group 10 it project report

7/23/2019 Group 10 IT Project Report

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A

Project ReportOn

AMAZON-SUPPLY CHAIN

MANAGEMENT

Submitted To:

Prof. Dee!"i #$!rd%!&

'!(u"t)-I*trodu(tio* to I*form!tio* Te($*o"o+) ,IIT

Submitted #):

Ab$i$e/ 0!i* ,112234

A$i$ De5 T$!/ur ,1122167!5i$ C$!ud$!r) ,122899

Pr!tee/ 7!%!tr! ,12286

Pi)u$ Set$i ,12286;

Sumit Prut$i ,112241


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TA#LE O' CONTENTS

1. O5er5ie% of =et!i" I*dutr)................................................................................................2

1.1 Size of the US Retail Industry..............................................................................................2

1.2 T%o T)e of =et!i"er i* t$e I*dutr)............................................................................2

1.2.1 Industry Trends.............................................................................................................. 3

1.3. To T$ree =et!i" Com!*ie i* t$e US...........................................................................

1.3.1 !al"art.........................................................................................................................

1.3.2 The #ro$er %o"pany....................................................................................................

1.3.3 %ostco............................................................................................................................

1. I*ter*et =et!i"i*+...............................................................................................................&

1.& To T$ree I*ter*et =et!i" Com!*ie !fter Am!>o*.(om..............................................'

1.&.1 e(ay) Inc........................................................................................................................ '

1.&.2*et+li,) Inc.................................................................................................................... '

1.&.3 O-erstoc.co"............................................................................................................... '

1.' =et!i" Su") C$!i* Stru(ture........................................................................................../

1./ Su") C$!i* C$!""e*+e !*d Oortu*itie................................................................../

2. A"azon..................................................................................................................................0

2.1 Am!>o*? bui*e mode"................................................................................................12.1.1 ines of (usiness.........................................................................................................1

2.2 T$e Am!>o* #ui*e Mode" C!*5!.............................................................................11

2.3 Cometiti5e !d5!*t!+e....................................................................................................13

3. Analysis of Supply %hain ana$e"ent of A"azon............................................................1

3.1 E"eme*t of SCM..............................................................................................................1

3.2 Am!>o* Su") C$!i* 7e) Iue..................................................................................1

3.3 AMAZON Su") C$!i* C$!""e*+e !*d Oortu*itie.............................................1&

3. AMAZON Su") C$!i* Net%or/.................................................................................1'

3.& I*5e*tor) Se+me*t!tio* %it$i* t$e Am!>o*.(om Net%or/.........................................1/

3.' Am!>o*? Supply %hain

Analysis......................................................................................14

3./ '!(tor (o*tributi*+ to AMAZON? Su((e.................................................................10

. AMAZON


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2. O5er5ie% of =et!i" I*dutr)

2.2 Si>e of t$e US =et!i" I*dutr)Accordin$ to the latest annual report fro" the U.S. %o""erce 5epart"ent) total retail sales

in 211 6ere 7./ trillion) 6hich represents an 48 increase o-er 21 total retail sales

9includin$ food ser-ice and auto"oti-e:. Retailers supported "ore than 2 "illion jo;s.

Accordin$ to 5eloitte Touche Toh"atsu and STOR


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%atalo$ue Sales

In>@o"e 5e"onstrations

endin$ achines

co""erce

+or e,a"ple) A"azon.co"

2.1.2 I*dutr) Tre*d

In>store picup ser-ices are hi$hly popular 6ith online consu"ers and retailers such as !al>

art) (est (uy and Ar$os report that 8 or "ore of their online orders are piced up in>

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store. Bet so"e retailers ha-e $enerally ;een slo6 to offer such ser-ices ;ecause they are

difficult and costly to i"ple"ent.

As traditional retailers lose custo"ers to A"azon and other online pure plays) ho6e-er) "ore

"erchants are co"in$ to see store picup pro$ra"s as a po6erful 6ay to 6in ;ac custo"ers.

Shoppers 6ho pic up orders at a store often "ae additional purchases) and con-ertin$ asin$le>channel shopper into a "ultichannel shopper typically results in a si$nificantly "ore

profita;le custo"er.

Also) studies ha-e sho6n that "ulti>channel retailers) 6ho first had a traditional retail outlet

and then esta;lished a 6e; presence) acCuired dou;le the consu"er clic rate of retailers 6ho

6ere only internet>;ased.

2.; To T$ree =et!i" Com!*ie i* t$e US

2.;.2 @!"m!rt

The co"pany 6as founded ;y Sa" !alton in 10'2) incorporated on Octo;er 31) 10'0. It is

an A"erican "ultinational retail corporation that runs chains of lar$e discount depart"ent

stores and 6arehouse stores. It is also the ;i$$est pri-ate e"ployer in the 6orld 6ith o-er t6o

"illion e"ployees) and is the lar$est retailer in the 6orld. !al"art has 4)& stores in 1&

countries) under && different na"es. The re-enues for +B 213 stood at US7 / ;illion 6ith

the net inco"e of US7 1/ ;illion.

2.;.1 T$e 7ro+er Com!*)

The #ro$er %o"pany is an A"erican retailer founded ;y (ernard #ro$er in 1443

in %incinnati) Ohio. It reported 70'.4 ;illion in sales for fiscal year 212. It is the countryDs

lar$est $rocery store chain) its second>lar$est $eneral retailer ;y re-enue) and fourth>lar$est

retailer in the 6orld 9surpassin$ Eer"any>;ased etro AE in 212:) accordin$ to 5eloitte. It

"aintains "arets in 31 states) 6ith store for"ats that include super"arets) superstores)

depart"ent stores) con-enience stores) and "all je6ellery stores.

2.;.; Cot(o

%ostco !holesale %orporation is a "e";ership>only 6arehouse clu; that pro-ides a 6ide

selection of "erchandise. As of Fuly 212) it is the second lar$est retailer in the United States)the se-enth lar$est retailer in the 6orld and the lar$est "e";ership 6arehouse clu; chain in

the United States. In the United States) the "ain co"petitors operatin$ "e";ership

6arehouses are Sa"Ds %lu; and (FDs !holesale %lu;. Althou$h Sa"Ds %lu; has "ore

6arehouses than %ostco) %ostco has hi$her total sales -olu"e. %ostco e"ploys a;out

1/) full and part>ti"e e"ployees. As of +e;ruary 213) %ostco had '4.2 "illion

"e";ers. It reported 70/.'2 ;illion in sales for fiscal year 212.

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2. I*ter*et =et!i"i*+

The internet retailin$ industry is defined as the set of co"panies that sell products or ser-ices

to consu"ers -ia 6e;sites that operate as online stores. Internet retailin$ is a se$"ent of the

o-erall retailin$ industry. Internet retailin$ consists of traditional retailers that operate an

online channel and co"panies that solely sell products or ser-ices o-er the internet.

Traditional retailers are so"eti"es referred to as G;ric>and>"ortarG co"panies. The online

channels that they operate are no6n as Gclic>and>"ortarG operations. %o"panies that do

not operate stores and sell product only throu$h their 6e;site are no6n as Gpure>playG or

-irtual internet retailers.

Online Retail has ;een each $ro6in$ steadily o-er the last decade. This has forced traditional

retailers to transfor" their operations fro" G;ric>and>"ortarG to Hclic>and>"ortar "odel.


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%o"panies 6hich ha-e only the online presence ha-e "ana$ed to stay ahead of those 6ho

follo6 clic>and>"ortar "odel. This can ;e attri;uted to the early "o-ersJ ad-anta$e they

ha-e in this sector of retail ;usiness.

2.4 To T$ree I*ter*et =et!i" Com!*ie !fter Am!>o*.(om

2.4.2 e#!)B I*(

+ounded in 100&) e(ay Inc. is an online auction "aretplace that connects "illions of ;uyers

and suppliers daily. e(ay has ;een $ro6in$ rapidly since its inception and is ;ased on the

-irtually unli"ited product selection and perfect price co"petition that is offered -ia online

auctions. Re-enues 6ere 71./ ;illion in 212 6ith the net inco"e of 71.0;illion.

H(rynjolfsson and S"ith discusses the concept of internet retail as an early perfect "aret)

6here consu"ers are fully infor"ed of products and prices. e(ay e,tends this concept into

the GperfectG supply chain) 6here suppliers are directly connected 6ith ;uyers 6ith nointer"ediaries and direct ser-ice.

2.4.1 Net'"iB I*(.

*et+li,) Inc. 6as founded in 1004 as an online ho"e 55 deli-ery ser-ice. In 212*et+li,)

Inc. had re-enues of 73.'1;illion 6ith a *et Inco"e of 721.' "illion. %usto"ers pay a

"onthly su;scription fee and de-elop a list of "o-ies they 6ish to -ie6. After 6atchin$ a

"o-ie) custo"ers place the 55 in a return en-elope and place it in the "ail. Once the 55

is recei-ed ;ac into the local *et+li, distri;ution center) the ne,t "o-ie on the custo"erDs

list is auto"atically sent to the custo"er. %onsistent 6ith "ost internet retail ;usiness

"odels) *et+li, co"petes on selection) con-enience) and price. *etfli, offers 14) titles)

the a;ility to auto"atically recei-e "o-ies 6ithout lea-in$ ho"e) and no late fees.

2.4.; O5erto(/.(om

O-erstoc.co" sees to pro-ide a "ore efficient "aretplace for connectin$ sellers and;uyers of e,cess in-entory at discounted prices. In so"e cases) O-erstoc.co" ;uys unused

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in-entory fro" "anufacturers) and in other places the co"pany just pro-ides a 6e; front end

that ena;les "anufacturers and retailers 6ith a channel throu$h 6hich to sell their o-erstoc

product. O-erstoc offers a 6ide product selection includin$ apparel and accessoriesK ;oos)

"o-ies) and %5 $a"esK electronics and co"putersK ho"e and $ardenK je6ellery) $ifts) and

6atchesK sportin$ $oods and e-entsK tra-elK and 6orld stoc. !orld stoc offers nu"erousproduct cate$ories fro" -arious countries around the 6orld) such as Persian

ru$s.O-erstoc.co" re-enues for 21 6ere 71.1 ;illion.

2.9 =et!i" Su") C$!i* Stru(ture

endors supply products to their retail custo"erDs distri;ution centers as 6ell as operate their

o6n net6or of distri;ution centers. Retail supply chains -ary in co"ple,ity) and this

structure can include any nu";er of "anufacturers) -endors) distri;ution centers) and retaillocations. Alon$ 6ith the physical product flo6) there is also an infor"ation flo6 ;et6een

supply chain partners. 5ependin$ on the technolo$y and colla;oration efforts ;et6een

partners) infor"ation flo6 can ;e e,tensi-e or li"ited. The type of infor"ation shared

;et6een partners could include point of sale data or forecasts o-er a certain period of ti"e.

Suppliers and retailers that colla;orate e,tensi-ely share in-entory status data as 6ell.

Inno-ati-e chan$es to the traditional retail supply chain ha-e ;een "ade in atte"pts to

increase the -elocity of products throu$h the supply chain and increase the accuracy of

in-entory "ana$e"ent. %rossdocin$ and distri;ution center 95%: ;ypass are t6o initiati-es

to increase product -elocity. %rossdocin$ is a process 6here products flo6 throu$h facilities

desi$ned to consolidate or deconsolidate in;ound ship"ents and re>route the" for out;ound

transportation. Products are not ept in in-entory. In a 5% ;ypass process) -endor ship"ents

are "ade directly to retailers 6ithout ;ein$ stored 6ithin a 5%. The 5% ;ypass is also

referred to as a direct>to>store process. (oth practices decrease the lead ti"e of deli-erin$

orders to the retailer.

2.3 Su") C$!i* C$!""e*+e !*d Oortu*itie

ie "any industries) "ajor challen$es in the retail supply chain include atte"pts to ensure

that the ri$ht products $et to the ri$ht places for the lo6est costs. %olla;oration efforts

;et6een tradin$ partners has arisen as a response to this challen$e. As indicated in the re-ie6

of supply chain concepts) colla;orati-e) plannin$) forecastin$) and replenish"ent 9%P+R: has

;een a process that has tried to lin tradin$ partners to$ether "ore deeply. This process

represents ;oth a challen$e and an opportunity. It has ;een a challen$e due to the a"ount of

cooperation and trust needed ;et6een ;oth parties. The opportunity lies in "ore accurate

"ana$e"ent of in-entory and Cuicer responses to supply chain disruptions. Aside fro"

e,ternal challen$es) there are also internal challen$es to co"panies 6ishin$ to i"pro-e their

supply chains.

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+inally) a critical challen$e for retailers is pro-idin$ on>shelf a-aila;ility of product. A

representati-e fro" a "ajor third>party lo$istics co"pany stated that a "ajor challen$e for

retailers) especially discounters) is ha-in$ stoc a-aila;le for custo"ers. It 6as also noted that

a hi$h percenta$e of "ajor discounterDs supply chain costs are located in the stoc roo" to

the shelf replenish"ent process. In order for stores to eep custo"er ser-ice le-els hi$h) theco"pany "ust synchronize its supply chain around "eetin$ these custo"er ser-ice le-els.

The challen$e lies in the ;alancin$ the cost of ha-in$ stoc a-aila;le 6ith the cost of ha-in$

in-entory in the pipeline. The opportunity is increased re-enue across the entire supply chain

and retention of custo"ers.

1. Am!>o*

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A"azon.co" is an A"erican>;ased "ultinational electronic co""erce co"pany. ItJs

headCuartered in Seattle) !ashin$ton. Feff (ezos founded A"azon.co") Inc. in 100 and

launched it online in 100&. It started as an online ;oostore.

Miio*

HTo le-era$e technolo$y and the e,pertise of our in-alua;le e"ployees to pro-ide our

custo"ers 6ith the ;est shoppin$ e,perience on the Internet.


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%o"putation

Soft6are

%ontent deli-ery

*et6orin$

5ata;ase pay"ents and ;illin$

stora$e

deploy"ent and "ana$e"ent

support

6e; traffic

application ser-ices

6orforce

1.2 Am!>o*? #ui*e Mode"

1.2.2 Li*e of #ui*e

A"azonDs lines of ;usinesses consist of the follo6in$?

1: Online retail

2: Internet ser-ices

3: #indle ecosyste"

O*"i*e =et!i"

The online retail line of ;usiness includes those products sold ;y A"azon as atraditional

retailer. A"azon clai"s to ha-e G


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of the products are handled e,clusi-ely ;y sellers) 6ith A"azon tain$ a cut of e-ery sale for

pro-idin$ the channel.

I*ter*et Ser5i(e

A"azon Pri"e

A"azon Pri"e pro-ides free t6o>day shippin$ on retail purchases) on>de"and -ideo

strea"in$ and free access to the #indle li;rary) all for an annual su;scription fee. A"azon

pri"e co";ines the Hsu;scription and Hall you can eat "odels 6ith retail "odel to pro-ide

added custo"er -alue.

A!S 9A"azon !e; Ser-ices:

A"azon decided to lease out its o6n ser-er space to other co"panies and indi-iduals.

Thou$h it 6as just a side ;usiness ;ut A"azon found itself "ana$in$ a lar$e nu";er of

ser-ers and internet ser-ices. A"azon decided to continue 6ith A!S as it did not affect their

core ;usinesses and also $enerated a constant strea" of inco"e 6hich they could use for their

retail ;usiness.

7i*d"e E(o)tem

A"azon has e,panded its ;usiness into "anufacturin$ and distri;utin$ #indle ta;lets.

Ori$inally desi$ned as an electronic ;oo reader) the #indle has no6 ;eco"e a fully

functional ta;let and "edia de-ice. A"azon ser-es as ;oth H"anufacturer and Htraditional

retailer for the indle ta;let. The #indle de-ices are sold at a loss) 6hich 6ould put this line

of ;usiness into the Hrazors and ;lades cate$ory of ;usiness "odel. (y sellin$ indle at a

loss) A"azon is ;ettin$ that custo"ers 6ill purchase enou$h e> ;oos) $a"es) and -ideos to

correct the initial loss.

1.1 T$e Am!>o* #ui*e Mode" C!*5!

This ;usiness "odel can-as is "ade up of nine ;uildin$ ;locs?

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http://www.digitalbusinessmodelguru.com/2013/02/the-non-traditional-retail-business.html#razorshttp://www.digitalbusinessmodelguru.com/2013/02/the-non-traditional-retail-business.html#razors


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The nota;le thin$ in the can-as is that thou$h there are "any ;usiness lines) still A"azon

"ana$es to eep so"e thin$s constant. Its -alue proposition re"ains price and con-enience

no "atter the product or ser-ice) and lo6 prices can ;e sustained ;y ensurin$ its custo"er

relationships continue to ;e "ostly auto"ated and self>ser-ice. A"azon continues to e,pand

its ;usinesses ;ut also "aintains its focus on these t6o ;locs.

Am!>o*? *e% 5e*ture

A"azon Pu;lishin$ is one of the co"panyDs recent -entures. It pro-ides tools for on

de"and pu;lishin$ and $i-in$ ne6 9or esta;lished: authors access to the A"azon

store.

A"azon has launched is HAutoRip. !ith AutoRip) a custo"erDs "usic purchases

fro" the past ;eco"e i""ediately a-aila;le di$itally and throu$h the cloud. This

ser-ice is e,pected to ;e e,panded to "o-ies and ;oos) allo6in$ any purchase of the

actual product to translate to di$ital -ersions auto"atically.

Sa"e day deli-ery is ;ein$ pro-ided ;y A"azon in so"e parts of the U.S. This ser-ice is

li"ited to the lar$e "etropolitan areas or those areas in closest pro,i"ity to its 6arehouses.

Sa"e day deli-ery 6ould per"it A"azon to enter into one "ore cate$ory i.e. the $rocery

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;usiness. Erocery ;usiness is still in nascent sta$e 6hen it co"es to 6e;. A"azon -alue of

price and con-enience holds true in all of its product cate$ories) allo6in$ it to e,pand itself

into ne6 "arets and deepen its custo"er relationships. The co"pany has do"inated online

retail 6ith a standard traditional retail ;usiness "odel o-er the internet.

1.; Cometiti5e Ad5!*t!+e

o$istics

%usto"er ser-ice

Inno-ation

IT capa;ilities

;. A*!")i of Su") C$!i* M!*!+eme*t

of Am!>o*

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;.2 E"eme*t of SCM

E"eme*t T)i(!" Iue

%usto"ers 5eter"inin$ 6hat actually the custo"ers 6ant

+orecastin$ Predictin$ the Cuantity and the ti"in$ on de"and

5esi$n Incorporatin$ 6hat the custo"er 6ants

Processin$ %ontrollin$ Cuality) schedulin$ 6or

In-entory eetin$ out the de"and 6hile "ana$in$ the in-entorycosts

Purchasin$


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@ere all In-entory sa-in$s need to ;e ;alanced a$ainst the hi$her transportation costs.

;.; AMAZON Su") C$!i* C$!""e*+e !*d Oortu*itie

A"azon.co" has o-erco"e a nu";er of supply chain challen$es as a pioneer in internet

retailin$. Althou$h si$nificant pro$ress has ;een "ade) a nu";er of challen$es re"ain in

supply chain desi$n) in-entory se$"entation) order sourcin$) fulfil"ent) and transportation.

Su") C$!i* Dei+*:

5ecidin$ on the nu";er and location of A"azon.co" distri;ution centers 95%s: to a

seasonal and $ro6in$ ;usiness is a challen$e for A"azon.co". The a"ount of internal

distri;ution center $ro6th that should occur ;ased on capacity) seasonality) and the e-ol-in$;usiness "odel is ;oth a challen$e and an opportunity. Also) ;ased on the e-er e,pandin$

product line at A"azon.co" the decision of 6hich ite"s to store in 6hich 6arehouse) and

ho6 ;est to desi$n 6arehouses for different product types is a challen$e

I*5e*tor) Se+me*t!tio* !*d Po"i():

A"azon.co" is a;le to deli-er orders directly to custo"ers fro" in-entory that is not ept

at its distri;ution centers throu$h partnerships 6ith distri;utors) pu;lishers) "anufacturers)

and other partners. Additionally) the nu";er of third>party sellers that ena;le A"azon.co" to

offer nearly unli"ited product selection 6ithout e-er purchasin$ the in-entory is increasin$.

!ith this "ulti>tier supply chain in place) A"azon.co" is faced 6ith the challen$e and

opportunity of "ain$ decisions re$ardin$ 6hich in-entory to store in its facilities) -ersus

in-entory to ;e stored in upstrea" tiers in the supply chain. +urther"ore) 6hich products

should not ;e carried at all) ;ut supplied ;y third>party affiliates is an issue that is 6orthy of

on$oin$ analysis.

Order Sour(i*+ Cot Mi*imi>!tio*:

On a per order ;asis) deter"inin$ 6hich internal facility or e,ternal partner should ;e

responsi;le for fulfillin$ the order is a challen$e ;ased on A"azon.co"Ds ;usiness "odel.

Orders are placed -ia the 6e;site) and custo"ers e,pect a real>ti"e pro"ised deli-ery date.

Also findin$ out the lo6est cost solution is a difficult pro;le" in real>ti"e 6hen there can ;e

"ultiple ite"s on an order 6hich are stored in different internal or e,ternal facilities) 6hile

;alancin$ the custo"er e,pectation of a sin$le deli-ery.

'u"fi""me*t Cot:

+ulfill"ent costs include the costs associated 6ith operatin$ their fulfill"ent andcusto"er ser-ice centers) includin$ costs associated 6ith 6arehouse processes fro" recei-in$

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throu$h shippin$) throu$h credit card collection costs) and throu$h pay"ents to drop shippers

for ser-ices pro-ided. (ecause of the -aria;le nature of these costs) A"azon.co" focuses on

internal operational i"pro-e"ents to reduce these costs. Reducin$ fulfill"ent costs fro"

1&8 of re-enues to 4.&8 of re-enues is a si$nificant i"pro-e"ent) althou$h reducin$ these

costs 6hile "ana$in$ a $ro6in$ product line is a challen$e.

Tr!*ort!tio*- #!"!*(i*+ Cot !*d Ser5i(e:

A"azon.co" does not ha-e the scale on a per order ;asis to contract trucload or less

than> trucload carriers as less e,pensi-e alternati-es to their parcel partners. *or do they

ha-e the lu,ury of a plannin$ cycle 6here deli-eries can ;e planned 6ith lon$ lead ti"es.

Therefore) A"azon.co" "ust find 6ays to sa-e "oney on transportation throu$h inno-ati-e

"ethods to achie-e scale and scope. A"azon.co" offers free shippin$ and other options that

can ena;le the" to achie-e a lon$er plannin$ cycle throu$h lon$er ser-ice 6indo6s to

custo"ers.

;. AMAZON Su") C$!i* Net%or/

The physical supply chain net6or of A"azon.co" 6hich supports its different ;usiness

"odels is discussed ;elo6

=et!i" Out"et

A"azon.co" $enerates all its sales fro" the -irtual stores 6hich are created ;y the

A"azon.co" and affiliate 6e;sites. It has no retail outlets. Thus it doesnJt has to incur the

cost of settin$ up physical retail stores. The "ar$inal cost of presentin$ a storefront for ne6

custo"er reCuired less in-est"ent.

A retail store has to carry in-entory in each store location as 6ell as in distri;ution centers

6hich adds to the cost. A"azon.co" ;ein$ an online retailer has store in-entory at the

distri;ution centres) thus they are a;le to carry a "uch 6ider selection of in-entory.

This pro-ides the" a co"petiti-e ad-anta$e o-er the retailers in in-entory turno-er.

Tr!*ort!tio* Hub - I*&e(tio* Poi*t

5ifferent transportation hu;s are operated under A"azon.co" 6hich they refer as Injection

Points. These Injection point locations are deter"ined ;y the concentration of custo"ers in

those areas) usually located in hea-y custo"er concentration area. This help in reducin$ the

transportation costs. The process includes

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It starts 6ith consolidatin$ the orders in distri;ution centers and then shipped fro" the

5% to the transportation hu; ;y contractin$ less than trucload or trucload shippers.

!hen they reach the hu;) the in;ound trailers are unloaded. The paca$es are sorted

and sent (y usin$ less than trucload or trucload carriers the o-erall transportation cost

is reduced as they are less 6hen co"pared to carrier partners.

Dro S$i Lo(!tio*

A"azon.co" directly deli-ers the order to custo"er 6ith the help of its supply

chain partners. The third>party sellers can also ;e considered drop shippers that offer their

products for sale on A"azon.co"

;.4 I*5e*tor) Se+me*t!tio* %it$i* t$e Am!>o*.(om Net%or/

It is esti"ated that A"azon.co" offers o-er 2 "illion ite"s for sale throu$h its 6e;site and

affiliates. A"azon.co" is a;le to support this selection throu$h its "ulti>tier in-entory

net6or. The follo6in$ is a description of the three tiers that co"prise A"azon.co"Ds

in-entory net6or.

The 6e;site 666.a"azon.co" o6ns the relationship 6ith the custo"er. The first tier 6ithin

the supply chain net6or is the A"azon.co" distri;ution center net6or. In-entory is

a$$re$ated in distri;ution centers. This ena;les A"azon.co" to carry less o-erall in-entory

than physical retailers that ha-e to carry in-entory in stores and 5istri;ution %enters to

support custo"ers.

The second>tier in the in-entory "odel is co"posed of 6holesaler and partner 5%s. This tier

includes drop shippers such as In$ra" (oo 5istri;utors) (aer and Taylor) and other ;oo

distri;utors. Also %5 distri;utors and other partners that are utilized to fulfil A"azon.co"

orders are also seen at this le-el. If A"azon.co" is una;le to fulfil the ite" fro" its 5%)A"azon.co"Ds IT syste"s can loo into partner in-entories to deter"ine 6hich party to

assi$n the order. This pre-ents the A"azon.co" custo"er fro" e,periencin$ a stoc>out for

an ite" that A"azon.co" carries ;ut does not ha-e in its o6n stoc no6. It also allo6s

A"azon.co" to offer ite"s that it does not sell directly throu$h its in-entory.

anufacturers) -endors) Pu;lishers and third>party sellers co"prise the third>tier in the

A"azon.co" "ulti>tier in-entory "odel. Apart fro" it) these parties further ena;le

A"azon.co" to offer the nearly unli"ited selection that they offer. Addin$ to it) the products

sourced fro" these entities ena;le A"azon.co" to reduce their dependency on distri;utors)a-oid distri;utor "arups) and i"pro-e "ar$ins.

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The $raphical representation of A"azon.co"Ds three>tier in-entory "odel is sho6n on the

follo6in$ pa$e.

In this "odel) A"azon.co" IT syste"s pass infor"ation to each tier in the supply chain

"odel. Physical products can then flo6 to the custo"er fro" any tier. +urther"ore) those

partners 6ho are in second and third tier replenish the A"azon.co" distri;ution centers 6ith

their in-entory.

;.9 Am!>o* Su") C$!i* A*!")i

A"azon is a successful co"pany that is looin$ to continuously i"pro-e. It has ;een

raned &th for its supply chain in the "ost recent Eartner Supply %hain Top 2& list. !hen

analyzin$ the A"azonJs supply chain) there are three out of the se-en principles of supply

chain and t6o out of the four pillars of e,cellence that stron$ly coincide 6ith its strate$y.

A"azon should e-aluate itself ;ased on trends of three areas to help i"pro-e its supply

chainK days paya;les outstandin$) in-entory turno-er ratio) and net cash flo6s fro" operatin$

acti-ities.

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A"azon has a direct>to>consu"er online and drop>ship"ent "odel 6hich co"es 6ith

"any ad-anta$es 9A"azon.co":. This "odel allo6s A"azon to ha-e "illions of different

in-entories listed for sale 6ithout actually ha-in$ it in in-entory since a different

"anufacturer 6ho is A"azon partner has it and ships it directly to the consu"er. A"azoneeps the trac of "ost popular in-entories on hand) thus reducin$ the costs of in-estin$ in

"ore capacity for in-entory. One another ad-anta$e of the strate$y is that A"azon recei-es

the custo"erJs pay"ent for a product ;efore they ha-e to pay to their suppliers) thus $i-in$

the" "ore cash to in-est in the co"pany and a hi$h in-entory turno-er. A"azon also has a

-ery uniCue supply chain syste" in place. They ha-e uniCue applications 6hich handle

nearly e-ery aspect of its supply chain i.e. 6arehouse "ana$e"ent) in;ound and out;ound

shippin$ )transportation "ana$e"ent) de"and forecasts) in-entory plannin$) and "ore

instead of usin$ le$acy syste"s These applications ha-e $reatly reduced the a"ount of

hu"an inter-ention in A"azonJs supply chain and has $reatly enhanced its speed and

efficiency in fulfillin$ orders.

;.3 '!(tor (o*tributi*+ to AMAZON? Su((e

2. Hi+$ Perform!*(e Ue:

!e;site is relia;le) fast and easy to use.

Shippin$ is pro"pt

%usto"er is infor"ed Inno-ati-e technolo$y

1. Co*5e*ie*(e !*d e!e of ue:

ar$e selection? 6holesale relations) pu;lisher relations) unli"ited -irtual shelf space

;. #r!*d $!re of mi*dF*et%or/i*+:

Short) cle-er na"eMta$line

Referral pro$ra"

%o>;randin$) cross pro"otion

. Commu*it):

%usto"er re-ie6s 6ith author re-ie6s are posted.

%usto"er $ifts? ;oo"ars) cups

Pro"otion 6here custo"ers colla;orate 6ith pu;lishers

4. Pero*!"i!tio*F"!r+e (utomer b!e:


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Reco""endations

Others readers 6ho ;ou$ht this title also ;ou$ht

Others readers 6ho ;ou$ht this author also ;ou$ht

9. T=UST: Euarantees

Return policy

Ereat custo"er ser-ice? easy search) no hassle return) e"ail confir"ation

3. Ete*ded er5i(e

Search

Out of print search

A;ility to order ;efore pu;lication

. Cot tru(ture:

o6 cost

o6 o-erhead? fe6er e"ployees) lo6 in-entory

6. Lo+iti(:

+ast) relia;le) ine,pensi-e shippin$

Ori$inally no in-entory

. AMAZON


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Am!>o* @!"m!rt

Stron$ technolo$ical infrastructure 6ith

a sin$le platfor". A"azonJs e>

co""erce front>end and ;ac>end

9"erchant.co" "odel: 6or in tande"

to "a,i"ize efficiency. 5ue to their

e,istin$ IT capa;ilities) A"azon.co"

does not ha-e issues in these areas) and

thus they are not an early adopter of

R+I5.

It is -ery a$$ressi-e 6ith respect to

technolo$y 9one of the support

acti-ities: and 6as the Nrst retailer to

use ;ar codes. It uses satellite lina$es

to co""unicate 6ith all its stores. It

has inte$rated its POS) in-entory>

control) R+I5) and other lo$istical

technolo$ies to speed product deli-ery)

i"pro-e security 9includin$

"erchandise shrina$e:) and reduce

costs.

Ereat product forecastin$ syste" Ad5!*(ed d!t! mi*i*+? acti-e

collection and usa$e of custo"er

purchase ;eha-ior infor"ation.

@!re$oue m!*!+eme*t )tem

,@MS: The ad-anced la;our"ana$e"ent) load ;alancin$) process

alternati-es) and opti"ization routines

;uilt into their !S ena;le the

efficient processes for internal 5%

processin$.

P!rt*er$i re"!tio*$i %it$

u"ier? inte$rates suppliers -ia IT Ltreats the" 6ell in ter"s of pricin$)

they are "ore partners than H-alue

taers

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4. Le!r*i*+ from Am!>o* Su") C$!i*

A"azon does not "aintain an in-entory of all the ite"s sold throu$h its 6e;site. It

acts as a channel for third party sellers. Thus the in-entory costs are -ery lo6.

A"azon uses a pull ;ased strate$y) thus enticin$ the custo"ers to ;uy fro" the". The

-alue propositions they offer are price and custo"er con-enience.

A"azon "aintains the data for custo"erJs data collected fro" pre-ious transactions.

This helps in studyin$ the pattern) forecastin$ future trends) and $ettin$ -alua;le

"aretin$ insi$hts.

A"azon purchases ite"s directly fro" the "anufacturer and offer it at lo6 prices to

the custo"ers ;y eli"inatin$ inter"ediaries.

Accurate) on>ti"e) cost effecti-e order fulfill"ent and transportation are the ey to the

ser-ice that it offers to differentiate itself fro" online co"petitors.

In order to "ini"ize lo$istics cost) A"azon operates Transportation hu;s. These are

injection points located in hea-ily custo"er concentrated areas.

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9. =efere*(e

1: An Analysis of %urrent Supply %hain (est Practices in the Retail Industry 6ith %ase

Studies of !al>art and A"azon.co"

2: ana$e"ent Infor"ation Syste"s = #enneth %. audon M Fane P. audon

3: 666.

group 10 it project report

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