Amazon's Inventory Management: Problems and Recommendations

This report analyses the inventory management problems of Amazon and provides recommendations for improvement. The supply chain management area, warehouse problem and improper product details are the major problems of Amazon's inventory management. The report suggests strategies for managing the supply chain, restocking, and pricing and description of products.

AMAZON’S INVENTORY MANAGEMENT
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Executive summary
In this report, The E-Commerce organisation Amazon is selected for researching on the
problems. This E-Commerce giant is operating their business in the Global market with billions
of customers. But the inventory management of this organisation is failing because of various
issues. The supply chain management area, warehouse problem and improper product details at
the major problems of the inventory management of Amazon. The research is based on the
reason behind this problem and how Amazon can overcome these management problems. For the
three different issues identified in inventory management, various recommendations are made on
depending on the research results.
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Table of Contents
Introduction......................................................................................................................................4
The management problem...............................................................................................................4
Research question............................................................................................................................6
Research design...............................................................................................................................6
The secondary data..........................................................................................................................7
Findings...........................................................................................................................................9
Conclusion & Recommendations....................................................................................................9
References......................................................................................................................................12
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Introduction
In every E-Commerce business, there is some problem related to the management areas. In this
study, the most significant management problem of The E-Commerce giant Amazon will be
analysed to understand the main reason behind this problems. Inventory management of Amazon
will be examined and in this report to provide a proper recommendation for improvement in
future. Adequate business research helps in understanding the business problems and also
provides an appropriate recommendation for overcoming the difficulties. The inventory
management of Amazon is a complicated procedure which needs to properly understood and
managed by the organisation for gaining proper growth and success in the E-commerce market.
The management problem
The inventory management is associated with managing all the products sold by The E-
Commerce site Amazon. Therefore the inventory management of this organisation has to work
properly to provide the customer with the best quality of services. The main and major problem
of Amazon is there for supply chain management procedure (Chaffey, 2015). If the supply chain
of an organisation is not the best, the organisational product quality as well as product
availability both suffer. According to the reports of Amazon, the manufacturers of the products
create a problem which is mainly related to the timing. In addition to that, the relationship
between Amazon and the suppliers are not healthy and the time problem creates resentment.
Therefore the organisational production gets hampered. There is another essential problem
regarding the supply chain is the organisation overlook the suppliers. This is because of
complacency.
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Figure 1: inventory model of Amazon
(Source: Chiu et al. 2014)
The inventory management problem of Amazon also creates a hugely challenging issue for
Amazon (Chiu et al. 2014). The products of the company sometimes are running out of stock
because of the management problem of inventory. Without appropriate supply, the organisation
was not able to sell products to the customers. It is the responsibility of the inventory
management system of Amazon to keep track of the sales velocity. The two main of this
inventory problem is overselling of the product and not properly monitor all of the sales outlets.
The inventory area of an E-Commerce organisation is considered as the most important area
because any problem which may occur in this inventory management problem impact on the
organisational production and reputation (Laudon, 2016). Amazon is one of the important names
in the E-Commerce industry, but their current inventory problems are affecting their sales and
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business which is related to the brand reputation. Incorrect pricing and descriptions can easily
create a problem for the organisation. This is because if a low price will tag on for a product,
then the organisation has to compromise with the profit margin. If there is a high price tag will
be displayed then it generally misses out on the sales of Amazon. Due to the long description
about the product confusion can be created on the customer who will directly affect on the sales
of Amazon (Fan et al. 2016).
Research question
The Research question helps in understanding the areas or specification of research. The
Research questions for this research are:
1. Is Amazon eCommerce having real inventory management problems?
2. How can the organisation Amazon overcome the inventory problems?
3. What is the appropriate way of managing the supply chain management?
4. What strategies can be used by Amazon for increasing the sells by overcoming the
current situation?
Research design
To research on the established research questions, use of appropriate Research Design is
essential. The Research Design includes the different research methodology used and finding the
proper answers for the Research question. In this research, the total research will be done on
secondary data.
Research philosophy- Use of appropriate research philosophy helps in understanding the
research problem for using appropriate theoretical approach for getting the research results (Kim
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and Peterson, 2017). There are a few important research philosophies which are used in
researches. The realism, positivism, interpretivism research philosophy why the philosophical
approach is used to understand the proper research problem. For this research Amazon e-
commerce, the positivism research philosophy is used because of this philosophical approach
help in analysing the social aspects with the help of current issues.
Research approach- There is mainly three type of research approach which includes inductive,
deductive and abductive research approach (Kratochwill, 2015). In this research, the deductive
research approach is used because of this approach help in analysing data with the help of
available theories.
Data collection- for a research Data Collection is considered as one of the major areas because
the collected data is used for achieving the results of the Research question. For this research,
only secondary data has gathered. For that various secondary resources are used; those are
books, journals, online sources, website, ebooks, etc. (Lewis, 2015).
Data analysis- there are two type of data analysis process depending on which type of data is
collected. One is known as quantitative data, and the other one is qualitative data. The
quantitative data is mainly associated with numeric values of statistics which is analysed by
quantitative data analysis. However, the qualitative data are mainly exploratory, and the
qualitative data analysis process analyses it.
The secondary data
In this research, the secondary data is collected related to the inventory management of Amazon
e-commerce. Most of the information collected from journals, books and websites. According to
the data, Amazon has an international market with international customers (Turban et al. 2017).
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This large organisation has a huge inventory management process which is lacking because of
various reasons. This organisation is selling the products in more than 60 countries, and this
organisation uses the Amazon to buyer sale approach. In addition to that Amazon, image E-
Commerce operates seven different websites for supporting their business operation globally.
The organisation offers more than 20 million items to their customers. The business model is a
multi-tier inventory model which is quite complicated. For managing the supply chain or
inventory management, the organisation has some specific strategies. Those include proper
maintenance of 20 million items of inventory (Yu et al. 2016). Developing the shipment process
for once in a week developing understanding about the customers delivery needs proper
coordination with the wholesale suppliers encouraging the independent producers, providing two
day delivery for most of the offered items and developing a proper query and tracking system of
the shipment for the customers are the other strategies of Amazon. In addition to that, the
organisation also focuses on using Technology for proper maintenance of inventory. For
example, the data warehouse of Amazon is made out of 4 CPUs per node, 28 Hewlett packward
service and Oracle 9i database software (Fan et al. 2016). In addition to that, the organisation
also has third-party seller queries and millions of backend operations to manage proper inventory
process by using Technology (Chaffey, 2015).
In addition to that the inventory management implementation is mainly aimed at the customer
satisfaction, hassle-free operations and efficiency in cost and time. The organisation also focuses
on reduction in the size of inventory for managing the warehouse more efficiently.
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Findings
From the secondary data collected during the research, it has been understood that Amazon has
issued some customers all over the world and their inventory management system is very
stronger. But after this heavy technological usage and inventory management strategies, issues or
challenging situations are occurring in the inventory management process of Amazon. The
problems are not only related to selling millions of item, but all of the identified problems need
proper solution individually (Chiu et al. 2014). The technological tracking system has developed
by Amazon for their customers for keeping track of the products which are purchased. However,
this organisation has to develop their tracking system for the inventory management and
warehouse processes. In addition to that, the supply chain management of this organisation is
very complicated where Amazon has to develop their system to understand the suppliers and
manufacturers for products and information. In addition to that, the proper description about the
product also needs to properly understood from the suppliers for giving the customer proper
information about the products (Laudon, 2016). The Amazon distribution centres need a proper
technical implementation which will help in developing the number of customers. The inventory
management issues are not only creating a problem but also are the major reason behind the
reduction of the profit margin of Amazon.
Conclusion & Recommendations
In light of the above discussion, it can be concluded that the organisation Amazon eCommerce is
currently facing some management problems which are related to the inventory management of
this organisation. The organisation already have strong strategies for maintaining the inventory
and warehouse. This also includes proper technological use. After all of this strategies and
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technologies, the organisation is facing problem regarding the inventory management. In this
research, the three different problems have identified one is related to the supply chain
management, the other is running out of stock and finally the incorrect descriptions and pricing.
Some managing the problem of the supply chain the organisation has to work with the suppliers
with transparency. It is essential to understand that if any supply you are not properly describing
the production and other processes of manufacture then there is a huge rest of understanding the
products and selling them to the customers. The organisation has to focus on the manufacturing
process and also provide the suppliers justified time for delivering the products. Inefficiencies in
this procedure also need to find out for minimising the negative effect of supply chain
management. The inefficiencies of supply chain management also effect on the stock of the
product of Amazon. Amazon is an E-Commerce organisation of few negative comments can
easily effect on the reputation and brand equity of this organisation.
Running out of stock is one of the main problems of Amazon regarding the inventory
management. The process of restocking takes a lot of time, and therefore the stage of out of stock
affect the image of Amazon. It is also the reason behind that decrease in sales, and the number of
unhappy customers also increases. Therefore the organisation Amazon always has to work on the
stock monitoring process and order to restocking at the time of low stock. Ordering for
restocking the items has to be quick enough at the stage of low stock.
Incorrect pricing and description impact on the profit of the organisation and therefore the
organisation has to manage the complete description and pricing under one dashboard. The
current advanced technology has multiple tools which help Organisation in tracking down proper
description and pricing of the product. The process of doing it manually is also effective because
of the chances of incorrect pricing and description decrease. But after the manual process sharing
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the information in the Google document will help the organisation in repeating the process for
future uses.
The above recommendation on three different inventory problem of Amazon e-Commerce will
assist the organisation for future inventory management process.
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References
Chaffey, D., 2015. Digital business and e-commerce management. Pearson Education Limited.
Chiu, C.M., Wang, E.T., Fang, Y.H. and Huang, H.Y., 2014. Understanding customers' repeat
purchase intentions in B2C e‐commerce: the roles of practical value, hedonic Laudon, K.C. and
Laudon, J.P., 2016. Management information system. Pearson Education India.value and
perceived risk. Information Systems Journal, 24(1), pp.85-114.
Fan, Y., Ju, J. and Xiao, M., 2016. Reputation premium and reputation management: Evidence
from the largest e-commerce platform in China. International Journal of Industrial
Organization, 46(1), pp.63-76.
Kim, Y. and Peterson, R.A., 2017. A Meta-analysis of Online Trust Relationships in E-
commerce. Journal of Interactive Marketing, 38(3), pp.44-54.
Kratochwill, T.R., 2015. Single-case research design and analysis: An overview. In Single-Case
Research Design and Analysis (Psychology Revivals) (pp. 13-26). Routledge.
Lewis, S., 2015. Qualitative inquiry and research design: Choosing among five
approaches. Health promotion practice, 16(4), pp.473-475.
Turban, E., Outland, J., King, D., Lee, J.K., Liang, T.P. and Turban, D.C., 2017. Electronic
commerce 2018: a managerial and social networks perspective. Springer.
Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2016. E-commerce logistics in supply chain
management: Practice perspective. Procedia Cirp, 52(1), pp.179-185.
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