Amazon.com's Inventory Management
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Case Details:
Case Code : OPER023
Case Length : 13 Pages
Period : 2003
Organization : Amazon.com
Pub Date : 2003
Teaching Note : Available
Countries : USA, Global
Industry : Online Retailing
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
Innovative Inventory Outsourcing
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In early 2001, Amazon decided to outsource its inventory management though it
knew that it was a huge risk. When Amazon managed its own inventory, it had
earned the reputation of providing superior customer service, which was its
biggest strength.
Now, the company wanted to concentrate on its main activities and outsource
inventory management in order to earn more profits. However, Amazon was
apprehensive that this move would damage the hard-earned reputation of the
company. Nevertheless, it decided to go ahead with the decision to outsource its
inventory.
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Amazon did not stock every item offered on its site. It
stocked only those items that were popular and frequently purchased. If a book
that was not too popular was ordered, Amazon requested that item from its
distributor who then shipped it to the company.
In the company, the items were unpacked and then shipped to the respective
customers. So, Amazon basically acted as a trans-shipment centre and ensured
that the entire process of shipping from the distributor to the customer was
done very efficiently...
Future Challenges
Although online shopping has become popular over the years, Amazon had to
struggle to make profits. One of the reasons was the variable costs incurred
by multiple delivery attempts and reverse logistics-the return of products
by the customers. Multiple delivery attempts cost the company about 20-30
percent of the total costs for home deliveries.
This was due to the additional shipping charges which had to be borne by the
company. Several incidents of thefts and product damage were reported as the
shipped goods were at times left at the customer's doorstep. All these
incidents also led to a lot of frustration among customers. The expenses on
reverse logistics and multiple delivery attempts ate into Amazon's profits
and hence it had to find a solution to this problem...
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Exhibits
Exhibit I: Products and Services Offered By Amazon.Com
Exhibit II: Amazon's Six Core Values
Exhibit III: Amazon's Partners
Exhibit IV: Amazon's Supply Chain Management: Key Objectives
Exhibit V: Income Statement |
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