Operations Management of Amazon: Objectives, Customers, and Supply Chain

This report discusses the operational objectives of Amazon, including customer satisfaction, cost, quality, and innovation. It also discusses the customers of the organization, both internal and external, and the supply chain strategy of Amazon. The report highlights the importance of Amazon's supply chain management and how it has influenced the retail industry. The report is relevant for students studying operations management, supply chain management, and retail management.

Running Head: Operations Management
Amazon
Operations Management

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Table of Contents
Introduction.............................................................................................................................................................. 2
Customers of organization.................................................................................................................................. 2
External Customers........................................................................................................................................... 3
Internal Customers............................................................................................................................................ 3
Operational Objectives..................................................................................................................................... 3
Cost...................................................................................................................................................................... 4
Increase in production................................................................................................................................. 4
Quality................................................................................................................................................................ 4
Creativity and innovation........................................................................................................................... 4
Supply chain of Amazon....................................................................................................................................... 5
Supply chain: on the horizon......................................................................................................................... 7
Recommendations.................................................................................................................................................. 8
Conclusion................................................................................................................................................................. 9
References............................................................................................................................................................... 10

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Introduction
Amazon is a behemoth player of online retail industry and along with the online retail
industry; organization has established its presence in various other industries like web
services, cloud storage services, online entertainment, dealing of other merchandise, etc. In
relation with this, organization has marked its effective and leading position in the global
market. Amazon was formed in 1994 and founded by Jeff Bezos in a garage. Initially,
organization was selling books and later on, music CDs, MP3, and other few items were
added in the product offering of the organization. From there, Amazon has acquired an
effective place in the global market with huge product offering. Amazon deals in millions of
products in more than 188 countries across the globe. Along with this, organization has set
up 12 offices in different countries and they also offer international shopping in some
countries (Amazon Inc., 2018a).
Major reason behind organizational success is their leader’s efficiency, unique style of
thinking and effective leadership style. With regards to this, organization along with his
CEO has acquired leading position in the global market. Amazon has marked its presence in
the top four companies across the globe in terms of market value. On the other hand, Jeff
Bezos has acquired an effective place in the top thirty richest men’s list in the globe. Jeff
once dreamt for selling everything on internet and with his clear vision, objectives and
goals, he has lifted his company to the peak position. In terms of market capitalisation,
Amazon has acquired leading position whereas in terms of sales, Amazon stands on the
second position after Alibaba Group. Organizational mission is “to be the earth’s most
customer centric company” and in relation with this, organizational strategies and policies
are designed and framed as per the organizational vision. Amazon reached US$1 trillion
mark in 2018 in terms of the market value and now Amazon has become the second
company to reach to this milestone after Apple (Amazon Inc., 2018b).
This report will focus over determining organizational operational objectives with regards
to the operations of organization. As Amazon is already performing in the worldwide
market, their operational objectives are to expand their operations in other countries

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across the globe along with gaining competitive advantage in order to uplift their market
value and brand image. Apart from this, the next phase of the report will focus over
analysing the effectiveness of organizational products and services in terms of meeting
with the customers’ needs and wants. Organization believes in customer satisfaction and
this objective has been set as the primary operational objective with regards to the
development of unique brand image in the target market.
Customers of organization
Amazon targets all customer segments because they have huge product and service
offering. With wide and huge product offering, organization has been able to set up its
effective brand image amongst their customers across the globe. Apart from this,
organization also believes in customer satisfaction and to satisfy customers’ needs and
wants, organization has set up certain quality checks, benchmarks and several standards
for the objective of maintaining quality of the products which they offer. Maintaining
quality of the products and services is one of the primary duties for every organization as it
acts as the most determinant factor for satisfying customers’ needs along with retaining
them for longer period with the organization and this result in organizational success,
growth and overall development (Slack, Brandon-Jones & Johnston, 2013).
External Customers
The external customer is someone who pays employer through any mode of payment in
order to avail the services or for consuming or for reselling the product in the market. This
type of customers has option to breach the contract of availing the services or stop
purchasing the products and they can take their business to other vendors. Factors which
influence external customer to switch their employer are prices of the commodity or
service, quality, time taken for delivery, behaviour of the employer, etc. (Johnson, 2018).
Internal Customers
Internal customer or internet service providers can anyone within the workplace such as
co-worker, department or distributor who is mainly dependent upon the organizational
functionalities in terms of delivering the products and services to the external customers.

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Generally, internal customers do not have choice to separate themselves from the
organization. For example, if the accounting department does not likes the policies and
standards set up by the top level management, they cannot fire the people in top level
management whereas if top level management will find any glitch in the accounting
department, they could fire the respective person who have made fault (Leblanc, 2018).
Customer service is the major attribute for customer satisfaction, building brand loyalty as
well as for customer retention and in relation with the internal customers, customer
service can only be flourished when all departments of the organization works together,
get agrees on policies and standards framed by the top level management and avoid raising
disputes and conflicts amongst each other (Antoun, et. al., 2016).
As Amazon believes in customer satisfaction and their major concern is to satisfy their
existing and potential customers’ needs, they target both internal as well external
customers in order to enhance their customer base and to fulfil their needs and wants.
With regards to this, organization has also adopted several strategies for customer
engagement and customer retention which are useful for the organization in terms of
attaining desired goals and objectives.
Operational Objectives
Amazon has marked customer satisfaction, retention and their engagement as the main
pillars of organizational success with the objective of attaining sustainable growth and
overall development in the dynamic and competitive business environment. With this
objective, major concern for the organization is to promote and encourage innovation and
creativity amongst the employees. In relation to this, organization provides all required
resources to its employees so that they could think out of the box and generate creative
measures for the organization in order to enhance its position in the global market.
Following are certain operations objectives for Amazon:
Cost
Price is the most determinant factor for Amazon due to intense competitive conditions in
the e-commerce industry. Thus, organization has made cost as their primary operations

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objective and in order to gain this objective, organization has adopted integration of cost
leadership and fair pricing strategy. With regards to these strategies, organization’s vision
is “the lower is the cost of producing goods and services, the lower will be the price of the
products for their customers”. Apart from the highly intensive industries, other industries
also focus on certain variables in order to control the cost and to manage the prices of their
products and services. With regards to this, it is essential for the organization to target new
customer segments along with retaining existing and potential customer segments. In
relation to this, Amazon has invested in adaptation of new technological measures,
equipment and towards innovation and creativity through which cost of production could
be minimised so that final prices of the products could be lower down. This is helpful in
terms of attaining competitive advantage and to enhance brand image of the organization
amongst the target market and customers (Mihalik, et. al., 2017).
Increase in production
This is another crucial operation objective of Amazon and it is also linked with the
reduction in the cost of production. The lower will be the cost of production; the higher will
be the production of the organization. For example, if four units are produced with two
unit’s waste and if that waste could be managed, two waste units could be converted into
one finished good, thus, productivity increases. In terms of Amazon’s functionalities, they
seek for more number of sellers who could provide variety of products and services at their
platforms to organizational target audience. This is the reason, Amazon is known as
everyone’s store because they company offers everything for every customer segment
(Smith, Rupp & Offodile, 2017).
Quality
This is one of the major concerns for Amazon because it is directly linked with the
organizational vision of being the “earth’s most customer centric company”. With regards
to this, organization mainly focuses on quality of the products sold at their website in order
to provide best and valuable to their customers for which they have made payment. Along
with delivering qualitative products, organization has also adopted customer centric
approaches with the objective of resolving customers’ queries. With regards to these

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measures, Amazon has been able to develop its brand image and brand loyalty amongst
their customer segments. These strategies have also become the major success factor for
the organization to uplift customer satisfaction and to maintain leading position in the
global market (Tyagi, et. al., 2015).
Creativity and innovation
Creativity and innovation are also one of the major operation objectives for Amazon as
these are useful for retaining existing customers’ interest within the organization along
with attracting new customer segments. This is also essential in terms of building
appropriate brand image and develops curiosity amongst the customers with regards to
the innovative products and services introduced by the organization. Recently, Amazon has
introduced Alexa as virtual assistant in terms of smart speakers for their users. Alexa act as
an artificial virtual assistant and it has the capability of performing tasks like making to-do-
list, playing music from different platforms, giving weather, sports and traffic updates, and
various other tasks that a human personal assistant performs. With regards to this
innovation, organisation has marked its presence in the virtual assistant industry and in
this industry; their major competitors are Google, Apple, and Microsoft. Amongst their
competitors, Alexa is leading the market because its capability and functionality is much
higher than the other companies’ devices (Plouffe, et. al., 2016).
Apart from this, organization is now planning to expand its offline market share by opening
Amazon Go stores. The first Amazon Go store was established in 2016 and in 2018, Go
stores are situated at 4 locations. These stores are smart and full of technology which
provides unique experience to its customers. With regards to this, organization
continuously seeks for innovation and creativity so that they could retain customer
engagement within the organization and its products. This is also essential in terms of
making separate image from its competitors which results in attainment of competitive
advantage (Grace, King & Lo Iacono, 2017).

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Supply chain of Amazon
Supply chain management of Amazon is one of the strong aspect through which they would
have been able to satisfy their customers’ needs and wants. Various retailers and big
enterprises in retail industry follow and adheres Amazon’s supply chain strategy and this
shows the effectiveness of their supply chain management (Khalil, 2015).
Figure 1: Supply chain of Amazon.
Amazon’s supply chain is meant to be the most effective strategy in this era, thus, various
small, medium as well as large scale companies follows Amazon’s supply chain strategy in

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order to improve their functionalities (Yu, et. al., 2016). As per the above figure, Amazon’s
supply chain strategy includes:
 Warehousing
 Delivery
 Technology
 Manufacturing
Warehousing: This strategy is known as the most determinant factor for organizational
success as this strategy ensures that products and services of the organization are easily
accessible from anywhere by anyone across the globe. Company has established their
warehouses in all metro cities and in the population hubs and there supply of the products
is kept smooth always in order to meet with the customers’ demands (Khalid, et. al., 2015).
Amazon’s warehouses are known as fulfilment centres and organization has also
established small warehouses in small towns, areas and cities to ensure that every
customer from anywhere could get the products and services on instant basis. The major
reason behind setting up large number of warehouses is meeting with customers’ demands
on instant basis. All these warehouses are optimised internally with five unique storage
areas with an effective organization strategy operated by team members and robots that
pick and drops the products from the storage area and then these are moved towards
packing and delivery sections (Barrett, et. al., 2017).
Delivery: Amazon has introduced numerous delivery options which could be selected by
the customers to get the product. Their delivery option has created vast difference between
their delivery services and other retailers’ delivery services (Ross, 2016). One day, two day,
Prime delivery option is major attractions of delivery section of Amazon. In order to deliver
products on instant basis, organization has adopted numerous strategies which include
usage of people, high-technologies and machinery to deliver the products to the customers
at lightning fast speed. In addition to their delivery network, organization has recently
introduced drone delivery which is still in beta testing and it will be soon launched with the
objective to deliver the products to the customers’ doorstep within 30 minutes. Initially,

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drone delivery will be introduced in the big cities and later on, it will be expanded to other
markets (Xing, et. al., 2015).
Technology: Supply chain management of Amazon is highly influenced with technology
because company utilises number of automation systems, robots, robotic solutions and
several other technologies for the motive of executing both pick and pack the orders as well
as for stacking and storing inventory. Measures used by the organization have not only
helped to enhance efficiency and enhancing delivery speeds but it has also helped the
organization to reduce their costs in relation with staffing and warehouse (Wisner, Tan &
Leong, 2014). With regards to this, organization could have been able to fulfil the needs of
logistics and supply chain. Amazon Prime Air services are also linked with the technological
measures. Under this project, drones will be introduced in the delivery system of the
organization and this will help the organization to enhance its performance along with
retaining its acquired position in the global markets (Manolakis, Golowich & DiPietro,
2014).
Manufacturing: Amazon act as an agent between sellers and buyers as they provide an
international platform to the sellers to sell their products and in return, organization
charges certain percentage of commission as fees for providing such as a huge platform to
execute their business functionalities. But company does not charges any fees or
commission from its buyers except the delivery charges and that too till certain amount
and after that amount, buyers do not needs to pay any extra amount for delivery. In
relation to this, organization has learned that third party products can be produced at
much cheaper rates and that too with high quality. Along with this, own production will
also generate positive outcomes such as increased profitability. Now, organization has
started manufacturing products in their own manufacturing units and this has helped the
organization to uplift their profitability along with developing effective brand image in the
global market. This allows Amazon to own the whole lifecycle of its products – from
creation to marketing to storage to shipment (Brusco, 2015).

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Supply chain: on the horizon
As Amazon has one of the most effective and well-tuned supply chain strategies across the
globe, still, company tries to enhance the performance of their supply chain regularly, thus,
it seems never to be stagnant. With regards to this, organization has started constructing
their second headquarter and their recent partnership with Whole Foods is also seems to
be effective which could easily change the whole food delivery game. These changes are
mainly implemented for the objective of fulfilling customers’ needs and wants. This is also
essential for meeting with the latest business trends and changing customers’ trends. Apart
from this, organization also focus on enhancing its market image by introducing new
products and services along with the objective of building appropriate brand image
amongst the target audience. This results in enhancing brand value, customer loyalty and in
terms of attaining competitive advantage along with generating opportunities for attaining
operation objectives (Christopher, 2016).
Recommendations
With regards to the operations of Amazon, it has been evaluated that Amazon is one of the
behemoth player of e-commerce industry with plethora of products and services to meet
with various customer segments’ needs. Amazon has certain operation objectives in
relation with improving organizational performance and for building brand loyalty
amongst the customers. These objectives are reducing cost of production, improving
productivity, maintaining the level of quality by setting appropriate standard, launching
new products and services randomly to retain its acquired market share in the global
market and many more. In consideration to these objectives, organization is totally
dependent upon their supply chain strategies and as their supply chain strategies are
considered as the well-tuned strategies in the globe but still, it is required for the
organization to make a back-up or alternative plan in order to deal with the dynamic
business conditions as well as for meeting desired goals and objectives. Thus, it is
recommended to the organization to set up more manufacturing units through which
products and services could be offered to its target audience at cheaper rates and that too
with high quality in comparison to the third party sellers. Apart from this, organisation

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could also move towards offline market as online industry is being saturated due to various
numbers of companies in the industry. Amazon has already entered into offline market
with a unique idea which is influenced with automation and robotics. In addition to this,
organization should expand its offline stores in various parts of the globe in order to
increase organizational size, its market share and the market value in the global market.

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Conclusion
From the aforesaid information, it can be concluded that every organization should focus
and trust over their functionalities in order to attain desired goals and objectives. It is
necessary for companies to ensure their investors, shareholders and every stakeholder that
their strategies are unique as well as effective enough through which operation objectives
could easily be attained. In this report, Amazon’s functionalities have been discussed along
with describing their operation objectives in order to match up with the standards in terms
of quality, productivity, time, etc. This report has also concluded type of customers targeted
by Amazon followed by describing supply chain strategies of the organization. Amazon’s
supply chain strategies are considered as the most effective strategies in the global market,
still, Jeff Bezos, CEO of the organization regularly tries to update their strategies as per the
latest business trends. The last section of this report has described recommendations for
filling gap between their strategies and their operation objectives.

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