Amazon supply chain strategy is a good-working
system built by Jeff Bezos and Amazon staff. Any retailer can learn from it.
Amazon has optimized every stage of their supply chain, they even have launched
their delivery network, added drones and other hi-tech features to the whole
pattern. Amazon's supply chain contains the whole logistics cycle.
Let’s take a look at an example. 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.
Rapid
Growth
In 2004, 10 years after Amazon was founded, its
annual revenue was just under $7 billion. According to Statista, by 2018, revenue reached almost $233
billion. In fact, Amazon is the fastest company to reach $100 billion in sales
revenue, taking only 20 years. From its inception, Amazon has been growing
approximately 20% per year. It grew by 30% from 2018 to 2019. Currently, it
enjoys more than 13% of gross global e-commerce sales. Many believe Amazon is
aiming for $1 trillion in yearly revenue. If you take Amazon’s 20% yearly
growth rate into the calculation, it should reach that goal by 2027.
Whether or not the company achieves that goal by
then, 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.
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.
Classes
and Zones
Amazon boasts more than 75 fulfillment centers in North America and greater
than 125,000 full-time employees. 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.)
The location, size, and number of warehouses are
important factors in Amazon’s supply chain success. Its warehouses are divided
into five storage areas. Its library prime storage stores books and magazines.
Next, its pallet prime storage stores full-case products that have very high
demand. Next, case flow prime storage stores high-demand products picked in
less-than-case quantities. Its reverse storage accommodates irregularly shaped
and low-demand products. Finally, its random storage area stores smaller,
moderate-demand items.
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.
ARTICLE:
https://boxaroundtheworld.com/amazon-supply-chain-management/
https://sellernexus.com/amazon-supply-chain
https://www.thebalancesmb.com/how-amazon-is-changing-supply-chain-management-4155324
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