Report on Logistics and Supply Chain Management Strategies at Amazon

This report analyzes the logistics and supply chain management strategies employed by Amazon in the USA. It highlights the importance and characteristics of an effective supply chain, including inventory optimization, flexibility, leadership, and sustainability. The report also discusses issues in demand management and customer service, focusing on supply-demand misalignment and its impact on customer loyalty and financial performance. Furthermore, it examines order fulfillment, order management functions, and the need for and costs of inventory, including fixed order quantity, fixed order interval, and the application of the economic order quantity (EOQ) model. Finally, the report delves into basic warehousing decisions at Amazon, emphasizing the use of robots, inventory stocking strategies, and communication with customers to improve service efficiency and meet order demands effectively. The report concludes by underscoring the importance of proper inventory management and warehouse strategies for ensuring customer satisfaction and efficient operations.

Running head: LOGISTICS
Logistics
Name of student
Name of University
Author note

1
LOGISTICS
Table of Contents
Introduction......................................................................................................................................3
Supply chain management...............................................................................................................3
Characteristics of an effective supply chain....................................................................................4
Analysis of issues in demand management and customer service..................................................5
Discussion of order fulfillment, order management and customer service.....................................5
Need for and costs of inventory.......................................................................................................6
Fixed order quantity, fixed order interval, and economic order quantity....................................6
Application of economic order quantity model...........................................................................7
Basic warehousing decisions...........................................................................................................8
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

2
LOGISTICS
Introduction
The report is prepared to analyse the different concepts of logistics and supply chain
management considering the business organisation named Amazon in United States of America.
The topic will highlight the importance of supply chain management and even the various
features of an effective supply chain. Managing the supply chains and logistics will allow the
company to fulfill the demands and expectations of the customers and improve the customers’
services efficiency too. The supply chain management and logistics will also illustrate the ways
of fulfilling orders, manage those and analyzing the needs for and costs of inventories. Lastly,
the economic order quantity model will be analysed and how it can facilitate the decisions made
during the warehousing activities at Amazon (Amazon.com, 2018).
Supply chain management
Managing the flow of goods and services along with storage and utilization of raw
materials, resources, inventories and finished goods starting from the beginning of production to
the consumption by consumers means the supply chain management. The management of supply
chain also includes gaining proper information about the finance availability and management of
materials and ensuring proper coordination of work. The most important objective of the supply
chain management system is to decrease the inventories and costs of managing those with focus
on availability of products and services whenever needed. The supply chain management along
with the use of various software systems linked with the web-based interfaces could also
improve the customers’ services and meet the demands and expectations of the customers with
convenience (Dekker et al., 2013). Amazon, being one of the leading online shopping companies

3
LOGISTICS
in US, has improved the retail business by using effective SCM strategies and deploying the
innovative technologies.
Characteristics of an effective supply chain
The most characteristics of an effective supply chain are as follows:
Optimization of inventories – The inventory optimization is facilitated by making appropriate
guesses through forecasting and it requires proper identification and evaluation of changes in the
various market segments. This would affect the manufacturing, production and shipping
activities during the supply chain management positively (Stadtler, 2015).
Enabling flexibility – Supply chain management should be flexible to cope up with the
requirements in the emerging markets and fulfill the orders consistently. It could improve
Amazon’s supply chain and allow the company to adapt to changes, furthermore maintain stable
political conditions and ensure successful logistics operations.
Leadership – Leadership is considered as an important aspect that can bring supply chain
excellence through improvement of customers’ services and making sure that the supply meets
the demands in the market. Strong leadership skills at Amazon could favor strong
communication and build effective teams for achieving the supply chain goals and objectives.
The leader should also focus on supply chain management more than the management of costs
for creating of value and development of strategies to bring competitive advantage (Allen,
Browne & Cherrett, 2012).
Sustainability is another important feature that can fulfill the requirements for managing
good supply chain management system. The renewable sources of energy are dependent upon the

4
LOGISTICS
geographic location related to the various aspects of managing supply chain. The involvement of
US Government could be beneficial for implementing various laws, rules and regulations and
make sure that the sustainable methods are managed by keeping in mind the environmental
concerns.
Analysis of issues in demand management and customer service
There are certain issues regarding the demands of customers, because of which the supply
chain management shall need to make sufficient amounts of materials and resources available.
This would help in meeting the needs and requirements and improve the customers’ services too.
The demand management is dependent on the outbound to customer logistics and inbound to
operations, which can assess the demands of customers in the market as well as generate proper
information to make operating decisions (Forslund, 2012). Supply demand misalignment could
be one of the major issues in demand management, which could hamper the level of trust and
loyalty among the customers, deteriorate the financial condition and make customers cancel
orders too. The inaccurate alignment between the supply and demand could also degrade the
profit margin by not supplying products in enough quantities to meet the demands in the market.
With the increase in production, the products are shipped against the inflated order situation and
sales are booked at high price during launch. With the filling of channel inventories, there would
be immense price competitive, which could even result in cancelation of orders losing customers
and sales decline (R. Huscroft et al., 2013). With the customers’ services issues, it could get
difficult for the customers to get answers or solutions to their queries regarding any products
purchased by them or about any kinds of orders.

5
LOGISTICS
Discussion of order fulfillment, order management and customer service
Traditional forecasting could enable Amazon, US to make early predictions about the
quantity of products that might be consumed. The order fulfillment are essential components of
the collaborative planning along with demand planning and fulfillment of orders with proper
synchronization. It has improved the quality of demands through sharing and exchange of
information rapidly too. The order management is possible by allowing Amazon to communicate
with the customers and making sure to exchange information, which will enhance the operations’
effectiveness and create customer satisfaction too (Gunasekaran & Ngai, 2012).
Few of the major order management functions adopted by Amazon are acknowledging
the order, checking the availability of inventories, management of shipping, receiving the order,
maintain order status and finally measuring the quality and level of service. By sharing
information between the customers and the company, Amazon would constantly gain the
feedbacks and responses of the customers regarding the products delivered to them, based on
which, the necessary solutions could be provided. This would promote high level of satisfaction
among the customers and influence their buying behaviors, further make them loyal customers
and allow them to visit the company frequently (Jacobs, Chase & Lummus, 2014).
Need for and costs of inventory
The cost incurred for managing the inventory storage is based on the product size tier and
based on the months. The fees are mainly charged between the months of January and September
and between October and December. The charge for standard size per cubic foot is $.64 between
January to September and charge per cubic foot between October to December is $2.35.

6
LOGISTICS
Fixed order quantity, fixed order interval, and economic order quantity
The fixed order quantity system is a major component of the management of inventories I
logistics functions at Amazon. To manage this system, the quantity of order and reorder point is
needed to be evaluated to assume the expected outcomes and deliver the orders to the customers
at the least cost possible. The formula consisting of the major components of fixed order system
is represented below (Taleizadeh et al., 2013).
Total cost= Purchase cost + Ordering cost + Holding cost
The fixed order interval assumes the review and assessment of stock level of Amazon at
fixed intervals. If the stock level falls down, another order is placed to regain the actual level and
ensure that the fixed orders are delivered within proper time intervals. The fixed order interval
could be used by the organisation to review the inventory position during fixed time periods and
even make sure that the sufficient amount of stock is available deliver the orders placed by
customers on time (Teng, Min & Pan, 2012).
Application of economic order quantity model
During the logistics operations and inventory management, the economic order quantity
or EOQ model is used to reduce the actual holding cost and costs incurred while ordering a
certain item. It is an effective scheduling models that has brought numerous advantages and
value based benefits for Amazon in United States. Amazon applies EOQ model when the
products’ demands have remained constant for a long time (Amazon.com, 2018). When the
inventory level reaches zero, the new orders are delivered that are applied with a fixed cost. A
particular cost is assigned for each of the units known as the holding cost.

7
LOGISTICS
Basic warehousing decisions
Amazon has managed warehouses properly to store materials required for the production
process and even store the products that are needed to be delivered to the customers. The
decisions made by Amazon till now have resulted in introducing robots that could manage cross
docking activities and provide protection against contingencies. The warehousing decisions are
made to keep the items stocked randomly based on purposes. Decisions are made to make sure
that the warehouses hold enough stocks to provide proper customers’ services and on time. The
decisions are made regarding the minimization of physical efforts and ensure that less cost is
incurred while moving the goods in and out of the storage facility (Dekker et al., 2013).
Decisions are also made related to the facilitating of communication and establishing good
relationship between the company and its customers. This would help in understanding the
demands of the customers and keep enough stocks available to deliver items to them whenever
required on time. This would not only reduce the transportation costs but would also improve the
customers’ services efficiency, furthermore meet the orders received and filled (Gunasekaran &
Ngai, 2012).
Conclusion
The report was developed to focus on the various important aspects of logistics and
business functions associated with it. The major features of the supply chain management were

8
LOGISTICS
flexibility, optimization of inventories and managing proper leadership. The various faced were
related to the demand management and inappropriate customers’ services, which could not only
reduce the sales revenue but would also hamper the productivity. Proper inventory management
should be done and maintain stocks at the warehouses for ensuring abundant supply of goods to
meet the expectations of the customers.
References
Allen, J., Browne, M., & Cherrett, T. (2012). Investigating relationships between road freight
transport, facility location, logistics management and urban form. Journal of Transport
Geography, 24, 45-57.
Amazon.com. (2018). Retrieved 9 February 2018, from https://www.amazon.com
Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse
logistics: quantitative models for closed-loop supply chains. Springer Science & Business
Media.
Forslund, H. (2012). Performance management in supply chains: Logistics service providers'
perspective. International Journal of Physical Distribution & Logistics
Management, 42(3), 296-311.
Gunasekaran, A., & Ngai, E. W. (2012). Decision support systems for logistics and supply chain
management.
Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2014). Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

9
LOGISTICS
R. Huscroft, J., T. Hazen, B., J. Hall, D., B. Skipper, J., & B. Hanna, J. (2013). Reverse logistics:
past research, current management issues, and future directions. The International
Journal of Logistics Management, 24(3), 304-327.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Taleizadeh, A. A., Pentico, D. W., Jabalameli, M. S., & Aryanezhad, M. (2013). An economic
order quantity model with multiple partial prepayments and partial
backordering. Mathematical and Computer Modelling, 57(3-4), 311-323.
Teng, J. T., Min, J., & Pan, Q. (2012). Economic order quantity model with trade credit
financing for non-decreasing demand. Omega, 40(3), 328-335.