Presented by :

Prakash Tiwari
Samvedna Kumari
Rahul kumar
Shilpa Dhawan
Case overview…
Historical Milestone…
1998

1997

1996~1997

1995
 1995—1998 ︰ Establishing Amazon.com
 1999 ︰ Building Addition
Fulfillment Infrastructure
 2000—2002 ︰ Optimizing the Customer
• Rely on distinctive procurement strategy
• Hold modest inventories and rely on
wholesalers
• Amazon opened direct account with publishers
to obtain better purchasing discounts
• Built up its infrastructure and systems
• Expanded its product lines
• Face tougher competition from different players
• To remain the “e-tailing” leader, Amazon decided to
follow “Get Big Fast” strategy
• For supporting its transformation and its projected triple
growth , Amazon adapted its supply chain and
distribution network
 How many DCs it should have and where to location
them
 Which product types each of new DCs should carry
 Regarded the equipment in new DCs
 Maintain high level of quality and productivity in its DCs
 Focus on operational excellence which
means treating customer right but at lower
cost
 Streamlining US distribution centres processes
 Inventory costs
 Delivery processes
 Other company initiative to gain profitability
 Launching Amazon in UK & Germany
• In 1998, Amazon entered the European market,
targeting UK & Germany.
• German customers were accustomed to buying books
through mail order companies.
• In April 1998 Amazon acquired a leading online book
retailer in each country.
• In the fall of 1999, duplicating the US strategy “Get
Big Fast”.
• In 1999 Sales reached to $167.7 million (10% of
total revenue)
 Launching Amazon in France
• In September 2000, Amazon continued its expansion overseas
with opening of Amazon.fr.
• In French market it did not acquire an online bookseller prior
to its launch, but built the site from scratch.
• This include time consuming task.
• Unlike UK & Germany, It faced tough competition from
already established competitors.
• At the end of 2000 international segment reached $381 million
sales (13.8% of total revenue).
• In 2001 sales reached to $661 (21% total revenue)
Challenge in Europe

1
3
Challenges in Europe
EDI (Electronic Data Interchange)
Services include:
• Communicate with its US suppliers.
• Purchase order and invoice
• Payment
• Tracking the status of the product ordered
•EDI penetration was low among book, music & video
distributors in Europe.
•Finally relied on National postal service carrier.
Organization of European subsidiaries
• Each country had its own organization (decentralization).
• Local employees headed by country manager.
• Local experience was critical in every facet operations.

• By 2001 Amazon Embarked on a major

o Cost-cutting.
o Restructuring effort to reach profitability.
o Unify the marketing and branding functions of three
subsidiaries, to build an identical set of values for the
Amazon Brand.
 SWOT Analysis

Strength
Provides conforms to individual
demand information.(customization Weakness
service) Customer can’t skim through
Up-to-date technology and the book before buying it.
software
1-click ordering; select and Large inventory risk
purchase the products on line.
High brand name recognition
Distribution centres –geographical
coverage
High inventory turnover
 SWOT Analysis

Opportunity
Since the internet is developing
quickly, the electronic commerce
market has significant potential.
Increased number of internet
users and amount of purchases
worldwide
Threats
 Aggressive competition
 Ease of entry into the
market
 Prone to identity theft
EDN…Opportunities
Why EDN..??

 As Historical records show that each

European DC has experienced a system
failure at least once. Thus the EDN
implementation would reduce the risk of
relying on a single DC to serve a large base of
customers.
 It would help to balance the load across
different DCs
Strategic/Geographical
determination
Strategy Shift
 The Single DC theory
PROS
 Decrease in demand
variability across the supply
chain due to location
pooling in a single DC.
 Risk Pooling leading to
decrease in inventory levels
and associated costs.
 Decrease in inbound
transportation cost.
 Bullwhip effect is lessened
 Relatively easy to
implement.
CONS
 Pooling effect
diminished as more
regions are pooled.
 Increase in outbound
transportation cost
 Customer service levels
may be affected with
the increase in lead
times.
 The two DC theory
Pros Cons

 This design may pose

 Realizes advantages of
some challenges on
location and lead time
scalability once
pooling without the
expansion plans are
concern of inconsistent
underway as two DCs
postal delivery service
may not be enough to
and transportation
serve a huge
difficulties.
customer base.
 The THREE DCs Theory
PROS CONS

 Decrease in demand variability

across the supply chain due to
 This design results in bigger
virtual pooling.
inventories than in a single DC
 Reduced inventory and
that enjoy the benefits of
transportation cost along with the
inventory pooling.
ability for postal injection by
 A high degree of coordination
bypassing poor postal service
increases the complexity and
between countries to deliver
IT costs of the system and
products through road
makes implementation that
transportation provide added
much more difficult.
benefits.
 Reduction in implementation cost
Consideration to be made with 3DC

 Analysis of past data of what all items are

brought together and placing these items
together in DC to overcome the split order
 the transportation team should work
collaboratively with customer service to
educate customer to associate a different
shipping price to the delivery service level
chosen.
 Centralized procurement system
 Better coordination among different
department, good IT infrastructure
and a collaborative environment for
better forecasting
 Communicate the benefit of EDN to
the customer
 Thank you…!

• Questions & Discussion…?