Amazon SCM
Paper Summary
The paper seeks to explain the supply chain of Amazon.com. Amazon.com is an American company that provides its customers with internet services. The paper will give a brief background of the organization, evaluate and analyze how the company operates giving emphasis on its supply chain, production and service processes, performance monitoring, and information systems. The paper will then provide a recommendation on how Amazon can improve its products and services.
Organization background
Jeff Bezos founded Amazon.com in 1994 as an online bookselling platform but later advanced into selling other products. The company’s headquarters are based in Seattle. Jeff remains the head of the company as the CEO and president; however, other high profile officials in the company help in running it (Inc, 2020). There is a board of governors who provide oversight to the company leadership; the board is chaired by Jeff Bezos. Amazons offer its customers with cloud computing, digital streaming, artificial intelligence services, and e-commerce options (Inc, 2020). The company has extended and currently has over forty subsidiaries providing different services to the people. The company has employed more than 800000 workers, making it the second-highest employer in the United States (Inc, 2020). It is also one of the most valuable companies in the United States, providing retail services for its clients. Its website, which is one of the core avenues of their service and product provision, recorded over 615 million visits in 2018 (Inc, 2020). Though the company is located in the United States, its products are services are not limited to the United States; they provide them throughout the world.
Supply Chain Strategy
Amazon has a supply chain strategy that ensures their customers can easily access the goods and receive them both in a timely and efficient manner. The company has over 75 fulfillment centers in different countries and different parts of the world, making it easy for them to make their deliveries in time (Inc, 2020). The company also has over 25 sortation centers where sortation takes place (Inc, 2020). Their supply chain strategy is based on a large warehouse and a robust distribution network. The company has also identified the best ways to deliver their products to their customers in different parts of the world; there are various modes of transport selected based on the time, cost, and location of the delivery. The company has established a robust system to ensure that it remains competitive on the market. One of Amazon’s most recognized competency is their recognition and consideration of their customers, their services are customer-based, and the customers determine how the company acts (Majed, Nuraddin & Halma, 2018). Amazon is also known for its innovations, which have seen them lead in many areas.
Supply Chain
Fig 1. Amazon’s Supply Chain. Retrieved from https://blogs.anderson.ucla.edu/global-supply-chain/2015/07/amazon-prime-now-the-cost-of-expediting-the-last-mile.html
Amazon provides its customers with a wide variety of goods and services and therefore has a wide range of suppliers. Optoelectronics is one of the supplies which gives Amazon data equipment. Amazon Web services also supply a large number of its services to Amazon, with Amazon purchased accounting for 60% of the sales (Inc, 2020). Air Transport Services Group provides the company with most of its air transport services; they generated 29% of their income from Amazon (Inc, 2020). Suppliers are selected based on their abilities to help propel the company’s vision in providing excellent services. Performance of the Suppliers is based on data; the company has algorithms that determine how well a supplier functions. Customer feedback is part of the data collection process.
Only the best of the suppliers are selected and retained. Amazon clients are classified into prime members and non-prime members. Prime now was a strategy adopted by Amazon that aimed at increasing customer loyalty. To become a prime member, you have to be a constant customer who buys from Amazon. Loyal customers are provided with cheaper and faster services. On some occasions, prime members are given credit for less expensive products or services. These customers have access to services and products within an hour. Non-prime members have to wait for two-three days for their deliveries to be made. Amazon customers are paramount to the business, and their feedbacks are highly appreciated. The company has also set very high standards of employees, ensuring that they provide the best services. Amazon partners with different companies to ensure the smoothest running of operations. The company has much partnership with companies offering various services and products. They include Samsung, google apple, and Microsoft. Air Transport Services Group and the United States Postal services are the primary companies Amazon uses to transport its goods. The company has over 125000 employees in its fulfillment and sortation centers who ensure that the products are well parked and distributed (Inc, 2020). The company has its inventory management system known as Amazon Inventory Management System.
Performance monitoring
The company ensures that the performance of their employees is measured and ranked. There are specific metrics selected by the company that ensure that the employees are performing doing their best. Jeff claims that at Amazon, an employee must work long, hard, and smart, saying that they can’t choose only two (Courtney, 2018). Employees are subjected to data analysis, which ensures that they have a clear insight into how their employees are performing. The use of data is meant to provide them with clarity. Customer satisfaction is essential, and their feedback is highly considered in determining the company’s and employees’ performances (Courtney, 2018). Performance at Amazon takes place every three months. Only the best employees are employed and retained at the company. The company provides an analysis of its total profits, losses, and net sales, in 2019, the company made net sales of 280,522 million US dollars (Inc, 2020). In the recent past, Amazon has introduced Amazon drones, which are enabled and deliver products within 30 miles using drones provided the customer has an Amazon-branded mat. This innovation is in a bid to ensure timely deliveries.
Services Process
Amazon provides a variety of services and products for its customers. Customers are provided with delivery services for products that they order online, the products ordered online can include day to day commodities such as perishable foodstuffs, to books and electronics. The company also provides its customers with e-commerce and other internet-based services. Customers use the company website, Amazon.com, to order their services or products, pay, and then wait. Some customers prefer picking up near pickups. Service response by the company is speedy given that some customers order fast or perishable commodities, and hence quick reaction is required. Prime members can have their deliveries made within as little as thirty minutes; their deliveries take no more than one hour. Non-prime members wait for 2-3 days (Taylor, 2019). Amazon has a large capacity of service delivery, with a large fleet of trucks that can carry as many as 2000 boxes at a time (Taylor, 2019). They have 20-40 vans in most locations, with over 40 employees. The company has started a Probability Level Demand Forecast, which is used to determine the demand.
Production Process.
The product process at Amazon is based on the customer, where their demands are paramount; however, despite innovation also plays a significant role in product production. The company starts with the customer and work backward (Shmula, Says & Kerala, 2018). The company begins by providing a press release; they then take note of customer feedback and use the feedback and question to design the final product. The company has large warehouses where they store their products; they are then moved into fulfillment areas and finally to sortation centers where they are distributed (Shmula, Says & Kerala, 2018). Transport is done by a fleet of trucks vans, and partnered transport companies.
Information Systems
Amazon adopts an Interorganizational Information Technology, which they use in the management of their supply chain. One of these forms of technology is called the Electronic Data Interchange, which provides a platform for communication for retailers and suppliers. The company also applies Radio frequency identification to identify a customer’s location (Al Imran, 2014). The company also uses customer resource management (CRM) and Enterprise Resource Management (ERM) (Al Imran, 2014). The company is working on a drone information system where the customer’s information is fed to a drone, which in turn delivers their orders. The company is yet implementing this system.
Critiques and recommendations
Amazon has managed to penetrate and deliver its commodities in most parts of the world; however, there is limited penetration in the developing countries (Majed, Nuraddin & Halma, 2018). There are very few fulfillment and sortation centers in these countries and hence reducing the profits of the company. Amazon should, therefore, embark on increasing its outreach in developing countries through vigorous marketing and construction of centers. Amazon can also expand partnerships with companies and firms in developing countries. Amazon acts as a delivery agent on most of its products, they only produce some of the products, and they should work towards increasing their products on the market.
References
Al Imran, M. A. (2014). A study on amazon: information systems, business strategies, and E-CRM.
Courtney, J. (2018). How Does Amazon Do Performance Management? Retrieved from https://blog.performyard.com/how-does-amazon-do-performance-management
Inc, A. (2020, January 30). 10-K Annual Report Fri January 31 2020. Retrieved from https://last10k.com/sec-filings/amzn
Majed, S. Z., Nuraddin, S. H., & Hama, S. V. S. (2018). Analyzing Amazon success strategies. Journal of process management. New Technologies, 6(4), 65-69.
Shmula, Says, H., & Kerala, H. (2018, June 26). Amazon Product Development Process: Customer Work Backwards. Retrieved from https://www.shmula.com/start-with-the-customer-and-work-backwards/324/ (Shmula, Says & Kerala, 2018)
Taylor, N. (2019, November 04). 3 Key Elements to Amazon’s Supply Chain Strategy. Retrieved August 02, 2020, from https://feedvisor.com/resources/amazon-shipping-fba/3-key-elements-to-amazons-supply-chain-strategy/