amazon supply chain management case study pdf

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How the Amazon Supply Chain Works

Brian Connolly

October 25, 2021

Amazon Inventory Management , Amazon Seller , Selling on Amazon , Uncategorized

The Amazon Supply Chain is responsible for getting customer orders from point A to point B as quickly and efficiently as possible. 

Between those two points is a lot of moving parts such as receiving inventory, sorting inventory, warehousing, product-picking robots, warehouse associates, truck drivers, Amazon Prime Air, delivery drivers, and so on.

On the customer side, all one needs to do is click a button, then two days later, their order magically appears on their doorstep. 

As an Amazon FBA ( Fulfillment by Amazon) third-party seller, you get to leverage Amazon’s state-of-the-art facilities and processes, giving your business the logistical efficiency that would be impossible to match on your own. In a nutshell, here’s is how the supply chain works :

• You (the Amazon seller) create a shipment in Seller Central specifying how many units or products will be shipped and the size and weight of your shipment, making sure each unit has a scannable barcode.
• An Amazon-partnered carrier or shipping company delivers your bulk product shipment to the Amazon fulfillment center(s) specified in your shipment information.
• Amazon associates unload and receive your shipment by scanning a unique barcode that connects each package to your seller account.
• The units are unloaded from your shipment and scanned individually by an associate to identify each one so it is properly added to your inventory. The product should have either a UPC barcode or an FNSKU, which are unique Amazon barcodes that identify your products.

• Once received Amazon stores and/or distributes your units to other Amazon fulfillment centers.
• When a customer places an order for your product, Amazon robots and associates work together to accurately pick, package, and label the product.
• The product is then sorted and loaded onto a truck and/or plane to reach its delivery station where customer orders are prepared for last-mile delivery.
• One to two days later, the package is delivered to the customer’s doorstep.

To make all of this possible, Amazon’s fulfillment network consists of over a hundred buildings across the country for inventory management and processing millions of orders every single day. 

According to Amazon’s facilities page , this is what the fulfillment network is comprised of:

Sortable fulfillment center

Around 800,000 square feet in size, sortable fulfillment centers can employ more than 1,500 full-time associates. In these buildings, Amazon employees pick, pack, and ship customer orders such as books, toys, and housewares. Thanks to the innovations of Amazon Robotics, associates often work alongside robots, allowing them to learn new skills and help create a more efficient process to meet customer demand.

Non-sortable fulfillment center

Ranging in size from 600,000 to 1 million square feet, non-sortable fulfillment centers employ more than 1,000 full-time associates. In these centers, associates pick, pack, and ship bulky or larger-sized customer items such as patio furniture, outdoor equipment, or rugs.

Sortation centers

At sortation centers, associates sort customer orders by final destination and consolidate them onto trucks for faster delivery. Amazon’s sort center network provides full- and part-time career opportunities and is powering our ability to provide customers with everyday delivery, including Sunday delivery, which customers love.

Receive centers

Amazon’s receive centers support customer fulfillment by taking in large orders of the types of inventory that we expect to quickly sell and allocating it to fulfillment centers within the network. Full- and part-time roles are available in these buildings, which are about 600,000 square feet in size.

Amazon’s fulfillment network support includes additional types of buildings that handle specific categories of items or are pressed into service at peak times of the year such as the holiday season. Many of these buildings feature part-time opportunities with the option to convert to full-time.

Delivery stations

In these buildings, customer orders are prepared for last-mile delivery to customers. Amazon delivery providers enable our fast, everyday shipping.

How Amazon’s Supply Chain benefits Amazon sellers

The average small- or medium-sized online retailer doesn’t have the capacities or sophisticated logistical processes that Amazon has built. Amazon’s supply chain not only benefits them and their customers but also benefits the third-party sellers who sell their products on Amazon. 

Amazon sellers have two options to fulfill their orders: FBM or FBA . 

In FBM (Fulfilled by Merchant), the seller handles all order fulfillment including storing, packaging, and order shipment

While in FBA (Fulfilled by Amazon), sellers send their products to Amazon fulfillment centers and Amazon handles all storage and order fulfillment. On top of that, products become Prime eligible which allows sellers to have orders delivered to their customers within 1-2 days. 

By using FBA, sellers get to use Amazon’s advanced fulfillment network to grow their business. Instead of worrying about where to store your products or how you’re going to package and ship orders, you can let Amazon handle it all.

Amazon fulfillment centers

Amazon has 110 fulfillment centers across the US and over 185 across the world to ensure no matter where customers are located, they receive their orders fast and on time. 

When sellers create a shipment in Seller Central, Amazon will tell them which warehouse or warehouses to send their inventory to. They base this on the demand for your type of product across the US. For example, Amazon may split your shipment between a New Jersey fulfillment center and a Texas fulfillment center.

Sellers do have the option to send all of their inventory to a single fulfillment center. Amazon will then distribute its inventory across multiple fulfillment centers to ensure sellers can meet the two-day Prime shipping promise in any region. 

The fulfillment centers are where all the magic happens! Receiving, quality assurance, storing, packaging, and shipping all take place here.

Fun fact: Did you know that before COVID-19, you were able to tour an Amazon fulfillment center? While you can’t visit one again in person just yet, Amazon does offer virtual tours so you can get a glimpse of what their technology and people do for Amazon. It’s worth watching if you want to see where your products go and come from.

How Amazon customers receive their orders

Once one of your customers orders your product, Amazon quickly processes and ships the order — and you don’t have to do a thing.

When your products leave the fulfillment center, Amazon loads them into a tractor-trailer or an Amazon Air cargo plane to bring your package closer to its final destination. Once Amazon sorts out packages at the delivery station, they load them into one of Amazon’s delivery vehicles and deliver them to your customer. 

It’s pretty incredible to think all of this happens within two days from when a customer placed their order. Next time you order something on Amazon or send inventory to a fulfillment center, think of all the hardworking employees that make these swift deliveries possible.

You know the Amazon delivery vans and trucks you’ve been seeing in your neighborhood? Many of their routes are actually owned and operated by independent contractors through the Amazon Delivery Service Partner program. Anyone can apply to become an Amazon delivery partner with as little as $10,000 and no logistics experience.

Use Jungle Scout to Navigate Amazon

As much as Amazon’s supply chain benefits all sellers, each seller should fortify their own operations on their end. To have a successful business on Amazon, you must be able to properly manage your inventory . 

Without proper inventory management, you run the risk of understocking, causing a loss of sales or overstocking, resulting in costly monthly and long-term storage fees. Overstocking also causes issues with your storage limits in Amazon’s fulfillment centers, taking up the space you could use for faster-selling products. 

With the right tools and strategies in place, you’ll know how to maintain the perfect balance of inventory needed for your business to run smoothly.

Using Jungle Scout’s Inventory Manager tool, you can accurately forecast demand , know when to replenish your inventory, and avoid costly storage fees.

Using this tool in conjunction with your Amazon metrics will allow you to run your FBA smoothly without the worry about overstocking inventory in Amazon’s fulfillment centers. 

Use Amazon’s expertise to run your business

Amazon’s innovation won’t stop here. They will continue to invest in fulfillment centers, advanced technology, and talented people to exceed customer expectations and beat the competition in every aspect.

We hope this article gives you a better understanding of Amazon’s supply chain and how much actually goes into its operations. 

If you have any more questions about Amazon’s supply chain and process, let us know in the comments below!

Brian is a writer and entrepreneur with over 6 years of experience in e-commerce and selling on Amazon.

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Supply Chain Management. Case Study on Amazon

Case Study , 2021 , 24 Pages , Grade: 1

Autor:in: Vishal Sawale (Author)

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This term paper is written to identify and understand the application of SCM principles, Wholeness system thinking, and principles in the supply chain of Amazon. We study how Amazon's supply chain works in detail explaining the critical parts that make the supply chain perform as a whole. Analysis of the SCM of the amazon system is done to understand the important interaction of different parts. We choose to study the SCM operations of Amazon because Amazon is the world leader in logistics with operations around the world and to become aware of the different elements, interconnections, and purpose of a successful company like Amazon and relate it to its current perspectives. The study is based on the definitions of the Lean principles, six principles of SCM, Whole system thinking, and their inter-relation. We approach the study by defining all the concepts and then explaining the Amazon company's SCM strategy and inter-relations of various parts. The Objective of the term paper is to study how the theoretical concepts are implemented practically by Amazon.

Table of Contents

1. Wholeness System Thinking 1.1 Wholeness Synthesis 1.2 Wholeness Analysis

2. SCM Principles

3. Lean Principle

4. History of Amazon

5. Amazon Products

6. Supply Chain Management in Amazon 6.1 Whole process Overview in Amazon 6.2 Optimizing an order picking process at Amazon

7. Wholeness System thinking in Amazon 7.1 Wholeness Synthesis 7.2 Wholeness Analysis 7.3 Purpose of Amazon 7.4 Interaction 7.5 Parts

8. Principles of SCM in Amazon 8.1 Integration 8.2 Management of Processes 8.3 Value added processes 8.4 Push - Pull Strategy 8.5 Bullwhip effect 8.6 Decoupling Point

9. LEAN Principles in Amazon 9.1 Pull 9.2 One-piece Flow 9.3 Tact Time 9.4 Zero defects

10. Conclusion

11. References

12. List of Figures

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Amazon Supply Chain: Understanding how Amazon’s supply chain works

Whether you are a small or medium-sized business looking to scale your eCommerce operations, Amazon is one of the best examples to learn from to improve productivity, expand the reach, and maximize profits. Though several factors make Amazon the eCommerce leader it is today, one of the most critical elements to its success has been Amazon’s state-of-the-art supply chain.

Amazon has one of the biggest and most efficient supply chain operations globally. While the basic model has remained the same since its inception, it has adopted newer technologies over the years to streamline its operations and improve its efficiency.

Below, we explain how Amazon’s supply chain works and look at the key elements contributing to the company’s success.

On this page:

What is the Amazon Supply Chain?

Amazon fba and fbm, how does the amazon supply chain work, what happens when you buy a product on amazon, components of amazon supply chain strategy.

The supply chain of Amazon refers to the entire process on the platform, right from product warehousing and inventory management to pricing and delivery. Over the years, Jeff Bezos and his team have devised new ways to optimize every part of the supply chain process, ensuring everything works efficiently and smoothly to guarantee customer satisfaction.

As third-party sellers contribute up to 55 per cent of the total sales Amazon makes, the company makes sure these sellers using the platform have multiple fulfilment options available.

when it comes to selling on the platform, Amazon sellers have two options:

Fulfilment By Amazon (FBA) – Amazon takes care of logistics and customer support in this model. Sellers send products in bulk to the fulfilment centres from where the company picks, packs, and ships to customers. This fulfilment option is ideal for sellers who handle small and lightweight products or cannot arrange for logistics.

Fulfilment By Merchant (FBM) – With this option, third-party sellers are responsible for listing their products and taking care of storage and fulfilment on their own.

There is also an FBA Onsite option where Amazon uses its warehouse management program to help sellers optimize their operations. Third-party sellers take care of the inventory of the products, but Amazon is responsible for picking the products from the inventory and selecting the best fulfilment method.

Amazon covers all the bases for different seller types by offering these two programs. Sellers who want to store, pack, and ship products on their own can use FBM, while others can go with the FBA.

Related: How to start an Amazon FBA business

Amazon has been known to reduce delivery times and even offer same-day delivery. This is because it recognized the need for super-fast delivery among customers. There are two main components crucial to the success of Amazon’s supply chain – Amazon Fulfilment Centers & Amazon Delivery Fleet.

Amazon Fulfilment Centres

Amazon puts a robust fulfilment and logistics network to complete orders and meet the ultra-fast delivery expectations of over 110 million Prime membership subscribers. At present, it has more than 175 fulfilment centres across the world. Amazon also has approximately 500 warehouses near metropolitan cities globally.

Related: Crucial Tips for Selling on Amazon that every Seller must know

As the eCommerce sector experienced a boom in the past few months, Amazon has shown considerable growth. In ten months, it has hired about 427,000 employees to keep up with the increasing demand.

Third-party sellers have seen up to 60 per cent growth in sales, and the trend is expected to continue in the coming months. To respond to the growing demand, it will also open about 50 new warehouses and fulfilment centres in the United States.

Amazon Delivery Fleet

Amazon uses many logistics and delivery partners to deliver orders to customers on time. Trucks are used to carry boxes from fulfilment centres to sort centres. Then packages are sorted depending on the delivery speed and location. After this, the most efficient transportation mode is chosen to transport the packages.

Amazon uses an airplane fleet to meet the one-and-two-day delivery window offered to Prime members. The company uses vans, trucks, bikes, and even robots to facilitate timely delivery on the land. Amazon is presently working on drones to deliver products to locations near fulfilment centres.

Let us understand how Amazon’s fulfilment centre works to complete an order.

Receiving Products

Products are either stored into pallets manually or handled by machines at these centres. Freight is separated based on where it comes from, whether third-party vendors or Amazon facilities. Over half of the products sold on the platform come from small businesses and solopreneurs.

Product Storage

Amazon does not categorize its storage by type but instead stores everything randomly. There are yellow bins containing random items tracked by computers. The containers are then transported to associates depending on the size.

Picking Orders

When a customer buys a product, a robot brings pods of items to Amazon associates at the pick stations. The pickers read the screen, retrieve the product and place the product in a tote box.

Quality Assurance

A lot of quality assurance is required for the proper working of robots with humans. An item’s physical location should match the computer entries so that robots can function well.

Finally, products are organized and sent to the pack station, where box sizes are chosen, and the amount of tape required to pack them is measured. Items coming from third-party vendors ship out in their original packaging, but Amazon works with them to reduce these costs.

While the process of buying from Amazon seems straightforward, it involves a few crucial elements that come together to ensure a smooth shopping experience.

Warehousing

A big factor behind Amazon’s success, the warehousing strategy the company adopts is smart enough to make sure products are accessible from anywhere in the world. It hosts many warehouses and distribution centres near big metropolitan cities. Currently, there are 175 warehouses globally, the majority of which are located in Europe and North America.

Amazon stores its product inventory across these centres to quickly meet the demand. Such an extensive network of warehouses allows it to deliver orders to customers quickly and cost-efficiently. It also has mini-warehouses in smaller areas to ensure enough supply. All the warehouses are optimized from within, with five storage areas. Employees and robots can quickly find products and get them ready for dispatch.

Amazon’s delivery options are one of the most significant factors differentiating the supply chain from other eCommerce operators. The company offers two-day Prime deliveries, free delivery, and even the Prime Now option that delivers the products within two hours. Amazon uses a host of methods ranging from traditional to high-tech to deliver orders with lightning speeds worldwide.

Amazon has delivery trucks, vans, and even bikes operating in specific areas; it also leverages traditional routes like UPS and FedEx. Such a wide range of delivery strategies enables it to deliver faster, more efficiently, and easily to any location globally, even in rural and remote areas that traditional options don’t cover.

Related: 10 Dropshipping Tips that will drive sales growth

Technology adoption is at the core of the Amazon supply chain strategy, helping it work efficiently and cut costs. The company relies on several automation and robotic solutions to pick, pack and ship orders. Such tools and techniques improve the delivery speeds and cut down the costs associated with warehousing and staffing, saving funds for other processes.

One of the biggest advancements in technology anticipated by Amazon is its Prime Air Drone Delivery. Though still in its development phase, the program will ensure 30-minute deliveries in some areas once operational. Customers with an Amazon-branded landing mat living within 15 miles of the nearest fulfilment centre can qualify for a delivery option.

Manufacturing

Amazon has discovered that it can benefit from manufacturing more popular products to increase its profits and provide cheaper options.

Currently, the company has started white-labelling products from sellers and offering options across categories that include everything from household goods and pet supplies to a lot more. This strategy allows Amazon to keep the entire lifecycle of products, from production to delivery, in-house.

Related: What are the risks of dropshipping, and how do you avoid them?

Cost-effectiveness is one of the most crucial parts of the Amazon supply chain. One of the most innovative strategies is to segment the customers into Prime and Standard, offering varying service options at different prices. By creating additional shipping and delivery windows, Amazon keeps the flow of orders smooth, allowing it to respond to changes in demand without affecting the supply chain as a whole.

Amazon also uses such a pricing strategy for its FBA program. It understands that the large inventory can raise costs and slow down fulfilment. It, therefore, charges high storage fees for long-term usage from FBA sellers. This ensures that sellers only send sufficient inventory to meet the demand, and Amazon’s costs don’t rise.

Global Reach

Amazon operates 11 online marketplaces globally to let sellers grow their business worldwide, regardless of where they are physically based.

Businesses can introduce their products to millions of potential customers with these marketplaces located across Asia, Europe, and North America. When sellers register with one of these marketplaces, they get instant access to loyal customers who trust Amazon’s experience.

Related: Which is the Best Online Marketplace: Selling on Etsy vs eBay vs Amazon

Final Thoughts

The Amazon supply chain works efficiently with its latest innovations to beat the biggest competitors. This retail giant has set an example for eCommerce businesses with its consumer-centric approach and use of technology.

Regardless of the industry it enters next, Amazon’s unique supply chain strategy combined with innovations suggests that it will continue to rule the landscape.

Pia has consulted for a number of digital startups and small businesses in Asia before coming to the UK. Pia writes about a wide range of SaaS and B2B products, including trends and issues on e-commerce, accounting and customer service software. She’s also covered a wide range of topics in business, science, and technology for websites in the U.S., Australia and Singapore.

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• Corpus ID: 114713423

Amazon case study: Part one

• N. Terry-Armstrong
• Published 1 March 2013
• Business, Computer Science

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Amazon Supply Chain Management: A Case Study

• shashi kant dikshit assistant Professor
• Dr. Shekhar Trivedi Professor
• Ms. Venus Madan Assistant Professor

This study aims to clarify the position of Amazon in the retail industry which it primarily gained through high level supply chain and logistic developments. This research describe the E-commerce industry and the supply chain practices adopted by them, specially the Amazon. This paper will discuss the penetration of internet in India, E-commerce market in light of Amazon, Supply chain in Amazon, IT application and SC automation and finally Business strategies application for internet activity.

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Case Study on Amazon Supply Chain Metrics.pptx

This study aims to clarify the position of Amazon in the retail industry which it primarily gained through high-­‐level supply chain and logistics developments. The first part of this research describes the retail industry, especially E-­‐Commerce, as well as supply chain practices whereas the second part focuses on Amazon as a representative company. Drivers of the company's supply chain as well as numerous product and service developments such as Anticipatory Shipping, Amazon's Chaotic Storage Model and Amazon's Logistics Network Plan are identified and discussed. It becomes apparent that constant innovation in a supply chain context has more extensive and significant long-­‐term effects on company success than large profit figures. A comparison of Amazon with Apple, Google, Walmart and other relevant companies shows that Amazon's supply chain is more diverse, implying that numerous services that are offered by competitors are combined within Amazon and its supply chain. Amazon's supply chain may be described by an efficient and flexible inventory management, fast delivery fulfillment, effective collaborations with partners, strategic acquisitions of supporting systems and companies and a high level of customer service. The results of this research paper may direct future studies towards the investigation of further competitive advantages of Amazon as well as how potential threats and weaknesses a company faces may be overcome in a supply chain context.

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Amazon.com has been through several stages of development: first as a cyber-bookstore, then a cyber-market, and now an Application Service Provider (ASP). I apply the concept of “business ecosystem” to describe the evolution of Amazon.com, and highlight the role of web services in the shaping of its ecosystem. The company plays a central role in the ecosystem, working with a network of partners to bring products and services to customers. By continually trying to improve the health of its ecosystem, Amazon ensures its own survival and prosperity. The mechanisms through which Amazon has created its ecosystem are discussed and ideas for firms looking to create analogous business communities are advanced. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.Amazon.com a désormais deux visages: celui du E-Retailer que nous connaissons tous, et celui moins connu, d'Application Service Provider (ASP). Dans cet article, je présente le concept d'écosystème d'affaires et le rôle joué par les Web services dans la constitution de cet écosystème. L'activité d'ASP d'Amazon est récente et marque une nouvelle phase de développement de l'entreprise au cours de laquelle elle a constitué une véritable communauté d'affaires composée de très nombreux partenaires. Amazon occupe aujourd'hui une place centrale au sein de ce réseau de valeur. A travers cet article j'analyse le développement de l'écosystème d'affaires d'Amazon. J'espère, modestement, que lecture de cet article sera une source d'inspiration pour les entreprises souhaitant développer leur propre écosystème d'affaires. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.

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Purpose Although supply chain scholars have acknowledged the fundamental disruptive changes experienced by today’s supply chains and the ensuing novelty of the research problems worthy of investigation, they have primarily relied on a limited number of theories to help explain the phenomena of interest. The purpose of this paper is to use a systematic literature review to address this gap and propose additional theories that supply chain researchers can use to help address novel supply chain phenomena, such as those caused by technological disruptions. Design/methodology/approach The authors use a systematic literature review to examine the studies published over the last 10 years in six of the top supply chain management journals (411 articles) and six of the top marketing and management journals (1,214 articles). Findings First, the findings show that 15 theories have been relied upon by over 95 per cent of the studies within supply chain management that use formal theories. Second, the authors identify the most frequently used theories within marketing and management (217 theories). Third, as space limitations make it impossible to offer a rich description of each of the 217 theories, the authors identify 30 theories that they considered to be the most salient to supply chain research and suggest areas where supply chain scholars can apply these theoretical lenses. Originality/value The research effort allowed the authors to map the current use of theories within the field to gain a better understanding of what other theories could augment the body of theories used within supply chain management. Thus, the current study is a “one stop shop” that supply chain scholars can consult when in a quandary about what theoretical lens to utilize.

Jacobin Magazine

Charmaine Chua

https://www.jacobinmag.com/2021/04/amazon-global-supply-chains-organizing-unionize-logistics

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