Introduction

It is a bright autumn morning in 2205 and Gaurav Maurya, SVP Amazon

Enceladus1 , is gazing outside the window and reminiscing about how Blue Origin2
had transformed Enceladus into a bustling human colony in a short span of 50
years, much like some of the developing countries back on Earth. Also, continuing
Amazons legacy, Amazon.en has become Enceladuss most customer-centric
company in a short span of one year and customers love to buy all sorts of products
on it every day. Gaurav is scheduled to meet the Board of Directors back on Earth in
3 days to present the first year report. For this meeting, Gaurav has decided to
focus on operations, and on how different verticals within operations are helping
raise the bar on customer experience. Gaurav enlisted four of his team members to
share their stories. As Gaurav prepares for the meeting, he has asked you to take a
look at the reports that his team has put together and help him answer some open
questions and come up with fresh ideas on how to solve the problems.
Scenario 2: On the launch day of Amazon.en, the analytics team noticed an
interesting trend in the buying behavior of the Amazon customers in Enceladus most of the orders being placed on Amazon were being done using
compromised/stolen cards. This was the first time that Amazon was seeing such a
massive fraud-attack right at the launch. While doing a root-cause analysis, it was
found that the machine learning algorithm (used for predicting fraud orders) was
not mature enough to capture these fraudulent buying-patterns. Nearly 10K orders
were placed on Amazon on the very first day of its launch, and there was a chance
that nearly 70% of them were fraudulent. Amazon.en has an annual-goal for
minimizing the bad-debt received due to fraud. Hence, minimizing the loss from this
fraud attack was pertinent without impacting genuine customers. A snapshot of the
above situation at Operations is as follows: Machine Learning Algorithms had failed
to detect fraud, hence the orders either had to be manually investigated for fraud or
had to be passed without fraud-detection (Batch-Pass). Batch-Passing of orders
(without detecting fraud) involved very high risk and could lead to huge losses for
Amazon. On the other hand, manual investigation of orders for fraud would have
reduced the probability of fraud to 0.5%. However, the team could manually
investigate a maximum of 1,500 orders each day. This effectively meant that the
remaining orders would have to be batch-passed. Please see Appendix 1 for
relevant data. Despite all these challenges, Amazon was able to handle this fraud
situation effectively. Please answer the questions that Gaurav had scribbled on the
report:
1. What is the correct mix of the orders that were sent for manual investigations
and the ones that were batch-passed? (Note: Please state all your assumptions
clearly and also include the work excel sheet for the solution)

2. Based on the attached data-set, what is the maximum loss that Amazon could
incur from this incident? (Note: Please state all your assumptions clearly and also
include the work excel sheet for the solution)
3. How can Amazon prepare better and prevent such an event from happening in
the future? (Note: Please limit your response to 200 words and try to support your
arguments with data points, if possible)