Supply chains were originally defined as encompassing all activities associated with the flow and transformation of goods from raw materials through to the end user, as well as the associated information flows. Supply chain management was then further defined as the integration of supply chain activities through improved supply chain relationships to achieve a competitive advantage.
The combination of multi-tier inventory management, superlative transportation, and highly efficient use of IT Information Technologyand its wide network of warehouses are all geared towards aligning its SCM with its competitive strategy. The next aspect is related to its outsourcing of its inventory management.
Amazon outsources the storage and distribution of products that are not frequently purchased nor ordered for immediate delivery as well as products where the costs of storing them exceed the marginal returns on their sales.
On the other hand, Amazon stocks the frequently purchased and ordered items in its own warehouses so that it can be responsive to the customer needs as well as not compromise on the delivery times and the lead times.
In other words, by segregating its inventory, Amazon is able to be responsive to the customers as well as cut costs or cut slack where it is needed Kotler, Amazon divides its customer segments and follows a price differentiation strategy.
The various forms of delivery are one day delivery, free super saver delivery, first class delivery, and prime customers delivery. For all these segments, Amazon offers the customers an option of paying more for faster delivery or retains the traditional lead-time.
Coupled with the inventory outsourcing, the customer segmentation into price-differentiated customers offers the company a nimbleness and agility in the market that changes with dynamic fluctuations in demand. For instance, Amazon started off as a bookstore, which acts as an intermediary between the buyers and the sellers and does not stock any product of its own.
Gradually, this gave way to holding some items in its own warehouses and at the present, Amazon follows a push-pull strategy wherein the inventory is held in a push strategy and the shipment of the orders is done in a pull strategy. Of course, even now, Amazon follows pure pull strategies for items that it does not stock.
|Supply Chain Strategy to improve your inventory optimization - Slimstock||What is supply chain strategy? We will show you 7 attributes of a solid strategy and strategy formulation tools you can use.|
|Best Books 2018-2019||In the past, supply chain practice has been primarily tactical, but this program presents a new and innovative approach to supply chain design, which will enable program participants to better understand:|
|Stephen Slade The years from through were notable for their economic volatility, reflected not only in the global economic recession but also the instability of customer demand and rapid movement in raw material, fuel, and commodity prices. Supply chain executives were under pressure to develop more efficient, customer-centric supply chains while finding innovative ways to reduce costs and enable growth.|
The first tier is the aggregation in the distribution centers, which ensures that Amazon holds fewer inventories and responds to demand in a dynamic manner. The next tier is comprised of the partner distribution centers and the wholesalers wherein whenever an ordered product is not available in its own distribution centers; Amazon can rely on its partners and wholesalers to supply the customer with the required product.
Further, through the use of sophisticated and real time IT, Amazon is able to leverage efficiencies in its distribution. The third tier is comprised of the networks of third party sellers, publishers, vendors, and manufacturers who ensure that Amazon acts as an intermediary that fulfills orders from customers by linking them to this tier.
By focusing on the five themes in which the analysis proceeded, we were able to identify the areas that Amazon does well in its SCM.
However, there are components and aspects of the SCM of Amazon where improvements can be made. This section identifies those areas and proposes some recommendations that Amazon can follow and implement to make its SCM world class and be a source of sustainable competitive advantage.
In other words, while the other components of the SCM seem to be efficient and complementing and supplementing each other, the part of the SCM where the customer interacts has been found to be deficient.
Therefore, Amazon can setup its own transportation and actualize superior last mile delivery by creating its own fleet of delivery vehicles and personnel. This means that Amazon can integrate its SCM better and move from a cooperation model with its suppliers to a coordination mode.
This would entail a sharing of information between all its partners and suppliers using the latest technology.
Further, this recommendation also entails creation of a unified IT system that can involve all the suppliers and the stakeholders in its SCM and not Amazon alone.Competitor Analysis: Strategy (outpacing) Resources Organizational Capabilities: Understand the needs of customers Strategic Management; Supply Chain; Documents Similar To Best Buy Analysis.
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