Assignment 5 Case 2 Adam Hams, Albin Larsson, Andreas Strömberg, David Bo Yuan Tey 1 Manufacturing traditionally refers to creating, producing, or refining of goods or articles. When you think about manufacturing you think of machinery, assembly lines or even handcrafters carefully detailing products which will later be shipped to stores, or directly to the end customer. In that sense, Amazon does not really fit into the manufacturing category of companies. Amazon does house and transport a lot of goods and have a wide variety of other services. One thing Amazon is not known for however, is giant manufacturing plants or in-house produced Amazon brand articles. Sure, there is a wide variety of goods sold on Amazon’s site, and Amazon warehouses house a lot of other companies’, and manufacturers’ articles. Although Amazon has started some manufacturing with “AmazonBasics”, the company itself is much more of an online retailer and 3PL, than a manufacturing company. To be called a manufacturing company, there are some basics factors and categories that need to be fulfilled by the company. This may be different depending on which country were looking at, but a lot of countries have a basic list of requirements for companies to check and see if they qualify and can be called a manufacturing company. 2 As previously mentioned, there are some articles that Amazon make, which bear their own brand. If you visit Amazon’s website, (Amazon, 2023), you can visit an interactive map showing the facilities used worldwide to produce Amazon-branded products (most recently updated July 2022). When you look at this map, you can see that Amazon-branded products are produced in several hundreds of places around the world. These manufacturing plants do not necessarily produce articles to Amazon exclusively, but we think it is fair to call them suppliers to Amazon. In this case, we think we can use the term “suppliers” in the traditional sense, since they produce articles which are later shipped to, and sold by Amazon. But as previously mentioned, Amazon does not only house and transport goods produced with the Amazon-brand. They are also housing and transporting goods from other companies, both large and small. These other suppliers are not what we would call “traditional suppliers” since the product manufacturing and processing is already complete when the products reach Amazon. Amazon also has traditional suppliers that supply machinery and equipment that are vital to Amazon’s logistics functions. This includes the servers and network infrastructure required to run a huge online business. Another strategic resource is their autonomous mobile robots, which Amazon has invested heavily in with the goal of improving warehousing automation and efficiency. To summarize, the traditional suppliers to Amazon are those that supply vital machines and equipment that Amazon uses to run their business, as well as the ones that manufacture Amazonbrand products. These products are manufactured and processed, then shipped to Amazon for retailing. The more non-traditional suppliers would be the vendors who use Amazon’s programs to be able to get their products to the homes of people around the world, by letting Amazon take care of the housing, transportation, and return shipments of their products. 3 While Amazon has announced and initiated several eco-friendly projects, one can still argue that the company still has a long way to go. Amazon, being one of the world's largest corporations, has faced criticism and scrutiny regarding its environmental practices and claims. This increased consumer awareness puts pressure on amazon to evaluate and develop suppliers in a different path than discussed today. Supplier Assessments: Periodically assessing suppliers, e.g., quarterly, or annually, based on their significance and the criticality of their supplies. High-impact suppliers should be assessed more frequently, by using metrics such as: Quality: by Tracking defect rates, returns, and customer feedback. Timeliness: by Monitoring on-time delivery rates and lead times. Cost: by Evaluating competitiveness and the total cost of ownership. Sustainability: by Measuring environmental and social responsibility initiatives and impacts. Innovation: by Assessing the supplier's capability to bring in new and advanced solutions. Also performing audits that examine labour practices, community engagement, fair trade practices, and the health and safety measures in place. Supplier Follow-ups: By Implementing a Feedback Mechanism: After each assessment, providing constructive feedback on areas where the supplier excels and where improvement is needed. By Training & Developing by Offering workshops, seminars, or training programs to help suppliers address their weak areas. This can be especially useful in areas such as technological advancements, quality control, and sustainable practices. Using Continuous Improvement Initiatives by Collaborating on projects aimed at improving efficiency, reducing waste, or enhancing product quality. Issuing Resolution: by Having a clear process in place to address any concerns or issues raised during the assessment. This ensures that problems are swiftly addressed, and the suppliers feels supported. Also Reinforcing Partnerships by Recognizing and rewarding top-performing suppliers. This will later motivate other suppliers to enhance their performance. Supplier Standards: 1. Code of Conduct: Establish a clear code of conduct outlining Amazon's expectations regarding ethical behaviour, fair labour practices, and environmental responsibility. 2. Quality Standards: Set clear and non-negotiable benchmarks for product and service quality. This can be based on international standards or Amazon's specific requirements. 3. Compliance Requirements: Outline the legal and regulatory requirements suppliers must adhere to, especially if Amazon operates in multiple jurisdictions. 4. Sustainability and Environmental Standards: Given the increasing emphasis on sustainability, set clear standards related to waste management, energy consumption, carbon footprint, etc. 5. Technological Standards: As Amazon is a tech-forward company, ensure that suppliers are compatible in terms of IT systems, automation, and other technological aspects. Amazon could try to evaluate their “suppliers” according to the 5 Ps of procurement (Van Weele & Rozemeijer, 2022). Since we do not consider Amazon to be a traditional manufacturing company, their suppliers are not considered traditional suppliers either. Some aspects of supplier assessment and evaluation are not really applicable to Amazon’s suppliers, such as price level. Since Amazon’s real service to their “suppliers” is handling their logistics for them, with transportation, storing, picking, and handling returns, the suppliers’ prices are not that interesting. Somethings that might be more interesting for Amazon is evaluating their “suppliers” based on their process, people, and purpose. The assessment on the process level could be used for assessing their suppliers’ ability to get their products to Amazon’s fulfilment centres, as well as making sure that their suppliers’ products are sustainably sourced, if that is something they want to promote. People level might interest Amazon, if they are trying to expand their own supply of Amazon brand products. In that case, further cooperation and even partnerships with certain suppliers might be beneficial. Purpose level is probably the biggest one among these, as current or future suppliers to Amazon might be interested in expanding even more. If Amazons’ suppliers expand, and they are happy with Amazon’s fulfilment centres, more business will be coming to Amazon in the future, they might even develop mutually beneficial business strategies or other long-term commitments. Further evaluation could be done, as suggested in the course literature. That is, by collecting subjective perceptions of suppliers, but in a structured way. People working with certain suppliers could be asked to fill out questionnaires, regarding factors Amazon deems to be important to them. Even though Amazon only handles the logistics for their third-party suppliers, it is still important to maintain a certain level of quality and reliability. Therefore, suppliers need to be evaluated based on their quality of the product, such that it is consistent with its description. This is especially important for consumables, where safety is paramount. Since Amazon wants to create the best service available for customers, reliability is extremely important. To implement their 2-day deliveries, Amazon needs to ensure that their suppliers are able keep up with manufacturing as demand changes. Although it is not necessary to ensure this for every single supplier, it would benefit their brand if this were done on a product family level, so that every kind of product is always readily available on the website. Amazon is also able to help develop their suppliers through the power of analytics. By providing sales information and inventory cost metrics, Amazon can help their suppliers improve their manufacturing schedules, inventory management, marketing campaigns etc. Since Amazon is the world’s largest online retailer, the general feeling is that the company dictates the pace and rules and got a bit of a leverage over its suppliers. This situation, by speculation, Amazon could jump to a different supplier whenever it suits them, due to their leverage. Suppliers must play by Amazons rules. Therefore, in the future for Amazon could be to “help” their key suppliers and improve their business relationships by sharing their visions, ideas and customer data so the supplier gets a better chance to adapt in the future. But it can seem a bit farfetched. References Amazon. (2023, 10 11). Amazon. Retrieved from Amazon: https://sustainability.aboutamazon.com/human-rights/supplychain?workerCount=true&engagementProgram=true&productCategory=true#supply-chainpartnerships Van Weele, A. J., & Rozemeijer, F. (2022). Procurement and supply chain management. Andover, Hampshire: Cengage Learning EMEA.
