Challenges in Supply Chain Management for Amazon

This literature focuses on the challenges faced by Amazon in supply chain management and provides recommendations to mitigate these challenges and improve efficiency.

Running head: STRATEGIC SUPPLY CHAIN MANAGEMENT
ASSIGNMENT 2: STRATEGIC SUPPLY CHAIN
MANAGEMENT
[Amazon]
Name of the student:
Name of the university:
Student’s ID:

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Executive Summary
The primary focus of this shred of literature is to determine a few prominent challenges
pertaining to supply chain management for multiple businesses in 2019 along with its
perspectives and implications. The chosen organisation is the American multinational company
Amazon whose current supply chain practices have been briefly mentioned from which the study
was turned to identifying the key intricacies and business challenges most commonly
encountered in supply chain management activities. The very purpose of this paper is to acquire
a thorough comprehension of the key challenges and by using the appropriate academic theories,
a wide variety of recommendations are suggested to help Amazon adopt practices that can
mitigate the business issues and improves the organisational efficiencies to function better in the
near future. It impeccably identifies areas wherein the Amazon management needs to focus all
their attention.

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Table of Contents
Introduction......................................................................................................................................3
Supply chain challenges..................................................................................................................3
1. Supply chain disruption...............................................................................................................4
The rationale for the importance of supply chain related disruptions.........................................4
The implication of supply chain-based disruption on Amazon...................................................4
Present and future impact............................................................................................................5
Probable recommendations..........................................................................................................5
2. Cost Control.................................................................................................................................6
Rationale......................................................................................................................................6
The implication of this challenge on Amazon.............................................................................6
Present and future impact............................................................................................................7
Probable recommendations..........................................................................................................7
3. Planning and appropriate risk management.................................................................................8
Rationale......................................................................................................................................8
The implication of this challenge on Amazon.............................................................................8
Present and future impact............................................................................................................9
Probable recommendations..........................................................................................................9
4. Shifting priorities.........................................................................................................................9
Rationale....................................................................................................................................10
The implication of the same on Amazon...................................................................................10
Present and future impacts.........................................................................................................10
Probable recommendations........................................................................................................10
5. Sustainability.............................................................................................................................11
Rationale....................................................................................................................................11

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Implications of the same on Amazon........................................................................................11
Present and future impacts.........................................................................................................12
Probable recommendations........................................................................................................12
Conclusion.....................................................................................................................................12
Reference List................................................................................................................................14

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Introduction
In general, supply chain management commonly abbreviated as SCM corresponds to the wide-
ranging activities needed for the proper planning, regulation and above all executing the smooth
flow of a valued product or service (Markman & Krause, 2016). Such a process chiefly
comprises of acquiring the essential raw materials, manufacturing and the final distribution to the
prospective customers in the most cost-effective manner possible. Without a powerful and
vigorous SCM, a business finds difficulties to categorically fulfil its’ market demands (Stevens
& Johnson, 2016). As discussed in the previous assessment the varied SCM practices have been
elaborately outlined for the eminent company Amazon. A detailed overview of the existing SCM
practices in Amazon was narrated. Following the same, the prime purpose of this current
assignment is, therefore, to illustrate the most significant supply chain intricacies and challenges
for business units in 2019 along with their perspectives. In addition, this paper will explain the
significances of the same and recommend some suggestions or appropriate solutions to
ameliorate the efficiency of the supply chain operations in Amazon and maintain sustainability
over the decade.
Key Supply chain challenges
For any small, medium or correspondingly large-sized organisational unit, Amazon in this
regard, robust SCM has become mandatory for their success and more importantly customer
satisfaction (Durach, Kembro & Wieland, 2017). SCM operations have subsequently emerged as
a salient power having the potential to remarkably boost consumer-oriented services and
network, minimize operating budgets and above all refine the financial architecture of the unit.
As mentioned previously, the varied SCM practices in Amazon are:
o Forecasting.
o Lean management.
o Outsourcing.
o Six-sigma.
o Distribution system.
o Purchasing.

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o Agile management.
o Inventory management.
With the eventual passage of time, SCM operations are slowly becoming more prominent and
global. This subsequently increases the marginal errors, supply chain distortion and also the
overall financial impact (Russellreynolds.com, 2019). For instance, multiple companies were
categorically hit by tremendous supply chain-oriented disruptions over time while many others
lack complete visibility of their SCM disruption levels. The key challenges pertaining to the
SCM practices are as follows:
1. Supply chain disruption
This refers to the unforeseen massive production breakdowns or distribution nodes consisting of
a supply chain. This is an intricate challenge as encountered by many businesses that potentially
has a huge impact on organisational performance and their net productivity (Scheibe &
Blackhurst, 2018). Additionally, it causes immediate economic impact which is prolonged and
takes considerable time to completely turn around. Such underlying hefty risks effectively
require management assistance. Such disruptions can steeply minimize the shareholder value as
well (Trkman, Oliveira & McCormack, 2016).
The rationale for the importance of supply chain related disruptions
For any business, notable SCM based disruptions reflect delicate SCM practices which, in turn,
can result in poor productivity, aggravated customer discontent and annoyance and rising costs.
Therefore, inculcating stern SCM policies strongly aid to eradicate such negative affairs.
The implication of supply chain-based disruption on Amazon
Amazon categorically continues to deliver their proficient services everywhere thereby attaining
fame in a very short duration (Amazon.com, 2019). But there are a few notable instances
wherein Amazon has also suffered the minor brunt of supply chain-related disruptions; although
the intensity is not too severe. Infrequently, Amazon’s encounters interruptions pertaining to its’
steady flow of essential raw materials from the external environment (Amazon.com, 2019). Their
existing management policies are able to mitigate these issues yet they face vital intricacies
during the implication of the same. Furthermore, their online purchasing practices have

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reportedly failed to make the money expected from them which has significantly limited their
trade fares and their unit still struggles to uniformly establish their presence (Imd.org, 2019).
This has subsequently destabilized the pricing model of the subsidiary Amazon fresh in the US.
This depicts the existence of certain old-fashioned and primitive disruption controlling strategies
that Amazon should immediately modify to experience better efficiencies in the near future.
Present and future impact
The destabilized pricing model impacting the economic architecture corresponds to the present
impact. The probable future impact might be pertaining to lowering the shareholders’ values and
poor productivity.
Probable recommendations
Upon encountering any unanticipated disruption, the best probable way that Amazon could adapt
to help them control the after-effects of such disruptions is taking precautions and be prepared
for such unforeseen mishaps. Amazon must coherently undertake an organisational impact
analysis that will assist their business to remain consistently prepared to address the rampant
impacts. This analysis will solely identify Amazon’s core processes and successively determines
how their key SCM elements might get affected by sudden interruptions (Yu et al., 2016). Since
most disruptions lead to financial impacts, it is highly solicited that the proficient Amazon
management implements necessary measures to tackle the losses. This analysis will also allow
Amazon to critically measure the impact of such disruptions on the organisation’s financial
management. Amazon should also respond to challenges like stagnancy in the steady supply of
essential raw materials opening varied channels of communication. Having an impeccable
knowledge of the unit’s supply chain elements will enormously help Amazon to plan ahead and
accurately respond during disruptions. A well-defined simulation model system will enable
Amazon to formulate a constructive SCM with varied inputs to assess different simulation
outcomes and also aid to analyse and make important prerequisites for any upcoming
breakdown. In addition, Amazon can also ensure its’ customer satisfaction by not allowing them
to closely notice even a minor setback in their supply chain. But in case of any such situations,
Amazon must readily offer their valued customers' payment compensations so that they still
bestow their faith on Amazon’s services. Lastly, for any unaccounted operational error, Amazon
must inculcate a vulnerable and robust audit and ensure that its emergency plan is properly

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updated. Such activity will strongly help them survive any future business disruption pertaining
to the supply chain.
2. Cost Control
The second most critical supply chain-oriented challenge that might exert its magnanimous
impact on the steady functioning of business both currently and in the near future is the
conventional practice of optimizing a unit’s global operations (Kache & Seuring, 2017). In
general, for any smooth operating business venture, a steady and meticulous analysis is solicited
for informed location-oriented vital decisions. The constant increase in labour costs has
subsequently enhanced a deep focus pertaining to the value-generating determinants that
reportedly go even beyond the labour costs. Furthermore, an increase in the emerging market
consumptions has significantly altered every business’s global footprint (Soni et al., 2019). The
eventual rising of energy costs, huge count of global customers, novel and advanced
technologies, newly formulated regulations and increase in commodity prices clearly signify that
a company’s operating costs are coherently under humungous pressure (Gold, Trautrims &
Trodd, 2015).
Rationale
Cost control is of utmost significance to grow and more importantly maintain a company’s
accountable profitability. It also aims to significantly achieve neutral design based expenditure
for wide-ranging business essentials. A common method pertaining to cost control is service
outsourcing.
The implication of this challenge on Amazon
Over the years, Amazon has been categorically outsourcing some of their valued services related
to its supply chain as a cost-lowering measure with the sole intent of controlling the cost so that
revenues can be increased. They have been impeccably following the “strategic choice theory”,
by which they have strategically administered in their infrastructure but face certain challenges
due to its limitation in appropriate business implications. In this regard, it is significant to
mention that their cost controlling measure has significantly disappointed multiple sellers owing
to disappointing out-sourced client services. Eventually, their outsourcing initiatives in cost
controlling have notably observed in various fields as well (Hasan, Hossain & Khan, 2015). With

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some areas of success, their outsourcing services need immediate modification, especially where
financial burdens are observed. Although Amazon’s SCM network is so designed that has the
potentiality to minimize supply chain related costs, they must primarily enhance their SCM
visibility to obtain complete risk-free supply chain services. Amazon can categorically do that by
embracing better technological elements in their existing SCM networks to upgrade their
productivity, profitability by generating much better revenues in the near future.
Present and future impact
As mentioned previously, the wide-ranging challenges and disappointments that Amazon has
experienced with its sellers pertaining to customer service-oriented outsourcing have
significantly ignited the very necessity to alter the prevailing SCM network of Amazon.
However, in the times ahead, if the internal strategic architecture of Amazon continues their
primitive operations, there will be consistently weak revenue generation of the company. Also, if
appropriate budgeting is left unnoticed in Amazon, increment in profits will be remarkably less.
So if Amazon’s expenses continuously remain much higher than what they have initially
planned, then eventually their revenue generation will be stagnant. Therefore, Amazon
management should take coherent actions to get this eradicated from their core system.
Probable recommendations
The issues discussed in the above section facilitate a few salient recommendations to refine the
effectiveness and attain sustainability in the near future. Mere cost control measure alone will
never provide adequate positive consequence in Amazon’s supply chain strategy. The Amazon
management should put all their diligent efforts to ameliorate the overall performance rather than
furnishing just a single measure to mitigate cost-oriented intricacies. Their sole objective needs
to exclusively be customer satisfaction and therefore their SCM networks need occasional re-
designing to obtain better customer satisfaction. In addition, outsourcing often follows high
levels of impenetrable risk determinants (Choi, Wallace & Wang, 2016). In order to lower
organisational discrepancies, Amazon must inculcate better integration management policies and
accomplish a high level of visibility of their core SCM policies and furnish alterations wherever
needed.

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3. Planning and appropriate risk management
In general, even the best and meticulously planned business operation can experience certain
challenges pertaining to their SCM network. One of these corresponds to constructive planning
and appropriate risk management. All potential businesses can use efficient risk planning
supply chain strategies to carefully identify a plethora of problems that can interrupt the smooth
functioning of the project. Furthermore, a diligent risk management analysis aid in taking a wide
variety of preventive measures to avoid its occurrence in the business dynamic (Cagliano,
Grimaldi & Rafele, 2015). In addition, the continuous market changes like launching of varied
new products, global sourcing, emerging customer demand, availability of credits, several social
agendas coherently spring up wide-ranging issues of enormous magnitude. It is also quite crucial
to mention here that such inevitable variations can originate nearly from any viable direction
(Berner & Flage, 2017).
Rationale
To state, the very importance of effective planning and appropriate risk management certain
adherent aspects are considered. Any organisation must invariably prepare for a wide variety of
unexpected vents that can significantly cost their respective business and financial architectures
and can also result in the permanent closure of the particular business. However, with a well-
defined and above all comprehensive planning and risk management, one can progressively
minimize risk occurrences prior to their exhibition (Bromiley et al., 2015). Therefore, a
constructive risk management policy can help a business unit save money and thereafter protect
its’ future operations. Lastly, it can also secure the internal business framework by lowering legal
liabilities and enhancing operational stabilities. Amazon chiefly follows the “agile” SCM model
due to the continuous unpredictable demands of its customers.
The implication of this challenge on Amazon
Despite being well-equipped with proper planning networks, there had been plenty of
inaccuracies in Amazon inventories due to their occasionally fragile risk management strategies
(Amazon.in, 2019). No customer will purchase out-of-stock Amazon products coming due to
weak SCM practices. The major mistakes constitute the delicate risk management schemes that
lack perspectives. Furthermore, certain process related inefficiencies making the risk
management network adequately functional (Ecommercetips.org, 2019). Also, sometimes over-

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ordering exerts tremendous burden costing Amazon hefty storage fees which they could have
progressively utilized elsewhere. To assure agility in Amazon’s SCM, the management must
focus all their attention to develop the potential for having excess capacity and configure the
production process with the ability to grasp even the most minor manufacturing batch possible.
Lastly, their infrequent risk management also is evident in Amazon's delay in the delivery
process.
Present and future impact
Both the present as well its’ future impact could be high inflexibility pertaining to Amazon’s
supply source. Secondly, if proper implantation does not happen, there will eventually be poor
yield at Amazon due to infrastructure breakdown or inaccurate forecasting owing to inefficient
risk management tactics.
Probable recommendations
Primarily, with the very intent of staying as proficient as possible, Amazon, needs to organize
periodic assessments and certain reconfigurations in the present SCM strategies. The company’s
underlying risk determinants must be categorically quantified to overcome several probable
supply chain based disruptions. Such planning does not necessarily require being highly
expensive. A uniform commitment must originate from every level of Amazon. Secondly, the
company must possess sufficient tools allocated to complete a customer-oriented service. Also,
repeated ongoing training and risk management monitoring must be inculcated to obtain the
much-desired outcomes.
4. Shifting priorities
In general, there might be certain varying legislation which shifts organisational priorities
drastically pushing a particular aspect back while bringing another area forward (Hanieh, 2015).
The most prominent resource planning oriented issues including competition for essential
resources, changing risks, scope creeps and many other adjoining determinants lead to shifting
priorities. The common aspects pertaining to the same are as follows:
o Ameliorating customer services.
o Reduction of underlying risks.

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o Improving product quality.
o Inventory monitoring.
o Lowering of the operational costs.
o Faster product delivery.
o Reduction of capital.
Rationale
For any business unit like Amazon wherein a plethora of simultaneous activities take place
mostly on a daily basis, categorizing the more important tasks strongly help them attain the
predefined business goals more easily (Hanieh, 2015). Therefore, shifting priorities must
primarily be dealt with utmost effectiveness in the SCM schemes.
The implication of the same on Amazon
Amazon has diverse services that frequently demands priority variations. Their digital services
undergo occasional changes depending on customer preferences and organisational priorities. In
addition, their patents have also undergone occasional shifts and have categorically tracked the
business’s novel business priorities (Cbinsights.com, 2019). This was prominently seen with the
recent customer hit Alexa assistant. Having said this, their strategic experts prioritize what is
more significant to stay ahead of its peer competitors.
Present and future impacts
As evident, Amazon has moderate SCM practices for their shifting priorities that have notably
not generated major turmoil. Yet, this area needs certain improvisations particularly because it is
publicly traded. If not, their market capitalization might encounter tremendous deterioration
instead of swelling.
Probable recommendations
Firstly, it is evident that having concise visibility of the unit's contingency plans following the
flexible SCM model has and will aid Amazon to respond to unwanted changes. It is highly
solicited for Amazon to maintain a clear focus when shifting priorities arrive. Successful delivery
is expected even though there is a minor change in the delivery scope. Secondly, frequent
priority variations might originate from changes in the predefined project scope. It is crucial for
the Amazon management to comprehend the impact such varying priorities might exert.

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Additionally, Amazon should inculcate advanced software with the intent of tracking the project
progression. These will aid in managing the inevitable priority shifts ensuring steady
contribution as proficient management.
5. Sustainability
Increasingly, multiple businesses are solely making a wide category of strategic decisions
circumscribing their corporate sustainability mechanisms. Sustainability is regarded as a very
significant segment of proper SCM schemes in any organisation that effectively requires regular
monitoring and well-defined regulations (Fiorino & Bhan, 2016). The existing sustainability
practices including circular economy, packaging, responsible sourcing and many more has made
them deeply committed towards their consistent investment in sustainability (Fiorino & Bhan,
2016).
Rationale
Constructive sustainability practices are extremely salient for business and communities. It
enormously contributes to the business’s long-term affluence (Wu et al., 2016). The SCM
oriented sustainability principles potentially serve to elongate their core opportunities and also to
marginally reduce the wide array of negative effects their internal operations exert upon the
outside market. Substantial impact on a business’ economic infrastructure also follows the same.
Implications of the same on Amazon
Since the earlier few years, the sustainability practices of Amazon has set varied goals pertaining
to renewable energy, carbon footprinting, chalking smart environmental oriented policies and
simultaneously leveraging their skills in technologies via innovation. This is enhanced profit
enormously (Forbes.com, 2019). They have chiefly adapted the “material requirements
planning” and mediated the implications of sustainability. Additionally, they also aim to develop
better renewable opportunities. But the challenge in here depicts the Amazon’s core
transportation logistics as well as their distribution efficiencies which might minimize the
lifecycle energy utilization of certain customer products. Also, the processes have further been
complicated by individual website selling.

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Present and future impacts
If Amazon embraces more refined sustainable practices, they will automatically possess the
potential to ameliorate their customer buying experiences thereby differentiating it from peer
contemporaries. Despite a framed sustainability practice, not much is known due to the paucity
of information online. Secondly, Amazon investors have reportedly asked for more
sustainability. Therefore, a lack of potent sustainability schemes will aggravate and make the
process even more ambiguous by the sole volume of transactions.
Probable recommendations
In spite of all the SCM efficiencies, Amazon does not narrate much on their sustainability
(Lincoln & Andrew, 2018). There is no proper sustainability report. Also, they are poorly rated
on their initiatives to reduce carbon footprinting. To meticulously address such impenetrable
challenges, the higher panels of Amazon must readily incorporate wider sustainability principles
primarily in their day-to-day organisational decisions. This corresponds to a smart business
attitude that facilitates the prolonged success of Amazon. In addition, Amazon can attain more
sustainable SCM by carefully regulating their financial performance all through, they can steeply
conserve resources, control costs, optimize processes and above all promote more advances
corporate values. However, further investigations pertaining to Amazon’s sustainability practices
are categorically needed to acquire a much better comprehension of this area to propose better
solutions.
Conclusion
To conclude, it can be categorically mentioned that Amazon despite having enormously
proficient supply chain management schemes, do possess areas wherein their SCM policies
require some modifications. Improvement in product effectiveness can gradually come if the
very necessary policies pertain to cost control, risk management, sustainability is put vast
emphasis upon. This piece of literature proposed a few most probable recommendations to
suggest Amazon a few fruitful ways to mitigate the identified issues. In the near future, such
supply change challenges can strongly facilitate business stagnancy. However, this area requires
more elaborative research to reach more effective solutions to minimize Amazon’s issues with its
supplier-relationship management. These areas will subsequently provide the Amazon’s famed

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unit to enable better sustainability practices and ameliorate their network effectiveness and above
all perspective to continue their phenomenal services worldwide.

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