Challenges and Improvements in Amazon's Supply Chain Management

This report analyzes Amazon's supply chain management, focusing on challenges, logistics, and their impact on profitability. It explores the company's e-commerce operations, omni-channel complexities, and the need for cost reduction and efficiency. The report identifies key issues such as cost management, skill development, and the impact of health and safety concerns. It also examines Amazon's supply chain management and logistics, emphasizing the importance of quick and efficient delivery through technology and a vast warehouse network. The report proposes revisions to Amazon's logistics, including integrating its own delivery fleet, improving supplier coordination, and unifying its IT systems for greater visibility and accountability. Overall, the report provides a comprehensive overview of Amazon's supply chain, highlighting areas for improvement and strategic advantages.

Logistics and Supply Chain
Management Spring

Table of Contents
INTRODUCTION...........................................................................................................................1
OVERVIEW OF THE AMAZON...................................................................................................1
TASK 1............................................................................................................................................1
1. Impact of each issue on profitability of Amazon.....................................................................1
2. Supply chain management and logistic of Amazon.................................................................3
3. Impact of various challenges on Amazon................................................................................3
TASK 3............................................................................................................................................4
1. Revised logistic........................................................................................................................4
2. Good relationship with supplier helps in reducing cost...........................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Supply chain management considered as an management of operational activities and
functions (Chae, 2015). The report consist of challenges faced by supply chain management and
its effect on profitability on company. Role of e-commerce and e-business in providing solutions
to challenges. Development of low cost and high efficiency supply chain management.
OVERVIEW OF THE AMAZON
Amazon is a multinational technology company focusing on multi-pal services such as e-
commerce, cloud computing and artificial intelligence. Washington U.S. It is a public company
that is employing approx 613300 employees and earning a revenue of $232.887 billion US
dollars. It is the 5th largest retailer in UK Changing Supply Chain Management, 2018).
TASK 1
1. Impact of each issue on profitability of Amazon
To understand the issues related to supply chain management and its impact on company
first supply chain management needs to be understand. SCM is a process that helps in providing
goods and services to its consumers by involving multi-pal activities. This process starts with
transfer of goods by supplier to distributor then manufacturer then retailer and last activity is
logistic to deliver demanded goods to consumers.
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(Source: Supply Chain Management, 2016)
Supply chain management dine in most streamlined and cost effective way possible. It is
important because it increases competitiveness and customer satisfaction. The issues that are
sighted by supply chain management professionals in Amazon and impact of each issue on
profitability of company are as follows-
Reduce cost while improving consumer service and expansion: Competition is at its
peak in the present market scenario. Amazon is expanding its business slow and gradually across
all over the world. Amazon achieves reducing cost, improving consumer service as large
consumer base is served, and benefit of economics of scale is enjoyed by business organisation
(Supply Chain Management, 2016.).
Complexity of Omni channel: Omni channel is a modern supply chain that extends
delivery across mobile apps, website, social media and stores. Making availability of products
online and developing apps make it difficult to manage stock in supply chain management.
Expect lower cost and greater efficiency: This issue in Amazon of making a supply
chain that is cost effective and bring more efficiency in the organisation will have a positive
impact on the profitability of the company. As low cost and higher efficiency will bring more
profits by improving results with effective supply chain management of stocks supplied. For this
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Illustration 1: Supply Chain Management, 2016

cost will also be incurred to implement strategies but results of this will be great to increase
profits more then cost incurred (Christopher, 2016).
Safety and Quality incidences: When horse meat scandal is done then it puts a effect on
all the organisations that are dealing in providing goods to consumers. Effect of this on Amazon
will be that consumers will be more conscious about quality of products and online orders will
reduce. Their will be an increase in product and this will impact profitability of Amazon by
reducing revenue to some extent. As cost of logistic will improve with free shipping and getting
product back.
Developing new production skills: Enhancement of skills by providing training to staff
appointed for effective supply chain management will increase operating cost of Amazon.
Investment in production of new skills will be termed as an asset for organisation in long run. As
cost of supply and inventory management will reduce. In initial years impact of this issue will
leads to reduction in profitability of Amazon (Forslund, 2012).
2. Supply chain management and logistic of Amazon
Supply chain management of Amazon is based on the idea of quick and efficient reach to
its consumers. This is achieved by sophisticated technology and an extensive network of
warehouse. Together with this effective inventory management and excellent transportation
makes Amazon a highly efficient company. Amazon's supply chain management is heavily
depends on outsourcing its inventory management (Hines, 2012).
3. Impact of various challenges on Amazon
Skill Development in Supply Chain Management:
Supply chain management of organisation like Amazon is one of the primary concern
that will help in success of business in long run. Managing good relationship with supplier will
be cost effective as delivery system of ordered goods will be on time when supplier is well
known and possess a goods relationship. Number of cancellation of orders done by suppliers will
be less that will help in managing goodwill of the organisation. This will increase cost of
managing inventory as huge amount of stock of variety of products needs to be maintained.
Employing high qualified professionals in company make it more expensive task. When
organisation needs some special skills to manage inventory and training needs to be provided to
develop that skill then it will not be cost effective. On the other hand availability of professionals
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for inventory management is not sufficient and employing them in organisation is quite difficult
(Huemer, 2012).
Impact of skill development on profits of company:
When inventory management system is designed and managed by professionals who are
skilled then it will enhance productivity of Amazon. Having professionals in inventory
management system of organisation will help in reducing cost of inventory management on
continuous basis. This will help in enhancing profits of the company as most favourable method
will be used that is cost effective to the organisation and helps in achieving its objective.
Together with this new and more competitive strategies that helps in e-commerce and can adopt
technology very easily.
Other challenges:
Technology and business environment is changing on continuous basis and that leads to
bring some more new challenges for Amazon to perform various business activities. Some new
challenges are-
 Meeting new demands of various consumer group on time.
 Introducing latest technology in the organisation that required skilled employees.
 Always be adaptive to changes and more efficient then competitors.
TASK 2
Different five challenges:
Cost: It is defined as the source of exchange of good and services from buyer to
customer. In order to buy a desirable product clients use to pay a specific amount to buyer. This
is one of the major challenge for companies to fix cost of their product in a manner that help
recover these cost while selling product in market. They company like Amazon fear that in some
cases product are so much costly that they are not able to recover their cost. So manager are
more focused to handle this issue which require planning, executing, controlling in producing
goods or using of raw material. In Amazon Supply chain management and logistic department
are dealing in marketing sector in order to maintain cost of their product. It is observed that
continuous reduction in cost needs proper plan that are prepared according to market situation
and so that production cost can be covered and Amazon can earn decent profit. Hence, better
consumer satisfaction will intensify customer base and company can overcome the major issue
of cost through generating more revenue
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Complex: An organisation can also face complex internal challenges. These include
employee conflict, change (whether in corporate direction, corporate ownership, departmental
shift, or closure and renewal) and a dysfunctional organisational culture. Therefore, Amazon is
continuously facing the issue of mismanagement and lack of employee contribution because of
various complex issues between manager and workforce. This have a major impact on
profitability of a company as each cost of business operation are increasing such as distribution
cost, inventory cost etc.
Efficiency: It is very important for companies to manage their resources in appropriate
manner that support to increase overall efficiency and increase profit. But this is also consider to
be an main challenges for company because in order to make system more authentic and draw
better result companies focuses on major activities that reduces their profitability. Amazon is
performing its business through e-commerce and to manage inventory in the organisation there is
requirement of employing staff in management team who is highly competent in managing
inventory. When there is misunderstanding between suppliers and organisation the Amazon
needs to establish its own warehouse in which stock of each product will be maintained
Health and Safety: It includes all those policies and programs which are important for
ensuring health of employees at workplace. Eventually it is necessary for improving the
conditions at the workplace. Herein, the company Amazon if they do not consider about the care
of employees then it may become as a challenge for the company. This is why because without
proper health safety employees can not work with full of efficiency. There are major issues that
can be raised within Amazon related to health or employees that could be major problem for
company such as Occupational diseases– dust, silicosis, vibration injuries, Mental healthand
substance use – legalization of cannabis, opioid use, used needles in the environment;
accommodation for injured and ill workers
Career progression: It is all about promoting the employees in the terms of designation,
salary and rights. Eventually it is needed by every employees in the companies. It may become
as a challenge if organisations do not focus on the growth of career of employees. In Amazon
company this can be a issue if they do not have any policy for progression of workforce.
Commodity which are often acquire are not part of stock that is stored in storehouse and sales
are made through third party with Amazon. Therefore supply chain management of the company
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realize the value of fast transfer system and depends on ordinal companies for logistic which
make it challenging to accomplish quick delivery system.
TASK 3
1. Revised logistic
Logistic is the process of planning and executing the efficient transportation and storage
of goods from the point of origin to the point of consumption. The goal of logistics is to meet
consumers requirements in timely and cost effective method (Jothimani and Sarmah, 2014).
Amazon is an organisation that aims to develop a low cost and high efficiency supply chain
management. It is a organisation that has performed well in its Supply chain management system
but there is scope of improvement in its supply chain management and logistic system can be
revised. Amazon can follow and implement to make its SCM world class and be a source of
sustainable competitive advantage.
 Amazon has its own logistic system that helps in making quick delivery of orders and
gain high level of consumer satisfaction but there are many areas where delivery is done
through courier companies by Amazon (Kumar and Singh, 2012). When product is not
delivered to consumers on time and wrong product is delivered that hinders image of the
company. Amazon can setup its own transportation by creating its own fleet of delivery
vehicles in areas where courier system is used.
 Amazon can integrate its SCM better and more from a cooperation model with its
suppliers to a coordination mode. This would enable the organisation to share
information between all partners and suppliers using the latest technology. A unified IT
system that can involve all the suppliers and stakeholders in its supply chain management
and not in Amazon itself. This will help in bringing all the elements of supply chain
under one umbrella (Sampson and Spring, 2012).
 Amazon needs to unifying its supply chain management in less then one gigantic IT
system so that their is grater visibility on each component of the supply chain
management. More accountability and transparency in the process will be their with this
system. Amazon outsource some of its functions of supply chain management and can
integrate its entire supply chain management.
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Making improvement in some of its activities that are performed in supply chain
management Amazon can achieve its objective of reducing cost and enhancing productivity.
There are three recommended best practices for Amazon by adaptation of which it can become
an organisation with best supply chain management system.
2. Good relationship with supplier helps in reducing cost
Building healthy relationship with suppliers in business is beneficial for Amazon, as they
are the one who performs various activities for company. This is cost effective for Amazon
because supply chain management strategy of organisation have important role of suppliers. As
amazon is dealing international and huge range of products are offered to consumers for
purchase. Availability of wide range of choices in products makes it difficult for company to
store each and every product that is offered for sale (Sampson and Spring, 2012). Nearly 82
percent of sales made by Amazon is done through third party who are suppliers for the company.
This will benefit organisation indirectly as more and more orders will be received and revenue
will increase. Together with this cost of establishing warehouses and operating them will go up.
Overall cost of Amazon will get a hike when there is no healthy relationship between company
and suppliers (Soni and Kodali, 2013).
Analysing the whole scenario helps to understand that it is advisable for Amazon to have
a good relationship with its suppliers so that various cost can be avoided. A reduced cost in
various operating activities of supply chain makes company more efficient and cost effective and
brings competitive advantage. Robust arguments and evidences helps those decisions and
choices, developing policies and standards to know which intervention works and which remain
unproven.
CONCLUSION
From the above project report it has been concluded that supply chain management plays
very important role in success of an organisation. Form the above results it is recognised supply
chain management not only assist the business structure but also helps in managing the relations
with suppliers and buyers. As improved cost of managing inventory by having negative
relationship with suplier is proven for the business organisations. Their is a need of continuous
improvement in supply chain management system to improve efficiency of the organisation.
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Together with this best practice in logistics needs to be done to reduce cost and enhance
efficiency of the organisation.
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REFERENCES
Books and Journals
Chae, B. K., 2015. Insights from hashtag# supplychain and Twitter Analytics: Considering
Twitter and Twitter data for supply chain practice and research. International Journal of
Production Economics. 165. pp.247-259.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Forslund, H., 2012. Performance management in supply chains: Logistics service providers'
perspective. International Journal of Physical Distribution & Logistics Management.
42(3). pp.296-311.
Hines, T., 2012. From analogue to digital supply chains: implications for fashion marketing. In
Fashion Marketing: Contemporary Issues (pp. 46-67). Routledge.
Huemer, L., 2012. Unchained from the chain: Supply management from a logistics service
provider perspective. Journal of Business Researc. 65(2). pp.258-264.
Jothimani, D. and Sarmah, S. P., 2014. Supply chain performance measurement for third party
logistics. Benchmarking: An International Journal. 21(6). pp.944-963.
Kumar, P. and Singh, R. K., 2012. A fuzzy AHP and TOPSIS methodology to evaluate 3PL in a
supply chain. Journal of Modelling in Management. 7(3). pp.287-303.
Sampson, S. E. and Spring, M., 2012. Customer roles in service supply chains and opportunities
for innovation. Journal of Supply Chain Management. 48(4). pp.30-50.
Sampson, S. E. and Spring, M., 2012. Service supply chains: Introducing the special topic forum.
Journal of Supply Chain Management. 48(4). pp.3-7.
Soni, G. and Kodali, R., 2013. A critical review of supply chain management frameworks:
proposed framework. Benchmarking: an international journal. 20(2). pp.263-298.
Online
Supply Chain Management. 2016. [Online]. Available through:
<http://ainidrus081103.blogspot.com/2016/12/definition-retail-management.html>
Changing Supply Chain Management. 2018. [Online]. Available through:
<https://www.thebalancesmb.com/how-amazon-is-changing-supply-chain-management-
4155324>
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