Abstract
Amazon is one of the leading online retailers in the global market. The company sells various products and sends them to different parts of the world. The network of cargo and fulfillment facilities in the USA is substantial, which has enabled the company to introduce the prime delivery service that implies the delivery of the purchase within an hour. The company is diversifying and developing its land, water, and air transportation fleets. The use of these fleets will help Amazon reduce costs, decrease its reliance on such delivery companies as FedEx and UPS, become more customer-centered, and even develop a new branch that will potentially provide delivery services to other organizations and individuals.
A way to improve the existing transportation and logistics department is associated with the establishment of new cargo facilities in Beijing, Munich, and Delhi. These cities are some of the most populous in the corresponding regions, and they are business hubs where people value their time and comfort. To establish the new facilities, Amazon should pay attention to such areas as human resource management (health risks, cultural peculiarities, personnel development and training), effective information systems (knowledge sharing and traffic management systems), and urban pressures in the areas discussed. This paper includes a brief analysis of the strategy as well as a number of recommendations to follow to implement the necessary changes successfully.
Main Body
Amazon.com is one of the most successful companies in the e-commerce industry. The organization’s revenue more than doubled between 2012 and 2016 and grew from USD 61 million to USD 135 million (Morning Star, 2017). The company was founded in 1994 and started as an online seller of books (Lee, 2012). Jeff Bezos, the founder of Amazon, decided to sell books electronically as he believed in the potential of the e-commerce industry (Bolton & Thompson, 2013).
The first range of products offered included approximately 3 million titles in different languages while the biggest bookstore could carry only 175,000. It is noteworthy that the first office, as well as the storing facility, was Bezos’ garage. The use of efficient supply chain logistics ensured the success of the company and contributed to its unprecedented growth.
At present, Amazon sells books, audiobooks, CDs, DVDs, video games, toys, software, mobile applications, apparel, jewelry and even food. The company’s headquarters are in the USA where 70 fulfillment centers are also located (“Amazon fulfillment network,” 2017). Amazon employs 341,400 people in the USA (Morning Star, 2017). The online retailer also hires up to 120,000 seasonal workers to address the growing demand during the holiday period (Schuetz, 2016). Amazon has websites for such markets as the UK, Canada, Australia, India, China, Germany, France, Poland, Mexico and some other countries. The company collaborates with various suppliers (large companies as well as entrepreneurs) across the globe, which contributes to its supply chain’s flexibility and efficacy.
Its major competitors are Alibaba and Walmart (BI Intelligence, 2017). It is noteworthy that Walmart is only entering the market of electronic commerce, but it has substantial resources to succeed (Ferrell, Fraedrich, & Ferrell, 2016). This retailer has a well-established image and a large array of loyal customers across the globe, which can be a considerable threat to e-commerce companies including Amazon.
Amazon has a network of facilities that enable the company to sell different types of products in different parts of the world. Amazon is still a leading company in the field of e-commerce, and it continues its growth. The company invests a lot in the development of its transportation and logistics department. For instance, it is building more fulfillment centers in the USA and one facility in China. It also has a significant fleet that enables the company to deliver products by land, air, and water.
The company’s top management announces the company’s intention to further diversify and provide transportation and logistics services. It is necessary to note that the company aims at becoming “Earth’s most customer-centric company” (as cited in Lee, 2012, p. 53). Its prime delivery service is one of the strategies used to achieve this goal. Further development of the company’s transportation and logistics department is the key to addressing this aim as well. Amazon should set up cargo facilities in such cities as Delhi, Beijing, and Munich, as well as launch the prime delivery service in these areas, which will imply the use of a sound strategy with the focus on human resource management (health risks), effective information systems (IS), and urban pressures in the areas discussed.
Amazon’s Supply Chain and Its Strategic Goals
Amazon.com has an efficient transportation and logistics department, which helps the online retailer to achieve its strategic goals. As has been mentioned above, the company aims at being as customer-centered as possible (Lee, 2012). This is one of the primary strategic goals of the company. It also wants to deliver its products without addressing delivery companies. At present, the company still relies on such leading delivery companies as FedEx and UPS.
Amazon also collaborates with other companies to ensure timely delivery to different locations. What is more, Amazon hopes to develop a branch that will provide delivery services and will compete successfully with such giants as FedEx and UPS (BI Intelligence, 2017). The existing transportation and logistics department contributes to achieving the strategic goals mentioned above. It is noteworthy that Amazon collaborates with numerous partners ensuring the effective functioning of its supply chain, but it has already undertaken some steps to be able to manage some operations without external aid. The company’s transportation and logistics department is developing at an unprecedented pace.
First, Amazon has developed a considerable ground and water transportation fleet (BI Intelligence, 2017). This innovation has enabled the company to decrease costs and reduce its reliance on partners. The company can ship products to different parts of the world and control the processes associated with its supply chain. The land transportation fleet is instrumental in reducing costs associated with delivery within the United States.
The availability of vehicles, as well as cargo and fulfillment facilities, ensures the effective provision of the company’s prime delivery services. This service implies the delivery within an hour to premium customers. This service is provided in some cities in the United States and the United Kingdom. Clearly, the prime delivery service helps Amazon reach one of its strategic goals and become one of the most customer-centered company.
Furthermore, the development of the fleet and cargo facilities also enables the company to minimize or even diminish its reliance on delivery companies. Finally, it can help the company achieve another goal and create a branch that will become an independent delivery unit satisfying the needs of Amazon and providing services to other companies (BI Intelligence, 2017). The new branch is likely to be successful as the company already has quite substantial resources and has the necessary experience to provide a wide range of delivery services. Moreover, Amazon is a well-established brand associated with success and timely delivery. Hence, many individuals and companies will use (or, at least, try) new services offered. This kind of diversification will be beneficial for the company’s development.
At that, one of its most unexpected and effective innovations was the decision to develop its own air transportation fleet and cargo facilities in China. The use of aircraft enables the company to deliver products within shorter periods, which translates into customer’s satisfaction. The company’s air transportation fleet also enables Amazon to deliver different types of cargo within quite short periods of time.
Importantly, Amazon can deliver products to different countries. The development of a cargo facility in China ensures a significant extension of the services provided in this region. Amazon can expand the array of products provided as well as reduce some shipment terms. The new facilities can also be used as the platform for the development of the delivery branch that can develop in the Asian market. Therefore, it is possible to state that the existing transportation and logistics department helps the company achieve some of its strategies goals.
Strengths, Weaknesses, and Metrics
One of the major strengths of the existing supply chain is its flexibility. Importantly, this flexibility is one of the factors enabling the company to deliver different types of products (books, jewelry, and even food). It has its own fleet (of air, water and land transportation) (BI Intelligence, 2017). It also develops numerous alliances with different companies, which enables Amazon to address various risks.
Its wide network of fulfillment and cargo facilities across the USA ensures timely delivery of a considerable number of items to different locations. It helps the company to ensure one-hour delivery in certain locations, which can be regarded as a significant competitive advantage. Many e-commerce companies do not have sufficient resources to offer this kind of service. The company also utilizes the fill rate metrics, which contributes to the company’s successful growth. Another strength is the use of sophisticated information systems (Coyle, Langley, Novack, & Gibson, 2012). Knowledge sharing is regarded as one of the most important elements of effective communication among employees, departments, and subsidiaries. Employees are trained to use the existing system and contribute to its ongoing development.
One of the major weaknesses of the existing supply chain is the lack of fulfillment and cargo facilities outside the USA. For instance, there are certain facilities in London, which ensures timely delivery, as well as the provision of prime delivery services in the city. Clearly, London is one of the most valued markets. However, cargo and fulfillment facilities would help improve operations in other European countries or some major cities, and especially such markets as China and India.
The establishment of these facilities in several regions would help Amazon deliver an extended range of products. It could also ensure the provision of the prime delivery service in some strategic locations (for example, Beijing and Delhi). It is possible to note that the provision of the prime delivery service can be regarded as another weakness as many people living in other highly populated cities can feel quite unvalued as they do not have access to such services as prime delivery. The introduction of the service in only several cities can prevent the organization from achieving one of its strategic goals, which is being the most customer-centered company. In order to develop properly, Amazon should address these weaknesses and further develop its strengths.
Implemented Transportation Innovations
The most remarkable transportation innovation the company has implemented recently is the development of the fleet of air transportation. The company has announced its plans to lease 40 cargo planes (BI Intelligence, 2017). At that, 16 cargo planes are already operating, and this strategy has proved to be successful as the online retailer can control more operations, reduce costs, ensure the safety of the delivered items, and improve customer’s satisfaction.
The use of air transportation is still regarded as an expensive delivery option. Companies do not use this type of transportation as it is associated with high costs of the fleet maintenance, the development of infrastructure, and so on. However, Coyle et al. (2012) stress that this type of transportation can help companies deliver value-added items within shorter periods of time. Safety can also be ensured when using cargo planes as compared to other types of transportation.
Coyle et al. (2012) add that modern customers are ready and willing to pay extra for safety and reduced waiting time. It is clear that the development of this branch (if implemented properly) can help Amazon obtain an important competitive advantage and penetrate into new markets as well as develop existing ones. Moreover, there are various methods to reduce costs such as leasing aircraft instead of purchasing planes. As for the development and maintenance of the infrastructure as well as airways traffic control, these are controlled by the government and the delivery company does not need to make any additional investment (Coyle et al. 2012). Finally, proper use of place on board also contributes to the reduction of costs.
Amazon has a wide network of cargo and fulfillment facilities across the United States (“Amazon fulfillment network,” 2017). It continues investing in the development of new facilities in different American cities. For instance, the online retailer is constructing a large cargo facility in Kentucky where similar facilities of UPS and FedEx are located. The company is also constructing a cargo facility in China, which will improve the existing supply chain in the region (BI Intelligence, 2017).
Transportation Innovations to Implement
As far as further steps to improve the existing transportation and logistics department, the launch of the prime delivery service in such regions as China, India and Continental Europe can help the company develop a positive image, attract new customers, and increase profits. This innovation is consistent with one of Amazon’s strategic goals, which is becoming one of the most customer-centric companies. Importantly, this strategy can be beneficial for the growth of the organization as the development of “more intimate” relationships with the customer is one of the existing megatrends in the field of modern logistics (Stank, Autry, Daugherty, & Closs, 2015, p. 9).
Customers are ready to pay extra for services that help them save their time, receive added-value products safely, and receive high-quality service or rather care. Many companies try to respond to the new trend and offer the corresponding services. Notably, small companies can have an advantage locally as they tend to develop quite close relationships with their customers. Such giants as Amazon should come up with different strategies to satisfy its customers’ needs. The provision of prime delivery services can be one of these strategies.
The choice of the locations to start with is justified by their potential. Indian and Chinese markets have millions of potential customers who can afford to pay (and are willing to pay) for comfort, high-quality service, saved time, and ensured safety (Stank et al., 2015). Clearly, it is better to start with the most populous cities such as Beijing and Delhi. Apart from being some of the most populous cities in the world, these are important business hubs, which means that time is highly valued.
As for the European market, it is possible to establish a cargo and fulfillment facility in Munich. This is a business and travel hub of the continent, and it is a populous city. Amazon will be able to extend the range of services provided in such countries as Germany, France, Austria, Switzerland, the Czech Republic, and Liechtenstein. It is necessary to add that the development of cargo facilities in the cities mentioned above can become a proper test for the strategy aimed at achieving the central strategic goal. The successful implementation of the strategy in these regions can become the experience that can be used in other regions (Latin American countries, Japan, and so on).
Next Steps to Improve Amazon’s Supply Chain
Information Systems
To ensure the effective implementation of the steps mentioned above, it is essential to focus on the use of efficient information systems and human resource strategies, the collaboration with institutional entities, and adherence to the principles of social and environmental responsibility. Stank et al. (2015) emphasize that the use of IS is one of the megatrends of the contemporary supply chain logistics. Information systems help organizations expand and operate successfully in different geographic locations. Coyle et al. (2012) note that Amazon has an effective IS that ensures successful operations of its transportation and logistics department. The company uses sophisticated software and provides extensive training to its employees, which is essential for the successful operation of the information system.
The development of new facilities in other countries will need the allocation of considerable funds to the launch of the existing information system in the new locations. Apart from the investment in the corresponding software and hardware, it is critical to provide extensive training to the local employees. At that, it is necessary to take into account cultural peculiarities of local people to make sure they can and will use the IS effectively.
As far as transportation innovations are concerned, Amazon can use a traffic management system. Stank et al. (2015) note that the shift from functional to systemic approach is one of ten megatrends in the world of logistics. The researchers note that organizations focus on the integration of internal operations, which is often achieved through the use of technology. It could be beneficial for Amazon to employ the system that could manage such big data as vehicles’ locations, the number of items, the value of these items, some characteristics of these products including their temperature, or even weather conditions. This information can be important to ensure safety and proper delivery conditions of the items. Again, it is vital to make sure that employees are able to use the system properly.
Therefore, the company’s IT department should introduce the necessary changes to the information system that will be used in the new cargo facilities. It can be effective to collaborate with local (Indian, Chinese, and European) developers of software as this will help Amazon’s IT professionals understand what changes have to be implemented. As far as the traffic management system is concerned, it is possible to purchase it or collaborate with IT companies, which will help Amazon’s IT specialists to have a wider perspective on the matter.
Human Resource Management
When establishing new facilities in different countries, it is essential to pay specific attention to such areas as local labor laws and cultural differences. Labor laws differ significantly in the USA, Germany, India, and China, which brings to the fore the need to ensure certain flexibility in the corporate culture regarding labor laws and ethical issues. For instance, Chinese laws are becoming stricter for foreign organizations.
There are particular requirements concerning working conditions and employees’ working hours, as well as their age. On the one hand, the use of its own fleet and cargo facilities can help Amazon ensure compliance with all the regulations. At present, it can be difficult to control operations of all the partners and suppliers involved (Ferrell et al., 2016). There are chances that some of them can violate some norms (legal or ethical), which can have adverse effects on Amazon’s reputation. Clearly, the company should still make sure local employees are ready to comply with high standards accepted in Amazon.
Another area of a considerable concern is health safety. Some operations of delivery companies are associated with significant health risks that can lead to injuries or even deaths, legal issues, financial and reputational losses (Jaffee & Bensman, 2016). Health risks are especially high when it comes to seasonal workers and holiday periods. There have been a number of cases in the USA when temporary workers died.
One of Amazon’s temporary workers, for instance, had a heart attack although he was in his late twenties (Jaffee & Bensman, 2016). Such cases can never repeat so when establishing a new facility in a new country, and it is important to pay attention to working conditions of temporary workers, their health conditions, and other relevant data. It is also necessary to make sure that the number of seasonal workers is sufficient to address the workload. Working conditions should also be monitored on a regular basis to minimize the risk of violations.
Finally, it is vital to provide extensive and comprehensive training to employees in the new facilities. The training should focus on completing tasks and the use of information systems. At the same time, it is also necessary to pay sufficient attention to the corporate culture and ethical behavior as well as employees’ and the employer’s rights and responsibilities.
To address these issues, it can be beneficial to use a number of strategies. It is possible to launch on-the-job training in different facilities located in different countries. For instance, some Chinese and Indian employees should work at American facilities while American employees should go to the new facilities in China, India, and Germany. This initiative will facilitate knowledge and experience sharing.
Online discussions and meetings can take place regularly as it is a cost-efficient method to share knowledge and experience. Apart from that, it can be effective to collaborate with local recruiting companies as well as organizations providing training. Employees working in new facilities will be able to obtain knowledge and skills to avoid various issues associated with cultural differences.
Environmental Pressures
Apart from the construction of new facilities, leasing of a sufficient fleet of air transportation, and the use of sophisticated information systems, Amazon should also pay a lot of attention to environmental pressures existing in the areas mentioned above. The use of aircraft cannot ensure timely delivery as the availability of land transportation and proper infrastructure are all important elements.
Rose, Mollenkopf, Autry, and Bell (2016) claim that increasing population levels are common issues such regions as China and India face. As has been mentioned above, Beijing and Delhi are among the most populous cities in the world, and the number of people coming to these destinations is increasing. Local authorities often fail to meet the growing demand for the appropriate infrastructure. This trend is a characteristic feature of India (Rose et al., 2016). Clearly, the lack of roads and ways (which is associated with constant traffic jams, road accidents, and so on) can pose significant threats to timely delivery especially when it comes to prime delivery services.
Rose et al. (2016) state that companies can collaborate with local authorities to ensure the proper use of resources. It is vital to employ the most appropriate routes and types of vehicles, which is associated with the analysis of the existing and planned infrastructure. It can be important to be aware of some urban development plans that can help in the development of new routes. Moreover, organizations can contribute to the development of urban areas. This strategy will have manifold outcomes. On the one hand, this collaboration can result in the development of the sophisticated infrastructure with many routes.
On the other hand, it will contribute to the company’s image as it will show its adherence to the major principles of corporate social responsibility. Amazon will contribute to the sustainable growth of the area in social and environmental spheres. It has been acknowledged that the modern customer pays a lot of attention to the input of organizations. People are more willing to buy from companies that share their profits and help local communities develop in a sustainable way (Ferrell et al., 2016). The use of this strategy will require proper communication with the public.
Recommendations and Concluding Remarks
To improve the existing supply chain, Amazon should establish cargo facilities in Beijing, Delhi, and Munich, which will expand the range of products and services provided, reduce costs and ensure the provision of the prime delivery service. To address this goal, it is necessary to undertake the following steps:
- The company should ensure proper training of employees working at new facilities. This may involve the collaboration with local recruiting companies and organizations providing training (especially when it comes to cultural differences). The use of professionals from India and China can be beneficial as they will also be able to raise awareness of the local labor laws.
- The online retailer should pay significant attention to compliance with the local labor law especially when it comes to temporary workers.
- Amazon should use efficient information systems (knowledge sharing and traffic management systems), which may involve the collaboration with IT companies that can help develop the mentioned systems. The reliance on in-house IT professionals may result in the development of systems that will not be comprehensive.
- Amazon should also contribute to the development of the local infrastructure and collaborate with local authorities to have the information necessary to develop routes and use the most appropriate types of vehicles. The company’s effort should be made known to the public, which will positively affect Amazon’s image.
Amazon is one of the most successful companies in the e-commerce industry. The company’s focus on innovation and the use of the customer-centered approach are central to this success. The decision to open new facilities in China is an important step towards the further sustainable development of the organization. However, this initiative should be followed by the establishment of cargo facilities in such global hubs as Beijing, Delhi, and Munich.
The company will be able to deliver more goods to the customers in the markets mentioned above. The introduction of the prime delivery service in the cities with the multi-million population is likely to increase the company’s profits and contribute to the development of its image. The experience the company will gain when developing cargo facilities in the regions mentioned above can be used for the development of new facilities in other parts of the world. The steps outlined in this report are effective as they are consistent with the trends existing in the contemporary market.
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