Recommendations for improving supply chain network of Amazon
Discuss about the Empirical Examination of Critical Barriers.
The previous assessment discussed supply chain management of Amazon Inc. and from that research, certain strengths and weaknesses of company’s supply chain has been evaluated. In the first assessment, it was analysed that Amazon’s supply chain network is a combination of multi-tier inventory management, superlative transportation, usage of information technology and big warehouses to store fast moving goods. Along with this, organization has also adopted advanced measures for maintaining acquired position in the market. With the help of this supply chain network, Amazon has acquired the leading position in the online retailing industry. It has also been evaluated that the existing supply chain management of organization includes various frameworks but it does not cover the strategies and policies for mitigating the risk and vulnerabilities of the system. Thus, whenever company faces challenging a challenging situation, a new system or framework is adopted to face the challenges and issues appropriately in terms of coping up with the challenges so that the organizational performance does not get affected (Christopher, 2016).
In this assessment, various strategies will be discussed through which risks and vulnerabilities involved in the supply chain network could be mitigated so that positive outcomes could be attained. There are various issues and challenges which every organization faces while executing organizational operations. Main motive of supply chain network is to reduce cost of production and fulfil its customer’s demands effectively. Primary functionalities of supply chain network are to fulfil target audience’s demands along with providing them appropriate choices so that their requirements could be fulfilled. Effective supply chain management is an effective concept for enhancing organizational performance along with gaining competitive advantage. Amazon’s supply chain network includes functionality under which company outsource the distribution of products those are not purchased by customers frequently. Apart from this, Amazon stores those products in their own warehouses which are frequently purchased by consumers (Jacobs, Chase & Lummus, 2014).
In this report, recommendations for improving existing supply chain network will be discussed in order to gain positive outcomes along with making the organization more effective and efficient. The main motive of giving recommendations for improving Amazon’s supply chain management in order to enhance organizational revenues, profitability and performance in the competitive business environment.
One of the best possible methods for improving organizational supply chain network is utilisation of ERP (Enterprise Resource Planning) software. Following are certain essential element of ERP through organizational efficiency could be enhanced:
- Automatic purchasing: Controlling and monitoring inventory is essential element of supply chain network as it provides indication to the purchase department to maintain sufficient level of stock in order to fulfil target audience’s demand along with fulfilling sudden demands from consumers. Adaptation of ERP software will help the organization to make its supply chain network effective. In ERP system, an effective feature will be implemented which will concur the purchasing system (Stadtler, 2015). With the help of this system, orders will be placed automatically to the vendors whenever the stock levels will drop. This will reduce efforts of employees to regularly keep an eye on stock level, thus, employees’ efforts could be shifted towards other significant departments to enhance organizational performance.
- Standardize: With the help of standardised ERP system, organizational efficiency could be enhanced along with saving time and money. Standardised processes are the key success features for supply chain strategy and standardised form of processes removes the threat of low quality products and increase accuracy, encourages teamwork and reduces miscommunication (Monczka, Handfield, Giunipero & Patterson, 2015).
- Creates transparency: Major issues faced under supply chain strategy are waste, fraud and small glitches could easily fix with an effective ERP system. Main issue that occur in managing inventory is reconciling the physical count of inventory with software numbers. Creating transparency in the supply chain management will help the organization to meet its customer’s demand in an effective manner along with coping up with the external business environmental conditions (Hugos, 2018).
- Gain data insight: Data and information plays vital role in setting up strategies for supply chain management. In relation with this, real time reports helps to make supply chain effective and appropriate. This system helps both users as well as management to instantly access inventory, production data and purchasing for critical decision making purposes (Lai & Cheng, 2016).
- Real time inventory management: Amazon’s supply chain management is quite better and advanced from traditional forms of supply chain management. Though, ERP will make the supply chain more effective and effective result oriented. ERP software will make the supply chain management efficient and flexible through which business’ growth and unique needs of the organization could easily be attained (Mangan, Lalwani & Lalwani, 2016).
- Monitoring vendor performance: Vendor performance is dependent upon effective supply chain system. Thus, it is necessary for monitoring vendor performance so that ERP system could be rated. ERP system will allow the organization to review vendor cycle and all errors with just one click.
- Raise cost awareness: There are various uncontrollable factors and variables in supply chain management and managers of different managers of different departments are not aware about their expenses. This develops gaps and to reduce this gap, ERP system helps to centralise financial data through which expenses of all departments are recorded at one place (Ayers & Odegaard, 2017).
Effectiveness of Amazon’s supply chain network
Above discussed are certain measures through which supply chain management of an organization could easily be improved. Amazon’s supply chain management already includes advanced measures and techniques. Effectiveness of supply chain management of Amazon could be evaluated with its success. Amazon is leader of global online industry and it one of the top most companies in relevance with product offerings. Amazon has adopted customer centric approach along with the advanced measures and this has helped the organization to satisfy customer’s satisfaction. Along with satisfying target customer’s needs, organization has also acquired competitive advantage in the industry. With its wide product offerings and effective supply chain network, company has expanded its business in more than 188 countries in the world and it has also set up their registered office in approximately 12 countries. In relation with expansion of business, companies seek for effective change management along with obtaining consent from all the key stakeholders in order to enhance organizational performance. Adaptation of change management along with dynamic and flexible strategies is essential elements for enhancing organizational performance as well as to cope up with the external business environmental conditions along with the changing customer’s demands and requirements (Brandenburg, Govindan, Sarkis & Seuring, 2014). In relation with improving organizational performance along with enhancing the effectiveness of its supply chain network, following strategies are recommended to the Amazon:
- Just In time Inventory (JIT): Just-in-Time manufacturing is also known as just-in-time production or Toyota Production System (TPS). The basic motive of this system is to reduce flow times from the production system and response time amongst customers and suppliers. With the help of this system, organization could easily lower down its cost of production and meet up with the customer’s demand on time. For example, when demand for consumer electronic goods will be increased, supply will be increased along with decreasing the supply of other goods. Unnecessary costs are eliminated with the help of this system because those products which are not frequently purchased should be outsourced to the third party warehouses in order to reduce organizational operational costs (Wisner, Tan & Leong, 2014).
- Integration with information technology variables: Amazon’s supply chain network includes advanced variables linked with information technology. Drone delivery system is one of those effective measures adopted by Amazon but, it is not in practice yet. This system is going through beta-testing phase and it will be introduced in the physical market very soon. With the help of this system, organization will be able to fulfil its client’s demands so that the desired goals and objectives could be improved (Singla, Sethi & Ahuja, 2018).
Evaluation and monitoring should be executed at regular intervals so that the adopted policies and techniques of organization could be determined. It is necessary to evaluate the effectiveness of organizational policies and standards so that the desired goals could be attained. Supply chain management also plays vital role in the enhancing organizational performance along with the attainment of competitive advantage (Mitra & Datta, 2014). Following are some of the attributes which could be determined from the existing supply chain network of Amazon:
- Amazon mainly relies over third party courier services to deliver its products. Along with the third party couriers, Amazon has its own courier service company i.e. Amazon Transportation Services which operates under Amazon Inc. As Amazon is relied over third party courier companies such as FedEx, BlueDart, etc., various incidents have been reviewed where customers have not received the package on time and received in damaged condition. This was affecting reliability gained by Amazon from its target audience. Amazon faced various negative feedbacks from the customers, thus, it is necessary for the organization to expand its own courier service company rather being outsourcing the delivery of packages to third party courier companies in order to enhance reliability amongst the customers as well as to regain positive image amongst the target audience. It has been recommended to the organization to improve its delivery system so that customers could receive their orders on time as well as with the same quality and in working condition as expected (Ho, Zheng, Yildiz & Talluri, 2015).
- Customer interactions need to be improved because courier partners are the person who deals with customers on behalf of the organization. Thus, it is necessary for the organization to develop certain standards and policies for its courier partners so that it could be followed while interacting with the customers. Amazon follows customer centric approach and on the basis of this approach, they majorly focus over customer satisfaction. However, delivery partners are not performing as per the organizational objectives and this is affecting organizational performance. In relation to this, organization is required to adopt appropriate strategies and measures so that customer’s interaction could be improved with the company. Amazon has its own transportation department and in relation to this, in relation to this, organization needs to adopt appropriate strategies so that their transportation department i.e. ATS could be made as per organizational expectations (Turker & Altuntas, 2014).
- Amazon should also adopt cooperation model through which coordination could be developed amongst the suppliers so as to make supply chain network more effective. Latest technology i.e. ERP system could be used for this aspect. Coordination will help the organization and its supplier to be on the same page. Customer’s demand could be fulfilled with this format in an effective manner along with gaining positive outcomes. Major challenge faced by Amazon in its existing supply chain network is lack of communication between suppliers and the Amazon and due to this, organizational operations gets affected. For targeting new customers, it is required for the organization to adopt push and pull strategy. In push strategy, company promotes its products amongst the target audience with the objective of increasing demand for the product. Main motive of push strategy is “taking product to the customer” and for this, organization could use various promotional activities such as trade shows, using IMC tools, point of sale displays, etc. Apart from this, pull strategy is the medium through which customers are motivated to seek out the customers for the particular products. Motive of pull strategy is “getting customers to the brand”. Advertising through various mediums, word of mouth, sales promotions and discount, etc. are certain mediums through which organization could enhance its customer base (Hazen, Boone, Ezell & Jones-Farmer, 2014).
- Apart from the above recommendations, one of the most advanced recommendations for Amazon Inc. is adaptation of IT system into organizational operations so that supply chain as well as other operations of the organization could be improved. Accountability and transparency would also be developed in the processes of organization through which chances for success for organization increases. The main issues faced by Amazon are accountability issues which arise due to outsourcing of various functionalities in supply chain management. With the help of information technology system, organization will be able to integrate its all operations including supply chain management’s operations in a centralised manner through which every function would easily be controlled and monitored. This will also help the organization to connect all procedures with a single end-to-end IT system and this will help the organization to determine bottlenecks in time so that appropriate actions could be taken in order to enhance organizational performance (Ptak & Schragenheim, 2016).
- It has been recommended to the Amazon that to improve the supply chain management as whole, it is required to segregate the supply sources so that it could be identified that which segment is disturbing organizational performance. With the help of this, appropriate actions could be taken in time with the objective of improving organizational performance. Supply chain network is linked and dependent on all departments of the organization such as sales, finance, purchase, etc. By improving supply chain management, overall performance of the organization could be improved. Teamwork could also be promoted to perform the tasks in supply chain management process in an effective manner so that the goals could easily be attained (Fernie & Sparks, 2014).
- Tracking consumer demand is another effective option and way to enhance organizational performance. It is must for every organization to determine its operations’ effectiveness, thus, determining the demand for the goods is also necessary. Those goods which are demanded by consumers lot should be made available every time and those goods which are not much demanded by the consumers should be promoted so that consumers could feel the demand for those products. Promotion and advertisement is the biggest tool though which organization could easily enhance the demand of their products in the target market (Chen, Preston & Swink, 2015).
Most of the companies invest a huge amount of their earnings and revenues in research and development department to determine the needs of their target audience. But in scenario of Amazon, it deals in numerous products and their major concern is integrating all its product and service offerings in one system so that demand for each product could be tracked. With the help of an effective system, organization could easily boost up its performance along with managing its inventories in an appropriate manner. Supply chain management executes on demand and supply concept. The more will be the demand for product, the higher will be the supply so that the demand of consumers could be fulfilled. Supply and demand has indirect relationship and when prices for one product increases due to shortage of supply, demand for the substitute or alternative product increases. Thus, it is recommended to the organization to manage its supply chain operations in an effective and appropriate manner so that the desired goals and objectives could be adopted in an effective manner along with satisfying target audience’s demands (Wild, 2017).
Attributes of Amazon’s supply chain network
References
Ayers, J. B., & Odegaard, M. A. (2017). Retail supply chain management. CRC Press.
Brandenburg, M., Govindan, K., Sarkis, J., & Seuring, S. (2014). Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), 299-312.
Chen, D. Q., Preston, D. S., & Swink, M. (2015). How the use of big data analytics affects value creation in supply chain management. Journal of Management Information Systems, 32(4), 4-39.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Hazen, B. T., Boone, C. A., Ezell, J. D., & Jones-Farmer, L. A. (2014). Data quality for data science, predictive analytics, and big data in supply chain management: An introduction to the problem and suggestions for research and applications. International Journal of Production Economics, 154, 72-80.
Ho, W., Zheng, T., Yildiz, H., & Talluri, S. (2015). Supply chain risk management: a literature review. International Journal of Production Research, 53(16), 5031-5069.
Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2014). Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Lai, K. H., & Cheng, T. E. (2016). Just-in-time logistics. Routledge.
Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain management. John Wiley & Sons.
Mitra, S., & Datta, P. P. (2014). Adoption of green supply chain management practices and their impact on performance: an exploratory study of Indian manufacturing firms. International Journal of Production Research, 52(7), 2085-2107.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.
Ptak, C. A., & Schragenheim, E. (2016). ERP: tools, techniques, and applications for integrating the supply chain. Crc Press.
Singla, A., Sethi, A. P. S., & Ahuja, I. S. (2018). An empirical examination of critical barriers in transitions between technology push and demand pull strategies in manufacturing organizations. World Journal of Science, Technology and Sustainable Development.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Turker, D., & Altuntas, C. (2014). Sustainable supply chain management in the fast fashion industry: An analysis of corporate reports. European Management Journal, 32(5), 837-849.
Wild, T. (2017). Best practice in inventory management. Routledge.
Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach. Cengage Learning.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
