Assignment of Operations Management- II (Group No.

8)
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Company of Analysis: Amazon, Inc

Introduction

Amazon.com, Inc is a renowned American multinational technology company that has its
headquarters in Seattle and that has its primary focus in the e-commerce domain, digital streaming,
cloud computing, and artificial intelligence. It is among one of the Big Four tech companies, the other
three being Google, Apple, and Facebook.

Amazon is well- known for its disruption of already established industries through technological
innovation and massive scale. It is currently the world's largest online marketplace, Artificial
Intelligence (AI) assistant provider, and cloud computing platform as measured by both- revenue and
market capitalization. Amazon has been the largest Internet company by revenue in the world for
the most part of the last decade. It is the second largest private employer in the United States and
places itself in the list of the world's most valuable companies.

Amazon was incorporated by the infamous Jeff Bezos in Bellevue, Washington, in July 1994. The
company had begun its operations as an online marketplace for books but then later expanded its
horizon into selling electronics, video games, software, apparel, food, toys, furniture and jewelry.
2015 was one of the most crucial years for Amazon as it surpassed Walmart as the most valuable
retailer in the United States by market capitalization. In 2017, Amazon acquired Whole Foods Market
for US$13.4 billion, which vastly increased Amazon's presence as a significant brick-and-mortar
retailer in the United States of America. In 2018, Jeff Bezos announced that its two-day delivery
service, Amazon Prime, had inculcated 100 million subscribers on its platform across the globe.

Amazon is a distributor of downloads and streaming of videos, music albums, and audiobooks
through its subsidiaries of Amazon Prime Video, Amazon Music, and Audible. Amazon also runs its
independent publishing arm known as Amazon Publishing, a film and television studio, Amazon
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Studios, and a cloud computing subsidiary, Amazon Web Services. It is a manufacturer of consumer
electronics including Kindle e-readers, Fire tablets, Fire TV, and Echo devices which are popularly sold
worldwide. In addition, Amazon has acquired big giants including Ring, Twitch, Whole Foods Market,
and IMDb. Among various controversies, the company has been widely criticized for a hyper-
competitive and demanding work culture, technological surveillance overreach, anti-competitive
practices and tax avoidance.

A brief History of Amazon Operations

Jeff Bezos incorporated Amazon in July 1994. He chose Seattle as the base of operations because of
technical talent as Microsoft is located there. In May 1997, the organization asked for public
subscription of shares. The company began selling music and videos in 1998, at which time it began
operations internationally by acquiring many online sellers of books in Germany and the United
Kingdom (UK). The following year, the organization also sold many video games, consumer
electronics, home-improvement items, software, games, and toys in addition to several other items.

In 2002, the company initiated Amazon Web Services (AWS), which provided data on Internet traffic
patterns, Website popularity and other statistics to help the cause of marketers and developers. In
2006, the organization grew its AWS portfolio when Elastic Compute Cloud (EC2), which rents
computer processing power and Simple Storage Service (S3), that rents data storage via the Internet,
were made accessible. In the same year, the company started Fulfillment by Amazon which was
responsible for optimally managing inventory of individuals and small companies selling their
products through the company’s website. In the year 2012, Amazon bought Kiva Systems to
automate its inventory-management business.

Since Amazon has been a pioneer of Operations and Supply Chain Management, it has been our
group’s study of interest.
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Supply Chain Phases

1. Strategic decisions
2. Planning decisions
3. Operational decisions

Strategic Decisions taken by Amazon in the Supply Chain Management Process

- A big part of Amazon’s operational success lies in its competitive and efficient warehousing
strategy, which ensures products are easily accessible from pretty much everywhere in the
world. The warehouses of Amazon are literally present in all most all parts of the globe.
- All the company’s warehouses are strategically placed near the big metro cities and hubs
which have high population density.
- The inventory is spread amongst these warehouses to ensure demand can be met at regular
and continuous basis.
- There are even mini-warehouses present in the smaller and remote areas to ensure that the
orders can be sent and delivered fast.
- Warehouses are also optimized in terms of internal operations. Each warehouse has five
unique storage areas and the organization strategy allows the respective team members to
use pick-and-pack robots to pull products almost instantly and move them towards the
delivery department.
- One of the key differentiators between the Amazon’s supply chain management strategy and
other online retailers’ is the plethora of delivery options that are offered at the Amazon
platform.
- The Amazon supply chain management approach is to embrace technology and information
systems of the company are in sync with the supply chain management process. The company
utilizes many automation and robotic solutions, in order to pick and pack orders as well as
stacking and storing inventory.
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- These tools not only increase the company’s efficiency and delivery speeds, but they also cut
down on warehouse and staffing costs – freeing up funds for other logistics or supply chain
needs.

Planning Decisions taken by Amazon in the Supply Chain Management Process

Amazon’s warehouses are planned in such a manner that they are easily divided into 5 storage areas:
- Library prime storage - They particularly contain books and magazines
- Case flow prime storage - They particularly contain broken case and high demand
- Pallet prime storage - They particularly contain full case and high demand
- Random storage - They particularly contain smaller items and modern demand
- Reserve storage - They particularly contain low demand/irregular shaped products

Company’s warehousing planning takes the first and foremost place among all its strategic decisions,
and all sellers have to know why. Amazon wants to make sure that the products sold on their
marketplace are accessible anytime from any place on Earth.

The warehouses of Amazon have well-formed communications and logistics network allowing them
to transport products from one place to another in a very cost-efficient way. Amazon has even put
small warehouses near not very large towns to improve the customer experience of those people
who don’t live in metropolitan areas.

That’s the number of ways in which Amazon can make those deliveries happen.

- The number of ways include the infamous free, two-day Prime deliveries and;
- the Prime Now option, which gets products from point A to point B in two hours of less.
- Amazon also employs a whole host of planning– from more traditional to super high-tech –
to get its products out in the least possible time all over the world.
- There are drones employed that perform delivery. Though the program’s not fully
operational just yet, the drones will eventually allow for 30-minute deliveries in some of the
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United States biggest markets. All customers need is an Amazon-branded landing mat (and
to live within 15 miles of the nearest drone-enabled warehouse), and the instant air-side
deliveries are within reach.
- There are Amazon-branded trucks and delivery vans and
- There are even deliveries by bike in certain areas.
- The retailer has also been leveraging existing delivery routes via FedEx and Union Postal
System.

Operational Decisions taken by Amazon in the Supply Chain Management Process

Amazon’s supply chain process is simple, yet effective. It starts when a customer places an order.
After that red light in the warehouse prompts, which shows the worker that product have been
ordered, and then the bar code is matched with the order. The product is then placed in crates on a
conveyor, which then goes through the distribution centre and after that it will be sorted by bar
codes. Crates usually arrive at a centrally defined location, and the barcodes of products are matched
with their orders and they are sorted automatically into one of several thousand chutes and then it
goes into a box. The bar code then identifies the customer order, boxes are packed, taped and
weighed, and they are shipped for the last mile delivery and customer received the order within 1 to
7 days.
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- Seller send products to an Amazon fulfillment center or schedule a pickup

- Amazon stores’ sellers’ products from a single unit to an entire inventory
- Customer order sellers’ products from Amazon which gives them fast and free delivery
- Amazon packs and ships sellers’ products from fulfillment center to customer
- Amazon’s customer service and delivery creates loyal and happy customers
- Amazon’s supply chain management includes technology, as could be already understood
from the above points about drones and robots in the strategy and planning strategy of the
Supply Chain Management process.
- In terms of manufacturing and operational decisions, the products of Amazon allow them
take to control the whole cycle of creating and selling products. They continuously produce,
store, and ship them
- Technology helps Amazon fulfill orders as quickly as possible and save on staffing costs as far
as possible. So, they free funds for investing them in improving other supply chain areas.
- Amazon still allows third-party sellers, but the company seems to have learned that many of
those third-party products can be made for much cheaper – and more profitably. The retailer
has taken to manufacturing its own lower-cost products, as well as white-labeling products
from other sellers.