Amazon Com Supply Chain Management Case Solution

2. Problem Statement

Amazon had grown and expanded considerably by 2018. The company now sold merchandise and digital content in over 30 categories. These categories ranged from electronics to clothing to books and furniture. The online retailer also supported the streaming and sale of digital music and videos. The company’s growth had allowed it to develop an in-house shelf brand as well. This meant that Amazon old products under its own label as well as stocked and sold products of over two million third-party sellers. The expanded operations, dealings and shipment of a wide variety of products and increased global presence had shown the company shipment costs of more than $21 billion in 2017. The CEO of the company is therefore challenged to determine supply chain capabilities that would allow Amazon to support business growth and evolution, and at the same time, allow the company control over the supply chain and associated costs.

3. Analysis

As one of the leading retailers in the e-commerce industry, Amazon had seen high growth post-2000, with zero competition. The company had continually evolved, and from selling just books, the company had gradually stocked an increasing variety of products from different companies as well as third-party sellers. The company had also started its own brand in-house, where it sold products under the Amazon label. In addition, the company had also recently started to operate grocery stores. With more than 300 million customers across the globe, the company still faced challenges in its supply chain management.

The company had lost $7.2billion in 2016 in shipment and had outbound shipping costs of $16.167 billion. The company, therefore, had a revenue of only $8.976 billion from shipments. The company’s CEO, Bezos, also knew that the company’s shipping volume would grow under the company’s strategy of strengthening its B2B presence in the global marketplace. The b2b segment of the company – Amazon business - had shown high potential for growth and was also strategically planned to be expanded geographically.

The company knew that it would need to modify its supply chain model to be able to access greater control over the supply chain and control costs. The company had long-haul freight trucks, and also a fleet of Boeing 767-300s to manage its prime air logistics service. For marine shipments, Amazon had established a freight forwarding company. The company was increasingly improving its distribution network to smoothen the delivery process and services. 

Amazon’s strategy – to make delivery easy for customers, was continually evolving with respect to the changing needs of the customers, as well as the changing business models of the client companies. As a result, the company continually amended its supply chain – to be able to control costs and serve customers better.

4. Available Alternatives Solutions

Alternative Solution 1: Shipping with Amazon

Shipping with Amazon (SWA) is one of the alternatives available to the company attempting to control its supply chain. The SWA will be expected to serve third-party sellers and businesses that are registered with Amazon – and will ship products directly from the business’s warehouses to customers. The company will control the supply chain largely as all shipment and deliveries will be processed through Amazon. Other shipping companies will be contracted with for last-mile portion of the delivery for places that are out of Amazon’s reach.

This alternative will give the company greater control over the supply chain and will reduce its warehousing costs considerably. The company will resume a new role in a shipment company and will provide services for customers to be able to enjoy purchases directly through online ordering.

However, since the products will not be stocked with Amazon directly, and will, in turn, be available on the retailers' online website, any disparity in the physical collecting and dispatching of the product will cause harm to Amazon’s brand reputation and brand image. In addition, Amazon will need to verify third party sellers, and their stocked items to be able to ensure that customers receive their order son time.