Summary of the case study
Amazon has been established in 1995. Better to know that at first the company
used a distinctive procurement strategy, which consists of holding modest inventories
and relying on wholesalers. Through the following years (1996 – 1997), the group
known a certain growth expansion, and extended its infrastructure and systems by:
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Enlarging its distribution center capacity – it is able to decrease the order
fulfillment lead times, and also to decrease dependence on main suppliers.
Increasing the number of items held in distribution centers
Working on technology improvement such as company’s software
development to support back-office operations.
Its continual development allows it to use the so-called “technology supply chain
strategist software package” to find out solution against its competitors. By doing this,
the purpose is to know where to implant distribution facilities by considering
customers’ location and supplier’s one in order to beat the concurrence.
We can thus observe that Amazon had continually improved its system in every scale
in order to follow and to adapt itself to the society change and answer to the demand
of the customers
Inventory cost
Because Amazon has products at the right time, right amount and right place, its
business can run successfully but still, its inventory cost is not negligible. There are
the solutions used by Amazon to improve the inventory management:
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To improve the forecasting system to predict the future seasonal and regional
demand
To include inventory, warehouse and transportation in the suppliers’
management system in order to have a better control on all the processes and
being able to fix problems whenever it happens in any of the cited stage
And also try to avoid holding too much inventory (partnership with other
companies which would hold the inventory in exchange of other contracted
advantages)
The direct shipment distribution
The main goal of choosing the direct shipment distribution strategy is to try to skip
warehouses and distribution centers. Suppliers will in this case deliver the product
directly to retail stores.
By doing this, Amazon doesn’t need to pay a distribution center and lead-time is
reduced. Or it can also think about having an intermediate inventory storage point
strategy.