Supply Chain Management - Amazon - Sample Presentation

Supply Chain Management : Amazon
Ashok Advani
Adjunct Professor
New Delhi Institute of Management, Delhi
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SCM : Session Learning Objectives
At the end of the session, you will get to know:
 What is SCM?
 Differentiating SCM, Logistics & Physical Distribution
 Amazon & It’s rapid growth : Reasons
 Success of Amazon’s SCM model
 Fulfillment by Amazon (FBA) : Model
 Amazon & Ethics
 Amazon & International Logistics
 What is expected of you??
Prof. Ashok Advani - Adjunct Faculty : New Delhi Institute of Management, Noida
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Amazon : Rapid Growth
2004 :10 years after Amazon was founded : Annual revenue was just under $7 billion
2018 : Revenue reached almost $232 billion
The fastest company to reach $100 billion in sales revenue, taking only 20 years
Source: Staitista
Amazon Growth : Approximately 20% per year, since inception
2018 - 2019 : Growth 30%
Share of Gross Global E-Commerce Sales : Over 13%
Amazon is aiming for $1 trillion in yearly revenue ….. Possibly by 2029 - 30
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Amazon : Rapid Growth : Reason
Its transformation from a simple online bookseller to the most formidable force in the retail
industry is remarkable
One of the driving forces behind that transformation is its innovative and highly
efficient supply chain
Amazon’s continuous efforts to deliver products to the customers in the shortest possible
time are putting intense pressure on other retail industry giants across the globe and thus
changing the way supply chain management works
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Amazon : Success of it’s SCM
Game-Changing Delivery Strategy
 2005 : Amazon launched its Amazon Prime service
 By paying an annual membership fee, customers received guaranteed two-day shipping

on hundreds of thousands of products
 The introduction of two-day delivery was the game-changer that established the
dominance of Amazon in the online retail industry
 When many other retailers started to catch up by offering their own free two-day
shipping, Amazon tipped the playing surface again by offering a one-hour delivery with its
Amazon Prime Now service (which it has since changed to a free two-hour delivery)
The company has always made life difficult for its major
competitors with its innovative strategies
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Advanced Supply Chain Management Practices
 Amazon enjoys a cult following. It is a favorite choice for customers due to one crucial
reason: quick and efficient supply chain management.
 It’s a combination of:

o Sophisticated information technology
o An extensive network of warehouses
o Multi-tier inventory management
o Excellent transportation
Above efficiencies have made the current shop-from-home world possible
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Outsourcing Inventory Management and Insourcing Logistics
Amazon’s supply chain heavily depends on the outsourcing of its inventory management
 Products that are infrequently ordered are not stored in regular Amazon warehouses
 Third-party sellers are behind nearly 82% of Amazon’s sales. That amounted to $42.75
billion in 2018
 Amazon’s one-hour or same-day shipping is possible due to its dependence on its own
logistics. Depending on third-party logistics to deliver these orders would lengthen the
product delivery time
Amazon mostly uses its own delivery vehicles for same-day or one-hour
delivery options
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Delivery Options for Customers
Amazon has different warehouses for different kinds of products and customer preferences
 Prime delivery
 One-day delivery
 First-class delivery
 Free super-saver delivery
Amazon’s continuous efforts to meet every customer's delivery

preferences make it a logistics giant
Amazon Services
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Push-Pull Strategy for Supply Chain Success
Amazon’s own warehouses are strategically placed and stocked, moving closer and closer to
main metropolitan areas and city centers. As a result, it uses a pure push strategy for the
products it stores in its warehouses, forecasting demand for the specific region.
On the other hand, it uses a pure pull strategy when it sells the products from third-party
sellers, using more of an order-by-order fulfillment model.
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Warehousing
To make good on increasingly fast delivery promises, the company has positioned many
new warehouses in proximity to local urban markets. (Walmart's online strategy in China
now similarly makes use of a closer-to-the-customer fulfillment model, operating a network
of mini-warehouses)
Warehouses divided into five storage areas:
Library prime storage : Stores books and magazines
Pallet prime storage : Stores full-case products that have very high demand
Case flow prime storage : Stores high-demand products picked in less-than-case quantities
Reverse storage accommodates irregularly shaped and low-demand products
Random storage area : Stores smaller, moderate-demand items
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Automation
 In 2012, Amazon acquired a provider of automated and robotic warehouse solutions

called Kiva Systems
 In 2015, that company was rebranded as Amazon Robotics

 The robots of Amazon Robotics can pick and pack without needing any human assistance,
enabling Amazon to complete warehouse activities incredibly quickly. Amazon has
increased its army of warehouse robots at a rate of 15,000 per year since 2015. As of
January 2017, Amazon had more than 45,000 warehouse robots and counting.
 Amazon’s robotics have been aimed at bringing goods to people for the picking of orders.
The next generation of robots will see them picking the orders on their own to reduce the
need for human order pickers.
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Supply Chain Cost
Due to the huge economies of scale and a bundle of industry-leading supply chain
strategies, Amazon has been able to keep its overall per unit supply cost to a bare
minimum.
As a result, it has been difficult for other companies with far lower sales volumes and only
their own warehouses to compete.
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Drones: The Supply Chain of the Future
 In 2013, Amazon’s CEO Jeff Bezos announced that his company was developing a drone-
based delivery system called Amazon Prime Air that would be delivering products under
five pounds in locations within 10 miles of Amazon’s fulfillment centers within just 30
minutes or less. There are, of course, many hurdles to overcome to realize this dream.
But Amazon is keeping at it. As of November 2017, it announced the development of a
drone that would self-destruct during flight, if required, to keep people safe.
 Research and regulatory compliance updates continue, but there is no concrete date yet
for the official flight of Amazon's drones. Still, developing the drone-based delivery
system is a major indicator that Amazon is doing everything possible to leverage all of the
latest supply chain technologies to maintain its place as the clear market leader.
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Manufacturing Sector
 Amazon is not just a retail giant anymore. It now produces a wide variety of products
including batteries, backpacks, Bluetooth speakers, iPhone chargers, dog poop bags and
more. Its product manufacturing arsenal continues to expand to include more and more
categories.
 Amazon understood that it could produce many of the third-party products it is selling to
customers at much lower prices. The company's high volume naturally lends itself to low-
cost production. As a result, the manufacturing sector of Amazon is making it financially
stronger while grabbing market share from many manufacturing companies. This
manufacturing support for its retail operations provides Amazon with an important
revenue growth opportunity.
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The Bottom Line
 The rate of Amazon’s innovations in supply chain management has been mesmerizing,
making it difficult for lower-volume competitors to keep up. Amazon is forcing its major
competitors to invest more in supply chain automation, lessen the overall product delivery
time, increase the number of warehouses, and even engage in product manufacturing.
 Its acquisition of Whole Foods is also a bold declaration of its move to embrace brick-and-
mortar retail, and further emphasizes the convergence of traditional retail and e-
commerce strategies.
 Amazon’s unique supply chain strategies and continuous technological innovations have
already changed the way supply chain management works. With impending advances in
robotics, drones, and other autonomous vehicles, one can only guess what innovations
are next for Amazon.
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Source: https://www.thebalancesmb.com/how-amazon-is-changing-supply-
chain-management-4155324
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Fulfillment by Amazon (FBA) : Model
Fulfillment by Amazon (FBA) : Model
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FBA Model : How it Works?
Their FBA scheme works as follows:
 Send inventory to Amazon
 They receive & store your products
 A customer orders your product
 Amazon picks, packs and ships it
 Amazon provides customer service
 A happy customer returns for more products from you
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FBA Model : How it Works?
Their FBA scheme’s success is based on four parameters:
 Warehousing
 Technology
 Delivery
 Manufacturing
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FBA Model : Warehousing
Warehousing
 Amazon wants to make sure that products sold on their marketplace are accessible
anytime from any place on Earth
 All Amazon’s warehouses are situated near large population hubs
o Excellent communications
o Logistics network
 Amazon has small warehouses near not very large towns to improve the customer
experience of those people who don’t live in mega-towns
 Items in warehouse strategically structured
o 5 storage areas
o Robots pick, pack and move products if necessary
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Prof. Ashok Advani - Visiting Faculty : IIFT & Jaipuria Institute of Management, Noida
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Amazon strives to make every purchase the best one
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FBA Model : Technology
Technology
 Usage of Robots & Drones
 Fast execution of orders
 Save on staffing costs
 Deployment of free funds in improving other areas of supply chain
 Prime Air programme : Delivery by drones – special Amazon landing mats
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FBA Model : Delivery
Delivery
 Fast Prime delivery
 Last Mile programme
 Drones for Prime Air Users : Landing on shopper’s backyards
 Logistics Service Providers : UPS, Fedex, USPS
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FBA Model : Manufacturing
Manufacturing
 They now offer branded lines in anything from products for pets to household goods, and
the list is constantly growing
 Manufacturing products allows Amazon to control the whole cycle of creating and selling
products
 They produce, store, and ship them
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FBA Model : How it works?
Source: https://sellernexus.com/amazon-supply-chain
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Is Amazon Ethical?
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Amazon & Ethics
People
Labour Behind the Label’s 2019 UK report ‘Tailored Wages' report findings:
“Amazon has no policy on living wage and make no mention of wages being
enough to cover workers’ basic needs in their supplier code. It is appalling that a
market player of this size and influence has managed to take so little
responsibility for human rights at its suppliers, and has taken such a hands-off
approach to this vital issue.”
GMB Union national officer
"Hundreds of ambulance call-outs, pregnant women telling us they are forced to

stand for 10 hours a day, pick, stow, stretch and bend, pull heavy carts and walk
miles – even miscarriages and pregnancy issues at work."
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Amazon & Ethics
Environment
 Amazon’s sustainability report in July 2019, gave no information on the impacts of its
electronic products or textiles used in its clothing, hence Amazon does not seem to have
demonstrated a reasonable understanding of its main impacts
 Furthermore, in February 2019, Amazon’s policy on toxic chemicals used in the production
of clothing brands there was no information found, despite the fact that the manufacture
of clothing often releases numerous hazardous substances that negatively impact the
environment.
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Amazon & Ethics
Animals
In August 2018, Amazon's policy on materials such as fur, angora, merino wool, and
silk: They did not prohibit the sale of any of these materials despite the fact that their
production involves the exploitation and killing of animals.
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Amazon & Ethics
Taxation
In August 2018 it was reported on Channel 4 News that the pre-tax profits of Amazon UK
Services Limited, the UK distribution side of the business, covering activities in more than a
dozen giant warehouses across the country, increased from £24m in 2016 to £72m in 2017,
but its tax bill fell from £7.4m to £4.6m.
Amazon UK Services Limited is only one part of the company’s activities in U.K. Amazon
revealed in US filings that its total sales to the UK rose from £9.5bn to more than £11bn in
2017. But the tax paid on all these UK sales is not publicly available information because
sales made to customers in the UK are booked through the UK branch of a Luxembourg-
based company, Amazon EU Sarl.
Source: https://www.ethicalconsumer.org/company-profile/amazoncom-inc
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Amazon & Ethics
Source: https://www.ethicalconsumer.org/company-profile/amazoncom-inc
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International Logistics
Logistic Activities : Amazon
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Amazon’s Expanse
Amazon’s Expanse
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Key Terms : You should know!!
 Milk Run
 Push – Pull Strategy
 Bull whip effect
 Cross Docking
 Transshipment
 Unimodal – Bimodal – Intermodal – Multimodal
 Pre-carriage – Carriage – On-carriage
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What is expected of you??
 Develop the SCM for your CBR company
 Identify the strength areas in the SCM and their impact
 Identify the weaknesses in the SCM and their impact
 Any Best practices followed by your CBR company?
 Any innovative practices being used by them?
 Compare the SCM of your CBR company with it’s nearest competitor
 Suggestions for improvements
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Contact Details
Name: Ashok Advani
Mobile No.: +91-9810333002
Whattsapp No.: +91-9810333002
LinkedIn: https://www.linkedin.com/in/ashok-advani-b622936b
E-mail: ashok.advani@ndimdelhi.org
ashok-20@hotmail.com
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Supply Chain Management : Amazon

At the end of the session, you will get to know:

 Differentiating SCM, Logistics & Physical Distribution

 Amazon & It’s rapid growth : Reasons

 Success of Amazon’s SCM model

 Fulfillment by Amazon (FBA) : Model

 Amazon & Ethics

 Amazon & International Logistics

 What is expected of you??

2018 : Revenue reached almost $232 billion

Amazon Growth : Approximately 20% per year, since inception

2018 - 2019 : Growth 30%

Share of Gross Global E-Commerce Sales : Over 13%

Amazon is aiming for $1 trillion in yearly revenue ….. Possibly by 2029 - 30

Game-Changing Delivery Strategy

 2005 : Amazon launched its Amazon Prime service

 By paying an annual membership fee, customers received guaranteed two-day shipping

Advanced Supply Chain Management Practices

 It’s a combination of:

Above efficiencies have made the current shop-from-home world possible

Outsourcing Inventory Management and Insourcing Logistics

Delivery Options for Customers

 Free super-saver delivery

Amazon’s continuous efforts to meet every customer's delivery

Push-Pull Strategy for Supply Chain Success

 In 2012, Amazon acquired a provider of automated and robotic warehouse solutions

 In 2015, that company was rebranded as Amazon Robotics

Supply Chain Cost

Drones: The Supply Chain of the Future

The Bottom Line

Fulfillment by Amazon (FBA) : Model

Their FBA scheme works as follows:

 Send inventory to Amazon

 They receive & store your products

 A customer orders your product

 Amazon picks, packs and ships it

 Amazon provides customer service

 A happy customer returns for more products from you

Their FBA scheme’s success is based on four parameters:

Amazon strives to make every purchase the best one

 Usage of Robots & Drones

 Fast execution of orders

 Save on staffing costs

 Deployment of free funds in improving other areas of supply chain

 Prime Air programme : Delivery by drones – special Amazon landing mats

 Fast Prime delivery

 Last Mile programme

 Drones for Prime Air Users : Landing on shopper’s backyards

 Logistics Service Providers : UPS, Fedex, USPS

 They produce, store, and ship them

GMB Union national officer

"Hundreds of ambulance call-outs, pregnant women telling us they are forced to

 Push – Pull Strategy

 Bull whip effect

 Unimodal – Bimodal – Intermodal – Multimodal

 Pre-carriage – Carriage – On-carriage

 Develop the SCM for your CBR company

 Identify the strength areas in the SCM and their impact

 Identify the weaknesses in the SCM and their impact

 Any Best practices followed by your CBR company?

 Any innovative practices being used by them?

 Suggestions for improvements

Name: Ashok Advani

Mobile No.: +91-9810333002