International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS)

Volume VII, Issue I, January 2018 | ISSN 2278-2540

Supply Chain Management System of Amazon

Sharanya1, Dr. Sini V Nair2
1
Student, Trimester 2, Operations management, Master of Business Administration, College of Engineering Trivandrum, School
of Management, Affiliated to APJ Abdul Kalam Technological University (KTU)
2
Assistant Professor, College Of Engineering Trivandrum, School of Management, Affiliated to APJ Abdul Kalam Technological
University (KTU)

Abstract: The purpose of this review paper is to study the Statistics, in 2016, however, revenue reached almost $136
position of Amazon in the retail industry which it primarily billion.In fact, Amazon is the fastest company to reach $100
gained through high-level supply chain and logistics billion in sales revenue, taking only 20 years. From its
developments. It describes the supply chain practices with inception, Amazon has been growing approximately 20
Amazon as well as numerous product and service developments
percent per year. Currently, it enjoys 6.4 percent of gross
such as anticipatory Shipping, Amazon's Chaotic Storage Model
and Amazon's Logistics Network Plan. It becomes apparent that global e-commerce sales.
constant innovation in a supply chain context has more extensive One of the major secrets behind Amazon’s massive
and significant long-term effects on company success than large transformation from a simple online bookseller to the most
profit figures. A comparison of Amazon with Walmart and other
relevant companies shows that Amazon's supply chain is more
dominant and formidable force in the retail industry is its
diverse, implying that numerous services that are offered by innovative and highly efficient supply chain. Amazon’s
competitors are combined within Amazon and its supply chain. continuous efforts to deliver products to the customers in the
Amazon's supply chain may be described by an efficient and quickest possible time are causing intense pressure other giant
flexible inventory management, fast delivery fulfillment, effective players in the retail industry across the globe and thus
collaborations with partners, and strategic acquisitions of changing the way supply chain management works.
supporting systems and companies and a high level of customer
service. The results of this review paper may direct future studies II. LITERATURE REVIEW
towards the investigation of further competitive advantages of
Amazon as well as how potential threats and weaknesses a Laudon (2011) explains that the supply chain conception
company faces may be overcome in a supply chain context. started in the 1980s and it has evolved into a very
Keywords: Supply chain management, Amazon effect, e-tailer, importantbusiness concept. The supply chain is a network
logistics oforganizations and business processes to select raw materials
to transform them into intermediate and finished products and
I. INTRODUCTION distribute the finished products to customers. Itconnects
suppliers, industrial plants, distribution centers, means of

A mazon.com, Inc., doing business as Amazon, is an

American electronic commerce and cloud computing
company based in Seattle, Washington that was founded
transportation, retail stores, and information by means of
processes such as selection of raw materials, inventory
control, distribution and delivery, for the purpose of providing
by Jeff Bezos on July 5, 1994. The tech giant is the products and services from the source up to the point of
largest Internet retailer in the world measured consumption.
by revenue and market capitalization, and second largest
after Alibaba Group in terms of total sales The amazon.com In the past,the relationship between the customer and the
website started as an online bookstore and later diversified to supply chain ran through marketing. The customer talked to
website started as an online bookstore and later diversified to marketing and if the information communicated from the
sell video downloads/streaming, MP3 downloads/streaming, customer involved changes to orders, these changes were
audio book downloads/streaming, software, video games, communicated to supply chain through the sales and
electronics, apparel, furniture, food, toys, and jewelry. The operations planning system (S&OP) and the master
company also produces consumer electronics—Kindle e- production schedule (MPS).There was no need for supply
readers, Fire tablets, Fire TV, and Echo—and is the world's chain to talk to or even know anything about the customer.
largest provider of cloud infrastructure services. However, this system was not working because the supply
chain focused on cost and meeting the schedule but the
Amazon.com has changed the face of retail through its use of customer often wanted responsiveness and flexibility. New
bold supply chain strategies and its deployment of innovative radical solution was developed where supply chain would get
technologies. In 2004, 10 years after Amazon was founded, its to know the customers up close and in person. Supply chain
annual revenue was just under $7 billion. According to would focus on those things that customers wanted also

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 International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS)
Volume VII, Issue I, January 2018 | ISSN 2278-2540

known as the customer-centric supply chain. Like many things in order to have better control over its inventory and shipping
that have emerged in supply chain management, the customer- activities.
centric supply chain is the result of the convergence of major
Allen (2017) explained that efficient transportation
forces, one of which is the “amazon effect”.The Amazon
management with end-to-end visibility is becoming more and
effect is changing what customers expect from supply chain
more vital to a company's supply chain and its overall
management(Melnyk and Stanton,2017).
success.Transportation managers are faced with a growing
According to Aronow et al (2015), Amazon is a modern retail number of challenges: shorter lead times, tighter delivery
juggernaut. Since its founding in 1994, it has grown from windows, driver shortages, the need to make more frequent
being simply an on-line bookstore to a one-stop omni-channel and smaller shipments, rising freight costs, and
retailer for everything from furniture to food to streaming globalization.Amazon’s one-hour or same day shipping is
entertainment service. More importantly, it has changed how possible due to its dependence on its own logistics.Amazon
customers shop and what they expect, regardless of whether understands well that depending on third-party logistics would
the customers are end users or a business. 24/7 customer just lengthen the product delivery time. With a limited
service, easy to place orders, continuous flow of information inventory of in-store merchandise, fewer retail stores and the
about the order,reliable deliveries are some of its ability to find just about anything you could possibly need on
features.Itcontinues to innovate in both products and Amazon, consumers are less inclined to get in their cars and
services.Amazon manages its physical supply chain with head to the store for something.Amazon's investment in
precision and efficiency, enabling broad adoption of its logistics in India is paying off.But the online retail giant is
competitively priced hardware, which acts as a platform for trying some new methods tailored to India's patchy logistics
softwareand media content sold either discretely or through its and financial infrastructures, including a greater reliance on
Prime subscription service.In 2013, Amazon’s CEO Jeff motorcycle delivery men and allowing customers to pay in
Bezos announced that his company is developing a drone- cash.Amazon is allowing Prime-eligible merchants to ship
based delivery system called Amazon Prime Air which would items from their own facilities to free up space at company-
be delivering products under five pounds in locations within owned warehouses,own truck trailers, hiring ondemand
10 miles of Amazon’s fulfillment centers within just 30 delivery workers.
minutes or less.As per Amazon’s senior VP of worldwide
Amazon provides a range of services known as “Fulfillment
operations, Jeffrey Wilke, for company’s growth they focus
by Amazon” for sellers who go through Amazon.com -storing
primarily on price, selection and availabilityand all the three
their goods in warehouses and shipping them out once
depend critically on supply chain. Amazon has one of the
ordered. The fees range from $2 for a small package to more
most sophisticated supply chains-system in the world.Its
than $100 for heavy or oversized items.Amazon Seller
homemade applications handle nearly every aspect of its
Services launched two new capabilities `Self Service
supply chain: warehouse management, transportation
Registration' (SSR) and `Amazon Easy Ship', for sellers in
management,inbound and outbound shipping, demand
India. SSR will serve as an accelerated and friction-free
forecast, inventory planning and more. Amazon’s supply
channel to sell on Amazon and with Amazon Easy Ship;
chain system is so well integrated that when a customer places
sellers can make use of Amazon's investments in logistics to
order for different items, the order management system
have their orders on Amazon shipped from their own
communicates with inventory and warehouse management
warehouses. Hook (2017) says that this will help improve
systems to find the optimal distribution center or centers for
delivery experience and enable sellers to scale and grow their
fulfilling the order. The customer knows within a minute how
online business profitably and at cheaper cost.
long it will take to ship the items and whether they will come
in one package or separately (Bacheldor, 2004). According to Chopra and Sodhi (2014) Amazon.com Inc. has
expanded its number of U.S. distribution centers to be closer
As per the studies of Kargar(2004)published in the Journal of
to consumers. Amazon maintains inventory of its most
the International Academy for Case Studies, Amazon’s
popular items in the distribution centers and tends to hold
market strategy was designed to strengthen and broaden the
slow-moving items more centrally. Amazon’s own
Amazon brand name, increase customer traffic to its website,
warehouses are strategically placed, moving closer and closer
build customer loyalty and encourage repeat purchases .The
to main metropolitan areas and city centers. As a result, it uses
principle competitive factors in Amazon’s market segments
a pure push strategy for the products it stores in its
included price, selection, availability, convenience,
warehouses. On the other hand, it uses a pure pull strategy
information, discovery, brand recognition, personalized
when it sells the products from the third party sellers.
services accessibility, customer service, reliability, speed of
delivery, ease of use and ability to adapt to changing These new technologies are changing how firms design, build
conditions.Amazon has also invested significant resources in and deliver products, and how they interact with their
the development and maintenance of its technology base. customers. Melnyk(2017) explains that in 2012, Amazon
Also, amazon has its own warehouse and distribution centers acquired a provider of automated and robotic warehouse

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 International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS)
Volume VII, Issue I, January 2018 | ISSN 2278-2540

solutions called Kiva Systems. And in 2015, that company close to Amazon’s. The absence of an online platform that can
was rebranded as Amazon Robotics. The robots of Amazon collect the volume and quality of consumer data needed for
Robotics can pick and pack without needing any human stronger decision-making has set Walmart back. Even though
assistance, enabling Amazon to complete warehouse activities retail might be transforming offline retail is absolutely not
super-fast. As of January 2017, Amazon had more than dead. Offline retail is just going to look different in the future.
45,000 warehouse robots, and the robot invasion
continues.Also, Amazon is experimenting with 3D printing on III. FINDINGS AND SUGGESTIONS
trucks so that goods can be built as they are being delivered to
customers. From the above review it is clear that it is not possible for a
company to establish a fixed model of supply chain.E-
According to Hook and Wright (2015), the technology inside commerce companies that adopt differentiated supply chain
Amazon's distribution centers has long been a key advantage strategies for each product may possibly acquire advantages
for the group, which has built more than 120 giant warehouses over those companies that do not operate in this manner.
worldwide. They give a competitive edge to Amazon over the Amazon.com has changed the face of retail through its use of
others. To power the delivery service, Amazon has opened bold supply chain strategies and its deployment of innovative
more than two dozen Prime Now delivery hubs within the technologies. It is constantly trying to minimize human
cities, and could one day use drones for rapid delivery if intervention in its supply chain process.Adapting to changes
regulatory approval is obtained. Amazon has been building a like new business models, changes in the customer base,new
new network of midsized distribution centers, or "sortation technologies and changes in the supply chainrequiresthe
centers", that act as a staging ground between the mega- company to implement strategic moves,customer-centric
warehouses and local post offices. supply chains, new technologies and changes in the supply
chain.Also to enable this transformation, Amazon must first
Amazon successfully launched a new supply chain services in
identify their key customers,and then structure their
2015, such as same-day delivery, which is now available in
organization so that the there is no conflict between the supply
many U.S. metro areas. Hofman et al (2016) reports that in
chain team and other departments like sales and
another spectacular move Amazon ran pilots with automakers
marketing.Pure internet retailers’ supply chains could
Audi and Volvo to deliver packages directly to the trunks of
arguably be considered more flexible than their clicks-and-
customers’ automobiles. In 2015, Amazon released a series of
mortars counterparts.Amazon is efficient and effective for
instant ordering devices under the brand Amazon Dash, which
consumers because they have the ability to maximize options
enable consumers to push a button on a small, product-
for customers and the capacity to accommodate customer
branded fob when they need to reorder common household
segments differently based on advances in
items like laundry detergent, instant coffee cups, and diapers.
technology:Amazon’s own logistics network is one of its
.Supply chain pioneer Walmart which is the biggest brick- greatest achievements of which is it aiming at the reduction of
and-mortar retailer in the world has continued its push into e- dependence on third parties.As Amazon is known for large
commerce and has expanded investment in multichannel investments into Research & Development, the company has
drive-thru pick-up centers and a “click-and-collect” grocery numerous possibilities to expand and to serve a larger number
service offered at some of its stores. According to Kumar et al of markets and thereby become more unique and relevant.As
(2012), Walmart has perhaps the best physical distribution and currently Amazon's supply chain is not especially sustainable
retail network in the world, while Amazon is the clear leader nor environmental‐friendly so it may focus on Green Retailing
in the online space. Walmart is also leveraging its expertise in in the future.This may be achieved by implementing
supply network design and optimization in a drive to recapture recyclable packaging as well as energysaving standards in
the low-cost crown from its competition.Walmart also uses its company owned facilities.
online channel to offer a greater range of products compared
IV. CONCLUSION
to its stores.In addition, the web site also serves as a tool to
evaluate the introduction of new offerings of its offline Supply chains can and should evolve over time in response to
partner.In addition, Walmart.com has been able to take product life cycles or experience with a new
advantage of the existing services infrastructure of its offline market.Amazonfollows a customer-centric flywheel-business
parent company to improve trust in its online channel and model which is especially characterized by putting special
increase visits to its outlets.Two of these services are the emphasis on choice, convenience and price. Developing the
returns policy and the site-to-store service of drone-based delivery system is a major indicator that Amazon
Walmart.com.Amazon is well-known for its algorithmic is well ahead of other players in the retail industry and it is
approach to presenting particular products to its customers, as doing everything possible to leverage all of the latest supply
well as using real-time data to fuel dynamic pricing. Walmart, chain technologies to maintain their supply chain the clear
on the other hand, has lagged behind significantly when it market leader.In order to make good on increasingly fast
comes to building a robust online platform that can even come delivery promises, the company has positioned many new

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 International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS)
Volume VII, Issue I, January 2018 | ISSN 2278-2540

warehouses in proximity to local urban markets.The new [5]. Chopra ,Sunil ;Sodhi, Manmohan, 2014, Reducing the Risk of
Supply Chain Disruptions (MITSloan Management Review,
world of the customer-centric supply chain will require supply
VOL.55 NO. 3)
chain managers to embrace the change, drive it in their [6]. Hook, Leslie, 2017, Amazon unveils key logistics arm sales
organizations and learn to manage with their customers in surge,The Financial Times Limited
mind rather than focusing strictly on costs. [7]. Hook, Leslie; Wright, Robert, 2015, Amazon aims to go it alone
with deliveries, Financial Times ; London (UK) [London (UK)]12
Dec 2015: 12
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