Why Amazon is King in Supply Chain Management

What keeps Amazon on top is their commitment to change and growth. They’ve pioneered the face of retail by using bold strategies in supply chain and deploying innovative technologies. As a result, they’ve received a cult following because of their quick and efficient supply chain management. With Amazon sitting at the forefront, its competition is struggling to keep up. Here are a few ways that Amazon is changing the world of supply chain management.

 

Rapid Growth

Amazon began in 1994, making the company 24 years old in 2018. At 20 years, it became the fastest company to reach a sales revenue of $100 billion. Since its birth, the company has seen a steady growth of 20% each year. If they’re able to continue this trend, they’ll reach the revenue goal of $1 trillion in less than ten years. Much of this growth is thanks to its highly efficient supply chain and abilities to deliver products quicker than any other player in the industry.

 

Strategy

One of the most strategic plays the online retailer beast has made is the introduction of Amazon Prime service. Two-day shipping is a guarantee to members who pay a one-time yearly membership fee. Once the competitors were able to catch up and offer their own two-day shipping service, Amazon brought a new strategy to the table: Amazon Prime Now, a service that guarantees two-hour delivery to customers in select cities. Staying ahead keeps them at the top.

 

Practices

There are a few practices that brought Amazon to the top and are what continues to keep them there. First, they know when it’s right to outsource. Their supply chain relies heavily on outsourcing their inventory management. With the hundreds of thousands of products they offer, it wouldn’t make sense to keep everything in their own warehouses. Over 80% of their sales come from third-party sellers.

 

Amazon is well known for their multiple shipping options. As noted above, they offer the fastest delivery to their customers in the industry, but they also offer options such as first class delivery, one-day delivery, and free super saver delivery.

 

All of the Amazon warehouses are placed strategically near metropolitan areas. This practice allows for even greater supply chain success and utilizes a push and pull strategy. When deciding where to put their warehouses, Amazon takes a close look at the location, the size of the population, and the number of warehouses they can place.

 

In 2012, Amazon acquired Kiva Systems, rebranded to Amazon Robotics, and allowed for an automated and robotic warehouse solution. The robots can pick out a certain product and package it without the assistance of a human.

 

All of these practices allow for Amazon to keep their supply chain cost at a minimum. With low costs, they’re able to continue implementing new and groundbreaking strategies for the future.

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