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Amazon Supply Chain Analysis

Amazon is one of the most successful companies in the modern world, and its history is an exciting one. Initially, it was a single book store opened by Jeff Bezos. However, the business soon turned into a reputable corporation that provided its services to customers from all over the world. It is possible to note that the success was a result of a professional and sustainable supply chain. Thus, the primary purpose of this paper is to explain how Amazon has managed its supply chain and achieved growth and profitability.

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Supply Chain Integration

To begin with, one should state that sales and operations planning is an essential component that affects the supply chain performance. According to Jacobs and Chase (2014), this term refers to the effort of a company to balance its demand and supply. Amazon invests in this planning and provides its vendors with the responsibility for determining stock levels. Johnson (2020) stipulates that the company prefers P90, meaning that “there is a 90% chance Amazon will purchase the level of demand indicated or less and a 10% chance they will purchase more” (para. 12). This approach is useful because it contributes to higher sustainability of the firm.

It is also reasonable to state that Amazon benefits from medium- and long-term forecasting because it can increase customer satisfaction. On the one hand, medium-term forecasting predicts future demand, which is necessary to get a sufficient amount of inventory (Jacobs & Chase, 2014). On the other hand, long-term prediction focuses on manufacturing and logistics. Thus, one can say that these types of forecasting are useful for Amazon’s operations management department. It is so because these data show suspected demand and allows managers to adjust the company’s performance to these needs.

Amazon understands the necessity to meet the demand to be competitive, and that is why it draws specific attention to its logistics, transportation modes, and warehousing. Firstly, the company offers a few ways of how it can transport goods. It refers to “the free, two-day Prime deliveries and even the Prime Now option” (Johnson, 2020, para. 23). Furthermore, Johnson (2020) emphasizes that the firm can deliver orders by drones, trucks, vans, and even bikes. The latter option significantly reduces the company’s impact on the environment. Secondly, successful and timely deliveries are possible when warehouses are located close to destination points. Amazon succeeds in this area because it has 493 warehouses worldwide (Banker et al., 2018, para. 13). Thus, Amazon is said to have a developed logistics system that relies on the two phenomena described above.

Since the company distributes products all over the world, its effectiveness depends on global sourcing and procurement. Thus, Amazon has its factories in India and China and does its best to deliver products from them to customers in the United States and Europe in time (Ceil, 2018). This fact allows the firm to deal with the products of high quality and reduce costs. This strategy raises the opportunity of delayed orders, but the logistics system is designed to contribute to customer satisfaction.

According to the information above, it is not a surprise that Amazon deals with outsourcing. Jacobs and Chase (2014) explain that this term relates to conveying the company’s internal activities and responsibilities to outside agents. According to AMZ Advisers (2019), Amazon outsources the storage and distribution of less popular products as well as “the storage of products with storage costs that exceed marginal returns on sales” (para. 8). Somjai (2017) argues that the advantages of this approach refer to “the ability and time to concentrate on core process, risk-sharing, and cost reduction” (p. 157). As a result, Amazon uses its own warehouses to store frequently purchased items, which is necessary to provide customers with better service (AMZ Advisers, 2019). However, the firm is also subject to typical outsourcing issues that refer to the lack of control over its outside agents. Amazon addresses this issue by investing in an effective management system.

In addition to that, it is necessary to emphasize that Amazon has significantly benefited from e-commerce. Selling goods online allowed the company to enter new markets and become “an e-commerce giant with operations around the globe” (Ceil, 2018, p. 5). The firm has achieved these successful results because it has relied on a few practical strategies of electronic commerce. Firstly, Amazon has invested in upgrading its equipment to reduce page loading time, which is necessary to limit the number of unsatisfied customers. This fact, in turn, will inevitably contribute to higher sales. Secondly, Rana (2018) argues that the organization has experienced essential growth because of the personalized shopping recommendations offered to customers. Thus, Amazon has an information technology that analyzes customers’ activity and provides them with recommendations based on their previous orders. Finally, the fact that customers can send their reviews has also contributed to the overall success (Rana, 2018). Thus, people can both leave their feedback or find what others think of a specific product. This e-commerce strategy eliminates buyer hesitation concerning the trustworthiness of the organization.

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According to the information above, it is possible to state that Amazon is an example of how a company can successfully integrate its supply chain. The given firm demonstrates that developing logistics, warehousing, transportation modes, and others has a direct impact on the company’s performance and outcomes. Furthermore, Amazon has shown that it is reasonable to invest in innovation. On the one hand, it refers to e-commerce opportunities and advantages. On the other hand, it is also rational to draw attention to new kinds of delivery. For example, the company under analysis benefits significantly from the use of drones to deliver its orders in time. In addition to that, Amazon efficiently addresses some ethical considerations. Thus, it draws attention to environmental safety and the use of high-quality products irrespective of the desire to reduce costs.

Conclusion

Amazon is an example of a company that has managed to integrate its supply chain and benefit from it. It was not an easy process, and multiple phenomena have contributed to positive outcomes. Thus, the organization draws its attention to forecasting activities to predict changes in demand and be ready to meet them. Furthermore, Amazon’s competitiveness is robust because of an adequate logistics system that includes useful transportation modes and suitable warehousing locations. In addition to that, the company demonstrates that outsourcing and e-commerce are the phenomena that contribute to development. Thus, it is possible to conclude that other companies should follow Amazon’s example to boost their sales and experience essential growth.

References

AMZ Advisers. (2019). How the Amazon supply chain works. Web.

Banker, S., Cunnane, C., & Reiser, C. (2018).The Amazon supply chain: The most innovative in the world? Logistics Viewpoints. Web.

Ceil, C. (2018). Sustainable global supply chains at Amazon. Web.

Jacobs, F. R., & Chase, R. (2014). Operations and supply chain management (14th ed.). McGraw-Hill Education.

Johnson, T. (2020). How the Amazon supply chain strategy works. Tinuiti. Web.

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Rana, R. (2018). 5 things to learn from Amazon’s eCommerce strategy. Wunderman Thompson Commerce. Web.

Somjai, S. (2017). Advantages and disadvantages of outsourcing. The Business and Management Review, 9(1), 157-160.

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