Amazon: A Synopsis of Supply

Amazon: A Synopsis of Supply Chain Management and Global Leadership

Many have described supply chain management as both an art and a science (Wheatley, 2000). Supply chain management is indeed a fine art that customers and organizations can come to appreciate over time. It is also a science, that when properly understood gain result in substantial profits and competitive advantage. Supply chain management involved planning, sourcing, creating and delivering optimal goods and services to a companies target customer base.

Global companies now realize that to succeed in an increasingly competitive retail environment they must if nothing else improve their supply chain processes. Integrated logistics management is increasingly important for global companies to realize a competitive advantage in the international marketplace. A solid supply chain not only helps save a company time and money, but also helps ensure they satisfy both the needs of internal and external customers and key stakeholders in the company. Strategic management of logistics not only helps boost a company' strength but also enables significant cost savings and increasing market shares over time (Christopher, 231).

Amazon.com is one of the world's leading retail suppliers of more than 18 million different products. The company, started just 10 years ago, has risen to the top of the competition in part due to its exceptional supply chain management processes. While the company has struggle minimally in the past to design optimal supply chain processes, today one can define supply chain management at Amazon simply as the best of the best. A history of Amazon as well as the supply chain management process at Amazon are examined in greater detail below.

History Amazon

Before exploring the supply chain at Amazon the reader should understand a little about the companies history. Founded in July of 1995 Amazon.com is one of the leading Internet retailers on the market today. Founded by Jeff Bezos the company incorporated originally within the state of Washington then subsequently reincorporated two years later in Delaware (Amazon, 2005). The company is now headquartered in Washington state. Public since May of 1997m, Amazon is listed on the NASDAQ under AMZN (Amazon, 2005).

The company's mission statement is "to be the earth's most customer centric company; to build a place where people can come to find and discover anything they want to buy online" (Amazon, 2005). To that effect, many would claim that Amazon has succeeded and even surpassed their original expectations. Part of their success lies again in their supply chain management process, discussed in greater detail below.

Amazon currently distributes some of the most diverse products available on the net today (Tap, 2005). Among their product lines include books, home furniture supplies, clothes, entertainment, equipment and more. Just about anything a consumer needs they can acquire at this incredible and expanding resource. While the company initially opened shop offering modest product lines focusing primarily on books, the company has realized that to grow financially they must provide customers with more volume and products.

Part of the companies name may be attributed to their pomposity. Amazon CEO Bezos believes that there are virtually no corners the company can't turn and no products the company can't offer its diverse company base (Wheatley, 2000). Such open thinking has indeed enabled the company to expand into multiple markets successfully in the 10 years or so the company has been in business. There is no avenue untouched by the company, delivering even music and DVDs to savvy and cost conscious consumers (Szadkowski, 1998).

Amazon's target market? Anyone and everyone capable of purchasing online. Internet savvy consumers are almost all familiar with Amazon. The company offers niche products including products for almost anyone. Whether in search of toys, parenting books, electronics, high tech computer equipment, house wares or furniture you'll find just about everything you need online.

Supply Chain At Amazon

Part of Amazon's success is due to its supply chain efficiency. Strategic sourcing and integrated logistics help Amazon rise to the top of the competition particularly in an international or global marketplace (Venkatesan, 1992; Levy, 1995). Amazon has taken advantage of the globalization of production, which has resulted in significant growth in the way of international sources for finished goods and services (Levy, 1995). A key feature of Amazon's success has been deciding successfully which products they could source international and understanding how to minimize costs generated by separating various activities associated with the value chain at Amazon (Levy, 1005).

Amazon has continually worked to discover new ways to more speedily deliver products to consumers and to communicate with customers and suppliers effectively and efficiently. This in turn has substantially improved growth. Customers are also served better through solid logistics and supply chain management techniques even though Amazon has kept the costs associated with providing services over time relatively low.

Among the features of Amazon's supply chain include integrated warehousing and order fulfillment and transportation services. Amazon has formed a number of strategic and collaborative alliances with multiple suppliers enabling them to become one of the largest Internet-based suppliers.

Managing Change

Supply chain management in an international environment where a company partners with others (as Amazon has partnered with multiple companies) requires process integration and structural alignment (McKinsey & Company, 2005). It is not enough for a company to have technical knowledge to provide products and services. Rather a company must have a variety of solutions available that will meet the needs of all stakeholders in the company.

Amazon manages change by prioritizing critical business tasks and continually assessing logistics strategies to make sure that they meet acquisition targets within their areas of expertise (McKinsey & Company, 2005). Amazon has also defined global supply chain processes and roles for each of their partners and enables efficient communication between all partners to provide customers with the best services possible.

Networking

Networking is an essential component of the supply chain management process at Amazon. Amazon currently networks with multiple professional vendors to ensure that all products offered and delivered meet the highest standards.

The company continually assesses their distribution strategy for each of their partners and continually works to maintain an global distribution network for suppliers.

Supply Chain And Customer Service

Supply chain management at Amazon is also tailored to meet the needs of varying market segments. Consultants working with the company consistently work to balance the needs of customers while also minimizing the costs associated with providing optimal customer service. This involves tailoring supply chains to meet the needs of different customer segments, optimizing profit opportunities and fine-tuning pricing strategies where applicable and designing a distribution system that meets the demands of savvy consumers who want quality products delivered fast (McKinsey & Company, 2005).

Supply Chain Management and Internet Technology

Amazon has also successfully adopted multiple technologies to enhance the functioning of the supply chain management system. This includes implementation of a web-based system that tracks goods sent to consumers and also streamlines the order management and inventory process (McKinsey & Company, 2005). Product availability is also streamline, which enables Amazon to meet the extreme demands placed on them by customers. Planning solutions that may have also helped the company include implementation of ERP software that helps integrate all company processes including financials, order fulfillment, inventory, marketing and even human resources (Amazon, 2005).

What Makes Amazon So Successful?

How do we know that Amazon is successful? Just look at their sales figures for the last few years. Within a few years of operations sales at Amazon already exceeded 2 billion. Today the company makes more than 3 billion in revenues every year. Amazon partner's with some of the most reputable and widely known companies to provide services to their customers. Among their key partners and collaborators include wine.com, Babies R Us, Office Depot, Target and Toys R Us (Amazon, 2005). The company is customer centric or focused which bottom line means getting quality products to consumers at a fair price, and delivering products with speed and efficiency.

Product-based companies like Amazon simply can't succeed unless their supply chains operate at peak conditions (McKinsey & Company, 2005). This means that outbound flow of products and services to customers must be efficient, no matter how complex the inbound flow of parts and supplies is within the company (McKinsey & Company, 2005).

The goal of a successful supply chain system is to plan or strategize for the resources that will enable the company to meet customer needs, find suppliers capable of delivering the services the company wants to provide, manufacture products an schedule any activities necessary for production to occur and ensure timely delivery. Of course within each of these steps of the supply chain process are mini steps, which include setting pricing and payment processes and creating metrics that will allow a company to track its relationships with suppliers and customers as well as consumers over time. Amazon does all of this and more, very successfully.

Amazon has adopted multiple techniques and methods within their supply chain to add value and improve efficiency. These include creating optimal customer service abilities, creating global networks of suppliers and vendors, taking advantage of information technology enhancements and knowledge sharing to offer customers (both internal and external) the best service possible, and managing change in an efficient way (Mckinsey & Company, 2005).

Supply chain management isn't just a fact of life at Amazon. Corporate executives realize that supply chain management is in fact crucial to the success of Amazon now and in the future (Wheatley, 2000). Within five years of opening its doors to the public Amazon succeeded in enticing more than 20 million customers, located in more than 150 countries around the world (Wheatley, 2000).

Interestingly despite its economic gains Amazon has also realized multiple losses. These losses have resulted in stock price declines during the early quarters of 2000 (Wheatley, 2000). Why the change? Costs in an e-commerce business are often fixed. Amazon, because it is a Web-based business generally must deal with many high fixed costs. Fortunately the best way to overcome this obstacle is by selling as much as possible, or by increasing volume (Wheatley, 2000). Amazon has done this successfully, expanding its product base to include almost every product under the sun. While the company first started out by focusing on books, today Amazon offers more than 18 million different products to consumers (Wheatley, 2000).

To help minimize fixed costs Amazon has opened multiple distribution centers across the nation and world. The distribution centers currently rely primarily on automated processes to fulfill orders. Amazon has also expanded internationally by investing in integrated logistics solutions and software programs that will help improve supplier lead times and address varying transportation from distribution centers in multiple locations (Wheatley, 2000).

Conclusions

Supply chain management is a vital component of any organization's processes. It's not enough for a company to simply make a product and provide it to a customer. A company has to do so in the most efficient manner possible, meeting all customer needs, wants and expectations. When done correctly, supply chain management will propel even the smallest company to the head of the competition. Supply chain management is nothing more than the process whereby a company plans, sources, creates and delivers goods or products to their target audience. For a company to succeed this process must be streamlined to not only guarantee optimal customer service, but also to ensure that costs are contained so the company can realize significant profits. The one company that has continually achieved supply chain management excellence over time is Amazon.