Case Study 1
The $600 billion U.S. grocery market segment is large and complex. Consumers now shop for
grocery products in a variety of retail environments. Conventional supermarkets and grocery
stores capture 52% of the market segment. Discounters like Wal-Mart and Costco capture 27% of
the market segment. Convenience formats like c-stores and drug stores capture the remaining
21%.
No channel is dominant today because no one retail format does it all. Supermarkets offer onestop-shopping convenience and fresh food quality advantages, but at full margins. Discount formats
offer better prices, but often at the expense of brand-selection and convenience. And convenience
formats are easy to get to, but high-priced with very limited assortment.
In response to this complex retail landscape, the typical consumer now shops the full of range of
formats, with surprising frequency. Trying to balance the competing needs of great prices, my
familys brands, and easy to get to, the typical consumer goes grocery shopping 3.3 times per
week! Against the backdrop of increasingly time-starved lifestyles, this continuous grocery
shopping solution is becoming less satisfying and less sustainable.
Figure 1
U.S. Consumer Grocery Shopping Behavior
Q uick T rips
Fill-In T rips
Major Stock-Ups
% of T rips
62%
25%
13%
Average Items
Average Order Size
4.2
$21
9.1
$49
16
$97
% of Grocery Budget
34%
32%
33%
20
40
54
Average Minutes
Purpose
especially sensitive to
selection
Amazon.com plans to launch a national grocery business. This business will be a distinct
tab/store on www.amazon.com and will take advantage of Amazon's existing distribution network.
This offering is focused on shelf stable products which can be fulfilled through our traditional
warehouses and transportation solutions. This will be a completely separate website and delivery
infrastructure.
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French
VCPC matrix
Phone
Phone
Onshore Internal
$6.50
$3.01
$8.91
$4.12
Offshore Internal
$4.50
$2.10
$5.72
$2.71
Offshore
Outsourced
$4.12
$2.01
$5.42
$2.45
Expressed Dissatisfaction Rate (EDR): Expressed Dissatisfaction Rate is the primary quality
metric. Quality of customer response by sites was a major criterion in site selection. Each customer
is sent a survey to respond back whether he is satisfied by Amazon Customer Service. EDR is the
ratio of total unsatisfied customers to total serviced customers.
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English
French
EDR matrix
Phone
Phone
Onshore Internal
1.3%
5.4%
1.5%
5.4%
Offshore Internal
2.8%
4.6%
3.3%
5.2%
Offshore Outsourced
2.6%
4.7%
3.3%
5.8%
The Capacity Planning team has forecasted the following contact volume:
No of contacts
25000
20000
15000
10000
5000
0
Jan
Feb
Mar
Apr
May
Jun
Jul
2300
2760
3560
4557
5378
6722
8806
Phone 1610
2263
2599
3737
3926
5176
6252
6156
7102
497
961
820
1452
1546
2554
1539
2901
3151
3466
6457
Sep
Oct
Nov
Dec
Total
690
No of contacts
25000
Aug
Sep
Oct
Nov
Dec
20000
15000
10000
5000
0
Jan
Feb
Mar
Apr
May
Jun
Jul
2300
2760
3560
4557
5378
6722
8806
English 1472
1766
2243
2780
3388
4100
5636
4925
6502
French
994
1317
1777
1990
2622
3170
2770
3501
4916
Total
828
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Aug
5514
8532
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French
Phone
Phone
Onshore - Internal
6,000
2,000
9,000
3,000
Offshore - Internal
5,000
5,500
1,000
2,000
Offshore - Outsourced
Flexible
Flexible
Flexible
Flexible
Phone
Onshore - Internal
1.0%
0.3%
Offshore - Internal
3.3%
1.0%
Offshore Outsourced
4.5%
2.0%
Assume that all sites have unlimited capacity and all agents can handle any contact related to Fresh.
Q1. What percentage of email contact volume should be outsourced to offshore sites?
Q2. What percentage of phones and email contact volume should be handled in-house and in North
America?
Q3. John intends to launch Chat after 3 months. Who should handle this volume? How will this be
distributed (percentage)?
Q4. What should be the contact distribution strategy for Amazon? Please discuss your rationale.
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Case Study 3
With Amazon Fresh, the challenges faced in supply chain by Amazon increased because the
products now had expiry dates. In addition to that, Amazon strives to deliver the freshest items to
the customers optimizing its supply chain of suppliers, warehouses (which it calls Fulfillment
Centers FCs) and customer demand.
The following case will challenge the teams to fulfill customers orders in a city with the freshest
farm and dairy products.
Amazon sources farm and dairy products from the suppliers (SF Supplier of farm products and SD
Supplier of dairy products). There are 3 FCs on the periphery of the city all of which can process
and fulfill orders for Amazon Fresh. The demand from customers for farm and dairy products
through Amazon Fresh program is divided into Demand North (DN), Demand South (DS), Demand
East (DE), Demand West (DW) and Demand Central (DC).
Refer to the map below for the suppliers, FCs, demand centers in the city. The distance between any
two points on the map is the sum of horizontal and vertical distances. E.g. Distance between DE and
DS is 18 (horizontal) + (6+9) (vertical) = 33 kms
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All customer orders placed till 3 pm in the afternoon are processed for 2 hours (same for farm and
dairy products) in each of the FCs. At 5 pm, trucks carrying customers orders leave for delivery.
To maintain the freshness of the products, they are sourced from the suppliers so as to reach the
appropriate FCs by 3 pm. Multiple trucks can be run between SF and SD to each of the FCs to have
the most fresh item received in the FCs. Consider the age of the product, when the truck departs
from the supplier as 0 hrs.
The Inbound time from each of the supplier to the FCs is dependent on the distance between
suppliers and the FCs. Following table gives the inbound times to the FCs from each of the supplier.
Inbound time (hrs)
up to 10 km
11 - 20 km
21 - 30 km
31 - 40 km
41 - 50 km
above 51 km
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From
SF
1
2
3
4
5
6
From
SD
2
3
4
5
6
7
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FC1
2
2
4
4
5
5
FC2
1
1
2
2
2
3
FC3
2
3
3
4
4
5
Based on the above data and the map, answer the following questions:
1. Which FC should cater to demand of North, South, East, West, Central city for the items to
remain freshest (least old) under following conditions?
a. Separate trucks for inbound for each O-D
b. From an origin FC to a destination Demand Center, the trucks fulfilling farm and dairy
products' orders can be separate - if necessary.
c. 1 Demand Center can be catered by only 1 FC for any kind of product. i.e. FC1 and FC2
cannot deliver dairy products together to Demand North.
2. What is the minimum number of total trucks which will depart from the FCs if same truck
can be used for delivery of Farm and Dairy products?
3. What is the weighted average age of farm and dairy products in the above case?
4. There have been new plans for improving the infrastructure utilization. Two decisions are
taken:
a. No customer orders for farm and dairy products will be fulfilled out of FC2, and
b. From an origin FC to a destination Demand Center, the trucks fulfilling farm and dairy
products' demand CANNOT be different i.e. Single truck will be running between any
pair of FC-Demand Center combination
Which FC should fulfill farm and dairy product orders for which Demand Centers for the
items to remain freshest (least old)?
5. In Question 4 if, additionally, the cost of fulfilling 1 unit of farm or dairy product for FC1 and
FC3 to different Demand Centers are as follows:
in Rs.
FC1
FC2
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DN
1
4
DS
3
2
DE
4
2
DW
4
5
DC
2
3
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Case Study 4
Amazon uses three carriers A, B and C for shipping packages to the customers. Amazon further offers its customers
with two SLAs which are 1 day delivery (package is delivered on next day from customer placing the order) and 2
day delivery (package is delivered on second day from the day when customer places the order). There is a certain
defect rate associated with the two SLAs for each of the carriers. At the same time there is a limited capacity that
the carriers can manage for each SLA. The rates offered by the three carriers, their defect rates and their capacities
for the different SLAs is as follows,
SLA
1 day delivery
2 day delivery
SLA
1 day delivery
2 day delivery
SLA
Cost of defect incurred by the company is $10/package. The total number of packages that we need to ship in a
week is 5000 with 1700 for 1 day delivery and 3300 for 2 day delivery. There is also a minimum volume guarantee
that we give the carriers which is 1200 for A, 1000 for B and 1300 for C.
Keeping in mind the core principles of Amazon, devise the best combination of carriers and services to service the
5000 packages. Answer the following questions based on your adopted strategy.
1. State the objective on which you have based your strategy
2. What is the number of packages serviced by each of the carrier SLA combinations (e.g. A-1 represents carrier
A for one day SLA)?
3. What is the cost incurred by Amazon in servicing all the packages?
4. Articulate the rationale of your strategy in less than 300 words
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