees, including fulfillment fees, storage fees, and potential removal fees. These fees can eat into your profit margins.
• Less control : You have less control over the fulfillment process with FBA. 

FBM (Fulfilled by Merchant)

Unlike FBA, FBM allows sellers to fulfill customer orders themselves. When using this  Amazon Supply Chain strategy , sellers are responsible for storing, packaging, and shipping their products directly to customers. 

Pros and cons of FBM:

• Greater control over branding: You have complete control over the packaging and presentation of your products. Thus, you can maintain a strong brand identity.
• Potentially lower costs: For sellers with high-volume or bulky items, using FBA can be more cost-effective compared to FBA storage fees. 
• Direct inventory control: You have complete control over your inventory levels and can monitor stock more closely to avoid stockouts.
• Slower shipping times: Unless you have a robust fulfillment infrastructure in place, FBM can lead to slower shipping times compared to FBA.
• Increased operational complexity: Managing your own fulfillment requires significant time, resources, and expertise. This can be a burden for smaller sellers or those with limited resources.
• Customer service: You are responsible for handling all customer service inquiries related to fulfillment. This task can be time-consuming and requires dedicated staff.

Handy tips: To get more insight into the two forms of fulfillment mentioned above, you can refer to the article: Amazon vs Amazon Marketplace comparison .

How Does Amazon Supply Chain Work?

First, you can look at the diagram to best visualize how Amazon logistics works:

Our focus will now shift to a detailed examination of each step:

Receive products from sellers

Amazon Supply Chain begins with the crucial step of receiving products from sellers. However, only FBA seller can send their products in bulk to Amazon fulfillment centers. It is vital to note that FBA seller can’t deliver their inventory directly to the nearest FBA warehouse. Only professional carriers are allowed to make delivery appointments with Amazon Fulfillment Centers.

It should be noted that:

• For global sellers : Shipping to the Amazon Fulfillment center is handled by Amazon Global Logistics. 
• For domestic sellers: Amazon Sponsored Program Carrier Program is responsible.

Upon arrival, products undergo a meticulous process of receiving to check if they are accurate, of high quality, and in compliance with Amazon’s standards . Then, advanced barcode scanning and inventory management systems accurately log the products into Amazon’s vast inventory.

A big shortcut: Amazon Supply Chain can assist you in delivering items to your customers as well as reducing workload. However, if you are a multi-channel seller, you may need an additional tool to help you manage your inventory and save time. LitCommerce’s Marketplace Integration toolset, which includes Amazon Integration , is an excellent solution. It can help you streamline your workflow and provide you with a seamless cross-platform selling experience.

Store and distribute inventory

These fulfillment centers are designed to optimize storage space and facilitate the smooth movement of inventory. 

Amazon utilizes advanced robotics and automation to manage its inventory. Robots assist in the movement and retrieval of products within the fulfillment centers. This advanced technology enables Amazon to maximize efficiency and minimize the time it takes to fulfill customer orders.

Fulfill customer orders 

Fulfilling customer orders is a critical stage of Amazon Supply Chain Management. Amazon’s sophisticated fulfillment system goes into action:

• Picking and packing : Highly automated systems within the fulfillment centers locate and retrieve the ordered items. Robots or associates pick the items, and the system then directs them to a packing station. Here, trained associates carefully pack the items according to size, weight, and fragility to ensure safe delivery.
• Delivery : Amazon utilizes a multi-pronged approach to product delivery. Its growing delivery fleet includes trucks, vans, and even airplanes for designated areas. We will reveal more details in the following sections.

Deal with order return 

To complete Amazon Supply Chain Management, the company has implemented a streamlined and customer-friendly returns process to ensure a positive experience for its customers. 

When a customer initiates a return, Amazon’s system generates a pre-paid return label and provides instructions for the return. 

• Customers can choose to drop off the return at a designated location or have it picked up by a carrier. 
• Once the return arrives at the fulfillment center, it undergoes a thorough inspection to determine its condition and eligibility for resale.

Moreover, Amazon uses sophisticated algorithms and processes to check returned items and decide if they can be resold, fixed up, or thrown away.

6 Key Factors of Amazon Supply Chain Management

To take full advantage of the power of the Amazon supply chain process, you need to understand the following six key aspects:

• Warehousing
•  Delivery
• Manufacturing
• International reach

1. Warehousing

The warehouse system is a crucial component of Amazon Supply Chain Management. It is a complex network of facilities designed to get items to customers as quickly and efficiently as possible.

Amazon divides the distribution network into five types of facilities, including cross-dock centers and fulfillment centers. Here’s a breakdown of the key aspects:

• Fulfillment Centers: These are massive warehouses that store a wide variety of products. When a customer places an order, items are picked from the shelves here and prepared for shipping.
• Sortation Centers: Packages from fulfillment centers are delivered here, sorted by destination, and loaded onto trucks for delivery.
• Delivery Stations: These are smaller facilities located closer to final destinations. Packages are delivered here from sortation centers and loaded onto vans for final delivery to customers.
• Prime Now Hubs: These hubs are specifically designed for Amazon’s ultrafast Prime Now delivery service. They store a limited selection of high-demand products for near-instant delivery.

Remarkably, Amazon enforces strict standardization across its warehouse system. This ensures a consistent experience for both employees and customers, regardless of location.

2. Delivery

Amazon’s commitment to fast and reliable delivery is a cornerstone of its Amazon Supply Chain Management strategy. Here are some highlight points related to Amazon’s delivery strategy:

• Amazon doesn’t just rely on trucks! Their growing fleet of cargo planes, called Amazon Air. They are used to speed up deliveries by flying packages directly between fulfillment centers.
• AMZ has invested in air cargo services at over 15 US airports , with each jet transporting more than 30 containers. That’s why in 2022, Amazon Logistics processed 4.79 billion U.S. delivery orders, equating to 13.13 million delivery orders per day or 546,941 per hour (According to Capital One Shopping ). 
• Other carriers such as UPS, FedEx, and the United States Postal Services (USPS)
• A network of independent contractors through Amazon Flex
• Amazon Delivery Service Partners , which operates fleets of delivery vans
• Delivery options : From standard free shipping with Prime membership to ultrafast one-day or even same-day delivery options in select locations, Amazon provides a range of choices for customers. This caters to the growing demand for instant gratification.

3. Technology

Technology plays a pivotal role in Amazon Supply Chain Management . Let’s take a look at some state-of-the-art technology being applied:

• Sparrow: It is a smaller robot arm that can reach into totes and reliably grasp 65% of the more than 100 million products in Amazon’s inventory.
• Kiva robots : These are short, orange robots that move shelving units around the warehouse floor and bring them to pickers.
• Mobile robots : These are considered the workhorses of Amazon’s warehouses. 
• Amazon Air: The company has invested heavily in its own fleet of cargo planes, which allows it to control delivery schedules and transport time-sensitive items faster.
• Prime Air: Amazon is also developing drone delivery systems (Prime Air) for short-distance deliveries in specific areas. This futuristic technology may revolutionize delivery times in urban areas.
• Demand forecasting : By conducting an analysis of past sales data and identifying trends, Amazon can more accurately predict future demand for products.
• Route optimization : Delivery routes can be optimized based on factors like traffic patterns, weather conditions, and driver availability.
• Warehouse layout : Data analysis can be used to optimize warehouse layouts for better product placement and picking efficiency.

4. Manufacturing

Actually, Amazon does not directly manufacture anything themselves. Instead, they use a combination of private labeling and white labeling to sell their products. To make it easier to understand:

• Private labeling involves designing, branding, and producing products under Amazon’s own brand name. At one point, Amazon had more than 45 private brands and sold more than 243,000 products on the platform.
• White-labeling refers to the practice of purchasing unbranded or generic products from manufacturers and reselling them under Amazon’s brand name. Amazon is known to work with third-party suppliers and manufacturers to sell a range of products under the “AmazonBasics” brand.

However, according to The Verge , Amazon plans to reduce the number of items branded with its name. This decision is attributed to the increasing number of accusations against Amazon for collecting user data with the intention of promoting more of its in-house products.

Expanding Amazon-label goods can create conflicts of interest for sellers and does not ensure optimal Amazon Supply Chain Management.

Pricing strategy is a key driver of Amazon Supply Chain Management. Amazon’s pricing policy enables you to segment customers into two groups:

• Prime: Members in this group pay $14.99/month (plus tax) and receive fast, free delivery. They also get some benefits like exclusive deals and free access to popular movies,shows, music, games, and books.
• Standard: These clients can use only standard or slower delivery.

Understand that segmentation allows both sellers and Amazon to respond instantly to fluctuations in demand. It also correctly calculates the order flow and ensures the efficiency of Amazon’s Supply Chain Management.

On the other hand, pricing factors also affect the supply chain for FBA sellers. Due to high long-term storage fees, FBA sellers need to calculate future demand carefully to avoid overburdening fulfillment centers.

6. International reach

The final component that strongly affects Amazon Supply Chain is global reach. With operations in multiple countries, Amazon has established a robust network of suppliers, fulfillment centers, and delivery partners to serve diverse markets around the world.

As an Amazon seller, you benefit greatly from this extensive network.  With Amazon’s timely and efficient delivery options, sellers can expand their businesses globally. Check out the list below to see which markets Amazon has entered:

• amazon.com.mx
• amazon.co.uk
• amazon.com.tr
• amazon.co.jp
• Middle East:
• amazon.com.au

Amazon Supply Chain Management: FAQs

The Amazon Supply Chain is highly efficient, thanks to continuous optimization, embracing technology, and fulfillment strategies.

Amazon’s use of advanced technology, extensive network of warehouses, multi-tier inventory management, and excellent transportation contribute to its efficiency. The company’s investments in infrastructure, such as warehouse technology and trucking capabilities, further enhance efficiency

The Amazon Supply Chain is successful due to a three-pronged approach: tech, efficiency, and scale. 

They leverage automation with robots and AI for tasks like order picking and inventory management. This focus on efficiency extends to their vast network of fulfillment centers, strategically placed to get products to customers quickly. 

Finally, the massive scale of their operation allows them to negotiate better deals with suppliers and carriers, further driving efficiency.

Amazon’s supply chain relies heavily on automation. It uses robots, conveyor belts, and other technologies to sort, store, and ship products efficiently. This allows it to handle large volumes of orders quickly and keep costs down. Amazon is also developing AI-powered tools for planning and managing inventory.

Amazon Supply Chain Management: Final Words

Amazon’s unrivaled efficiency, speed, and customer-centric approach have set the bar high for the supply chain. By studying and implementing  Amazon Supply Chain Management, you can optimize your operations, reduce costs, and meet customer demands more effectively. 

Furthermore, if the idea of selling on multiple channels simultaneously resonates with you, feel free to reach out to us for expert guidance on utilizing LitCommerce tools. Plus, stay ahead in the industry by exploring my Retail Blog , where you can discover the latest trends and invaluable strategies for enhancing your eCommerce business.

David Do is an  E-Commerce Writer at LitCommerce . He has over 3 years of experience writing online content for small business owners and the marketing industry. David specializes in evaluating eCommerce platforms, plugins, and tools that help businesses grow.

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Supply Chain Management Assignment: Emerging Trends in Amazon

In this supply chain management assignment, you will conduct research in existing practice and emerging trends in supply chain management with a specific focus an Amazon as your case study. You are asked to read the Amazon.com case study, watch the Amazon - Supply Chain Conference 2017 video provided (https://www.youtube.com/watch?v=Okq0xvlagXo), and conduct a desktop research on Amazon Corporation to critically study their past, current, and possible future operations and supply chain management practices.

Introduction The aim of the supply chain management assignment is to develop an evaluative study about the Supply Chain and Logistics operations of the Amazon Corporation. The study shall be substantiated by a complementary analysis of the emerging trends in supply chain and logistics along with the patterns of supply chain operations followed by Amazon. The research is developed based on the summary of the points derived from the conference on supply chain, held in the year, 2017. The Amazon supply chain prerogatives were introduced and interpreted by Tim Collins, the Vice President of Worldwide Logistics at Amazon, focusing on the tagline, “Go Digital.”

Detailed overview of Amazon Corporation Introducing Amazon Corporation, it is nominated as the leading e-commerce company, at present, with a net worth of $1.7 trillion. Founded in the year, 1994 by, Jeff Bezos, Amazon had been ruling the e-commerce sector, with its excellent optimized supply chain and distribution networks and updated digitalized platforms of operation (About Amazon, 2021). The business strategy of the company had been the confluence of technology, teamed with an obsession for customer satisfaction and lead the competition, through cost leadership.

Jeff Bezos is believer of creating a virtuous cycle, wherein the stakeholders can start from any point. The hierarchy of the company never considered the supply chain operations to be separate from the heart of the business operations as the majority of the services rendered are dependent on the distribution network and supply chain. The value proposition of Amazon is to emphasize on meeting the customer requirements at all possible levels and making it easy for the customers to relate to the products and services and ensure an end to their search in the e-commerce portal.

Jeff Bezos considers technology to be the blood to run the operations of the company. He never separates technology from the distribution network and supply chain operations and hence, monitors the updation and integration of technologies to run the operations (About Amazon, 2021). AWS is considered to be the largest global infrastructure for Amazon, which empowers the company to deliver and integrate the customer applications and reach out to the content and network, from all possible locations (He et al.2017).

The target market of Amazon is not limited to any segment and has products and services, which are needed by every demographic segment, along with geographic locations. The cost leadership contributes towards a better reach. The company applies the Aspect Workforce Management (WFM) , to integrate the management of the workforce, followed by application of cost leadership along with robust technological support to address customer needs (Janger&Twerski, 2019). The key stakeholders of Amazon are the customers, the suppliers, and the employees, who help in running the business efficiently.

Critical analysis of Amazon’s operations and supply chain management practice From the discussion by Tim Collins at the conference of 2017, it has been made clear that the focus on the supply chain process had been there for Jeff Bezos, from the very beginning of the formation of Amazon Corporation (youtube.com, 2021). With the idea of expanding the business from a mere bookstore to a panorama of every possible products and services, the founder had focused on integrating the supply chain and distribution networks, with the primary business operations of the company (Dias Galuchi et al.2019). The emphasis on optimizing the supply chain and logistics operations of Amazon had been always supported by technological interventions and innovative practices, which led to the formation of a well-knit supply chain framework.

Considering the majority of the operations of the company, to be dependent on the e-commerce portal and the engagement of supply chain and distribution networks, to use the process, for optimized delivery, the company ensures that the supply chain and logistics framework is updated and optimized, throughout. The application of the Probability Level Demand Forecast model instrumentalizes the core of the supply chain and distribution framework of Amazon (Merlino&Spro?e, 2017). At present , it has been evident that , business organizations focus largely on the optimization of supply chain networks and distribution channels, by integrating cutting-edge technology , to encourage the company, cut through the competitive scale (Yu et al.2016).

The focus on technological optimization and sustainability are the characterizing the current supply chain networks and distribution channels. Amazon had scrupulously followed the trends in integrating supply chain with the main operations of the company, run through the use of innovation and disruptive technology. The two main elements of the supply chain framework and distribution channel of Amazon are Fulfillment By Amazon (FBA), and Sell Your Own Fulfillment (FBM) (Angeleanu, 2015). These two features add on to the fulfillment services of Amazon, making the organization, more convincing for the people.

Critics on the other hand have stated that the supply chain and logistics framework of Amazon is insufficient to address the demands of the customers. Despite , ensuring customer satisfaction, at all possible levels, the company at times fails to fulfill the customer demands, as the supply chain framework and distribution network suffers from incorrect forecasting and the company addresses these grievances in an yearly format, which creates the problems of stock over piling.

Additionally, it has also been criticized that the last-mile deliveries by Amazon is an ordeal , especially during the festive seasons. Further, there have been complaints from the customers that despite having the orders to be placed and tracked through AWS, there are issues of late or failed check-outs (Merlino&Spro?e, 2017). Nonetheless, despite having these issues, Amazon strives hard to retain the customer smile and maintain the supply chain and logistics operations, through timely and proper optimization.

Key challenges of Amazon in Australia and New Zealand region In congruence to the above critical analysis, it is evident that Amazon, despite facing supply chain and logistics issues, remains the leader in the e-commerce sector, mainly through its continued endeavor for technological integration and optimization. Amazon operates across 58 global countries, which includes Australia as well. The plans of expansion in New Zealand had been developed by Amazon, on creating a strong foothold in Australia. However, it has been found that Amazon faces few challenges, while operating in these two nations, Australia and New Zealand. The challenges are mainly two and include technological challenge and competitive challenges. The challenges are explained below:

Challenge 1: Security and compliance issues on Data Privacy and use of AWS

The customers of Australia and New Zealand use the AWS cloud services to store the confidential information, likely the card numbers, and conduct process sensitive transactions. However, it has been found that a considerable number of customers have complained about their data getting infringed, payments made, but the orders are not yet fulfilled and delivered (Sudbury& Hutchinson, 2016). This made the company fall into the broth of security and compliance issues with the policies in Australia and New Zealand.

Challenge 2: Competition from the existing retailers in the two countries

The rising competition in business can also be seen between Amazon and the largest retailers in Australia and New Zealand. In order to compete the aura of Amazon, big companies like Woolworths, FoodTown, Countdown and Thomas Dux banners are migrating into the online platform for taking orders as well as making home deliveries (Semprini, 2017).

Recommendations In light of the above discussion, it is evident that Amazon suffers from three major problems, which includes technological security, incorrect forecasting and growing competition. Hence, three specific recommendations are provided , to Amazon to help the company address these challenges and recover from the complications.

Recommendation 1: Amazon needs to focus on renewing their SSL (Secure Sockets Layer) , every six months and ensure a total PCI (Payment Card Industry) compliance. This would not only ensure a secured process of transaction from Amazon , but also for the customers.

Recommendation 2: Amazon needs to tighten its IoT (Internet of Things) applications and use RFID for better visibility and enhance the forecasting accuracy.

Recommendation 3: Amazon needs to retain its cost leadership strategy, as it will outcompete most of the business brands and even integrate sustainable business operations, securing the environment.

References (2021). Retrieved 10 September 2021, from https://www.youtube.com/watch?v=Okq0xvlagXo&t=135s About Amazon. (2021). Retrieved 10 September 2021, from https://www.aboutamazon.com/

He, Y., Liu, R., Li, H., Wang, S., & Lu, X. (2017). Short-term power load probability density forecasting method using kernel-based support vector quantile regression and Copula theory. Applied energy, 185, 254-266.:http://www.cs.bham.ac.uk/~syw/documents/papers/AppliedEnergy-yyhe.pdf

Janger, E. J., &Twerski, A. D. (2019). The Heavy Hand of Amazon: A Seller Not a Neutral Platform. Brook. J. Corp. Fin. & Com. L., 14, 259.:https://brooklynworks.brooklaw.edu/cgi/viewcontent.cgi?article=1332&context=bjcfcl

Dias Galuchi, T. P., Rosales, F. P., &Batalha, M. O. (2019). Management of socioenvironmental factors of reputational risk in the beef supply chain in the Brazilian Amazon region. International Food and Agribusiness Management Review, 22(1030-2019-623), 155-172.:https://ageconsearch.umn.edu/record/284931/files/ifamr2018.0004.pdf

Merlino, M., &Spro?e, I. (2017).The augmented supply chain. Procedia Engineering, 178, 308-318.:https://www.sciencedirect.com/science/article/pii/S187770581730053X/pdf?md5=2aa8707721cd4d902eb0013a43978b14&pid=1-s2.0-S187770581730053X-main.pdf

Yu, Y., Wang, X., Zhong, R. Y., & Huang, G. Q. (2016). E-commerce logistics in supply chain management: Practice perspective. ProcediaCirp, 52, 179-185:https://www.sciencedirect.com/science/article/pii/S2212827116308447/pdf?md5=6a27c704ac0c42f22ad076497467e047&pid=1-s2.0-S2212827116308447-main.pdf&_valck=1

Angeleanu, A. (2015). New technology trends and their transformative impact on logistics and supply chain processes. International Journal of Economic Practices and Theories, 5(5), 413-419.:https://conference.ase.ro/pdf/44.pdf

Sudbury, A. W., & Hutchinson, E. B. (2016).A cost analysis of amazon prime air (drone delivery). Journal for Economic Educators, 16(1), 1-12.:https://161.45.205.92/index.php/jfee/article/download/1512/1090

Semprini, P. (2017). Amazon: retail–apparel & speciality (Doctoral dissertation).:https://run.unl.pt/bitstream/10362/26181/1/Semprini_2017.pdf

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Supply Chain Management on Amazon Assignment

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• Implementing Supply Chain Planning

Manage Planning Profile Options

For Planning Central, Supply Planning, Demand Management, and Order Promising work areas, set profile options to specify the following:

The profile option used by Supply Chain Planning processes

The sourcing assignment set and lead time multiplier used by the Check Availability process

The number of minutes that the results from the Check Availability process remain valid on the Check Availability page, as well as whether the check availability page displays analytics

The number of default display days for the Review Supply Availability page, as well as the organization calendar to be used for supply buckets in the Supply Availability report

The category set used when assignment sets are created

Use the Manage Planning Profile Options task from one of the Supply Chain Planning work areas to open the Manage Planning Profile Options page. From this page, you can manage all of the profile options except the following:

Order Promising Sourcing Assignment Set

Order Promising Horizon in Days

To manage these two profile options, use the Manage Administrator Profile Values task in the Setup and Maintenance work area to open the Manage Administrator Profile Values page. On the Manage Administrator Profile Values page, search for the profile option code MSP. The search results will also include the External ATP Web Service Enabled profile option that must remain set to No in the current release.

For more information about profile options, see the Profile Options section in the Oracle Fusion Cloud SCM Implementing Common Features for SCM guide.

Supply Chain Planning Processes

This table lists the profile options that affect Supply Chain Planning processes. If the profile option doesn't have a default value, the Default Value column in the table is shown as Not applicable.

Check Availability Process

This table lists the profile options that affect the Check Availability process. If the profile option doesn't have a default value, the Default Value column in the table is shown as Not applicable.

Check Availability Page

This table lists the profile options that affect the Check Availability page.

Review Supply Availability Page and Supply Availability Report

This table lists the profile options that affect the Review Supply Availability page and the Supply Availability report. If the profile option doesn't have a default value, the Default Value column in the table is shown as Not applicable.

Assignment Set and Assignment Level

Each assignment level includes categories that you can select when you create an assignment set, depending on how you set the Sourcing Rule Category Set profile. This profile option doesn't come predefined with a default value, so you must specify a value for it.

Use Database Promising or Source Promising

For details, see Database Promising and Source Promising .

Enable Splits for Data Store XML Files Larger than 2GB

Set up the order promising site profile so that the Refresh and Start Order Promising Server process can generate multiple data store XML files when the file size is over 2GB.

Navigate to the Setup and Maintenance work area.

In the task pane, click Search .

Search for the Manage Profile Options task.

Open the Manage Profile Options page.

In the Search Results: Profile Options section, create a new profile option.

For the profile option code, enter this value: MSP_GOP_GEN_MULTI_DS_FILES .

For the profile display name, enter this value: MSP_GOP_GEN_MULTI_DS_FILES .

From the application menu, select Global Order Promising .

From the module menu, search for and select Order Promising .

In the SQL Validation field, enter this value: select meaning PROFILE_DISPLAY_VALUE, lookup_code PROFILE_CODE_VALUE from fnd_lookups where lookup_type = 'MSC_YES_NO'

Specify a start date that's no later than the current day's date.

In the Profile Option Levels section, at the Site level, set the profile value as enabled and updatable.

Click Save and Close .

Search for and open the Manage Administrator Profile Values task.

Search for the MSP_GOP_GEN_MULTI_DS_FILES profile.

In the Profile Option: Profile Values section, at the Site level, enter the profile value Yes .

This setting will take effect from your next run of the Refresh and Start Order Promising Server scheduled process, and supports following data store files:

InventoryPolicy

ResourceAllocation

ShippedDemandHistory

GeographyHierarchy

BeginningInventory

PurchaseOrder

PlannedPurchaseOrder

FulfillementLine

TransferOrder

PlannedTransferOrder

PlannedWorkOrder

Reservation

LaneTransportModelItem

MfgOperationItem

MfgOperationResource

ManufacturingRouting

This setting isn't applicable for the following files:

AllocationRule

OpdatastoreConfig

CarrierCalendar

SourcingRule

ServiceObjective

LocationManufacturing

MfgOperationOutput

Related Topics

• Overview of Profile Options
• Hierarchy in Profile Levels