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OTM-851 Supply Chain Management

Supply Chain of Amazon
Q1: Write approximately 1200 words summary on the supply chain profile of a company of
your choice. Consider the following points while writing the summary:
Introduction
Amazon is a technology based MNC that started as an online bookstore but has now become
one of the leading electronic commerce companies of the world in terms of turnover and the
workforce it employs. The company is registered on NASDAQ and has a stock price of more
than $110 per share and in 2021, had a revenue of $470 billion. The company was founded
by Jeff Bezos on July 5th 1994 in Washington, United States. The headquarters of the
company are in Seattle, Washington. The company has multiple subsidiaries which include
amazon web services, autonomous vehicles, satellite internet, ring, twitch, IMDb, and
wholefood market.
Supply Chain drivers of Amazon
The supply chain of amazon is the prime element in the success of the company. The supply
chain of amazon consists of all the warehouses, inventory management, pricing, and delivery.
The chain starts with a product being placed into the warehouses and ends with the product
being delivered to your doorstep. The third-party sellers are responsible for almost 55% of
the total sales on the platform and amazon incorporates two models named FBA and FBM for
its supply chain.
 Sourcing
The first one is FBA which stands for Fulfilment by Amazon in which the company takes
care of all the fulfilment related functions. This is used by many third-party sellers who just
send their product to the fulfilment centre of the company and from there amazon stores the
product, then packaging is carried out and then the product is shipped to the customer. All
delivery queries and any issue related to the exchange or return of the product are handled by
amazon.
The other method is FBM or Fulfilment by Merchant. In this, the merchant himself manages
the storing, packaging, and delivery of his product. The company has super-efficient logistics
and the company’s own supply chain software such as the Amazon Managed Blockchain and
Amazon Forecast provide the customer with super-fast delivery options. The company also
offers an amazon prime membership through which the company offers same day and 2-day
shipping options. When a customer places an order on amazon, process starts at FBA centre
in which the product is picked and matched with the barcode of the product. It is then packed
and delivered to the customer.
  Pricing
Pricing on Amazon is highly competitive providing customers with a choice to choose
between sellers that provide better prices. Amazon has two kinds of pricing named item price
which os the cost of the product excluding the shipping cost and total price, which is the price
of the product including storage, shipping, and rebates. The pricing model is basicall6 based
on keeping the prices as low as possible meaning that the prices may fluctuate many times in
a single day but still, they will remain as low as possible.
Amazon also reprices the products in which a competitor first changes the price of the
product and Amazon notifies XSellco of the change. XSellco is a helpdesk to improve
customer support. XSellco then calculates the new price and background safety checks are
performed. XSellco then notifies amazon of the price change and Amazon’s Pricing Error
System checks the new price.at the end, the new price is updated on Amazon.
 Location and Inventory
Amazon operates around 175 fulfilment centres globally, occupying almost 150 million
square feet of space, with 75 fulfilment centres and 25 sortation centres in North America.
Amazon is estimated to operate 500 warehouses worldwide. This global presence puts
distribution and inventory control in the hands of Amazon, allowing the company to rapidly
fulfil orders for customers at a lower cost. 
 Transportation
While having the capacity to store inventory and fulfill orders is crucial, Amazon’s delivery
fleet is just as important. To deliver orders to its customers, Amazon has various
transportation and delivery partners that help keep up with demand. Amazon’s trucks help
carry about 2,000 boxes or more from the fulfillment centers to the sort centers. There,
Amazon then distributes the packages according to location and the delivery speed required.
After that, the company selects the most efficient transportation mode to transport these
packages. Amazon meets its one or two-day delivery window for Prime members, through an
airplane fleet that helps with delivery. These airplanes fly from more than 20 airports around
the United States and can carry about 30 or more containers. On the ground, Amazon uses
trucks, vans, bikes, and even robots. Interestingly, Amazon is now exploring the use of
drones to deliver items to locations that are near their fulfillment centers. 
Strengths of Amazon’s Supply Chain
There are countless variables that have made Amazon the e-commerce leader that it is today,
but its state-of-the-art supply chain model is by far the most critical element to the company’s
unmatched success. Some of the strengths are:
 Diverse Delivery System
Amazon Trucks carry almost 2000 boxes from the fulfilment centres to sortation centres,
where the orders are distributed by location and required speed of delivery. Then the items
are distributed between the most efficient mode of transportation that include amazon trucks,
airplanes, and partnered courier services such as UPS. The airplanes are used for prime
member deliveries that have a capacity of 30 or more containers filled with hundreds of
boxes that take flight from more than 20 airports around U.S.
 Synchronization of Humans and Robots
The warehouses of Amazon use robots to pick and pack orders as well as to stack and store
inventory. This increases the speed of the company in its operations and also reduces the risk
of human errors. Amazon’s team of robotics and engineers work together with associates to
improve safety and increase efficiency. This has helped Amazon store 40% more inventory
making it easier to fulfil amazon prime orders. Amazon also launched Amazon Scout which
are six-feet autonomous delivery robots, delivering orders on sidewalks.
Weaknesses of Amazon’s Supply Chain
Amazon might seem to be a company free from any supply chain challenges because of its
diverse network and immense investment in technology but some challenges the company
faces are:
 Ensuring Sufficiency of Supply
Unclear demand forecasting can result in Amazon stocking more inventory than the actual
demand in the market as it has been seen that the company relies on past data and current
customer trends to make decisions of stocking way before the actual event or holidays. This
might result in dissatisfaction among customers and can cause supply chain distortion for the
company.
 Preparation of Resources to Match Demand
Last minute deliveries on occasions such as New Year and Christmas are a big concern for
Amazon as it becomes a big problem to match such a huge demand in the last hour. In
Christmas of 2013, Amazon suffered a logistic breakdown, which deprived many customers
of their orders. This convinced the company that it needs to take control of the delivery
mechanism and to adopt its own delivery mechanism.
 Technical Glitches
Amazon owns AWS which is the biggest cloud computing system of the world that gets
overloaded with orders during peak seasons. This has caused customers to be unable to
checkout in time causing them to miss on special discounts or even fast deliveries. Such
technical glitches are still a big problem that the company is addressing.
Suggestions for Strengthening Supply Chain of Amazon
Amazon’s supply chain model is already the best in the world and does not require an
extensive change in its approach. The company is a leader in operations and many companies
look forward to using the methods implied by Amazon to improve operations. One way the
company can improve itself and reduce storage costs for inventory is by accurately predicting
the demands and needs of the customers through analytics based on current trends and
customer preferences rather than using the past trends of consumer behaviour. Consumer
preferences and market situations are constantly evolving and the company needs to focus on
present and future trends rather than focusing on past consumer preferences and needs. The
company needs to shift from storing large amounts of inventory in its warehouses that exceed
the expected demand of the market so that the products do not become obsolete and excessive
storage coats can be saved. Moreover, the company should adopt synchronized automation in
its operations by utilizing artificial intelligence that improves the human labour rather than
replacing it. Robots and human labour should work together so work can be done more
efficiently making the company different from the rest that focus on complete automation.