Group Members:
Abel Jacob 1551351
Jithin Job 1553423
Tony Thomas Pattathil 1543259
Varadharajan Srinivasan 1507521
Vibin Mathew Saju 1587483
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1 Amazon Timeline
Contents
2 Products and Services
3 Information flow and Technology Pattern
4 Significance of Porter’s Value Chain in Amazon SC
5 Gartner’s Ranking
6 Supply Chain Key Components & Strategy
7 Amazon Business Volume & Revenue
8 Cash to Cash Cycle
9 Upstream - Amazon Market Place
10 Key Supply Chain Performance Metrics & Regulatory Standards
11 Amazon Customer Service - Downstream
12 Logistics of Supply Chain
13 Strong Points In Amazon Supply Chain
14 Inventory Planning and Management
15 Strategies/Actions to Mitigate Risks by Amazon
16 Success, Future and Suggestions for Amazon
2
17 References
Amazon Timeline
4
Global Presence
5
Information Flow and Technology Pattern
6
Information Flow
• Customer orders the product online.
• Web server sends message to Order manager.
• Order managers checks with the stock database.
• After conforming the order, the order manager places the order and conveys
the message to the supplier.
• The merchant system connects the customer with the bank to pay.
• The stock database communicates the amount to be paid to bank through
merchant system.
• When the transaction is confirmed, the product is released from the
warehouse and dispatched through logistics.
• Tentative date of arrival is given to the customer by the order manager.
• The order is then delivered to the customer.
7
Significance of Porter’s Value Chain in Amazon Supply
Chain Network
INFRASTRUCTURE
Support HUMAN RESOURCES
PROCUREMENT
TECHNOLOGICAL DEVELOPMENT
Inbound Logistics
Profit
Marketing &
Operations
Outbound
Logistics
Primary
Service
Sales
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Activity Performance
Inbound Logistics • Products bought at lowest possible price
• Regular quality and inventory controls.
• No long term arrangements with suppliers and no dependency on suppliers
Operations • Marketplace, Prime, AWS
Outbound Logistics • Third party Dependence
• Amazon's Logistics Network Plan with own trucks, planes
Marketing and Sales • Discounts on price and shipping prior seasonal peaks
• Immense use of SEO as well as collaborative filtering
Service • 24 hours accessibility - 30 day-return policy
• Customer-centric approach
• Dedicated service pre, during and post purchase
Infrastructure • Highly advanced technological infrastructure
Human Resources • Dedicated company culture
• Provision of employee benefits
• Desire to acquire highly skilled employees
Technology • High investments into technological as well as research development
Development • In possession of largest online retailing technology
Procurement • Fast order processing due to highly advanced infrastructure
9
Amazon Business Volume
http://www.gartner.com/technology/supply-chain/top25.jsp
12
Supply Chain Key Components
New
Products
and Customer-
Services Centric
Developme
nt
Simple Selling
Platform
https://onlinebusiness.syr.edu/blog/amazon-supply-chain-
simplified/ 13
Supply Chain Strategy
Analogy: “A flywheel at standstill requires a substantial amount of effort
to begin spinning. However, once in motion, the flywheel begins to
develop a momentum of its own, which makes it increasingly easy to
spin.”
Steps:
Initially protective.
Company alignment.
http://www.jimcollins.com/article_topics/articles.html#*flywheel
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Income Statement
https://www.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii&ei=CTHlWIHuBYuSjAHOo7CYCg
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Balance Sheet
https://www.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii&ei=CTHlWIHuBYuSjAHOo7CYCg
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Example:
Cash to Cash Cycle for 2016 = DSO + IDOS – DPO
= 22.38 + 44.88 – 104.66
= -37.40
DSO = Acc. Receivables * 365 = 8339 * 365 = 22.38
Revenue / Sales 135987
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Cash to Cash Cycle of Amazon for the fiscal years 2007 - 2016
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-10 • Generate revenue from customers before it has to pay its suppliers.
• Illustrates management's efficient use of working capital.
• Amazon is generating cash from its sales regardless of whether or not
-20
each sale is profitable.
• It is an interest free way to finance operations through borrowing -27.02
-30
from suppliers. -33.3
-37.39 -37.4
-38.49 -39.18
-40.47
-40
-49.47
-50
-56.78
-58.76
-60
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-70
Upstream - Amazon Market Place
1. Amazon Warehouse
• Products when ordered are shipped to customer from the third party supplier’s warehouse
• 584 and counting in US alone
• Sellers who does not keep goods in stock but instead transfers customer orders and shipment
details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods
directly to the customer 19
Supplier Tiers
• More than 60% of the sellers are in the United States
• United Kingdom has the second highest sellers
No: Market Place Number of sellers
1 US 584
2 UK 205
3 Germany 86
4 Italy 37
5 Japan 36
6 France 20
7 India 12
8 Canada 12
9 Spain 5
10 China 2
20
Key Supply Chain Performance Metrics & Regulatory Standards
(Upstream)
Amazon has placed stringent performance standards for Third party suppliers
• Cancellation Rate ( Target < 2.5%)
• Contact Response time ( Target: 24 hours or less in Q1-Q3, 12 hours or less in Q4)
• Customer Service Dissatisfaction Rate ( Target < 25%)
• Late Shipment rate ( Target < 4%)
Amazon provides a probation period of 60
• Order Defect Rate ( Target < 1%) days to any supplier failing to meet the
• Return Dissatisfaction rate ( Target < 10%) performance metric scores prior to account
disabling.
• Valid tracking rate ( Target < 95%)
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Amazon Customer Service - Downstream
Response time to customers
• Order fulfillment takes longer because of involved delivery time
Product Variety and Availability
• Able to offer a larger choice of products and services
• Able to react faster to changing customer demand which allows the company to
forecast its figures more accurately
Customer experience
• Personalized buying experience
• Displaying and suggesting items which are related to recent purchases by the customer
Time to market
• Faster introduction of products via online
Returnability
• Need to optimize this feature so as to reduce the gap when competing with retail stores
22
Logistics of Supply Chain
• Uses third party freight companies (DHL, FedEx, Aramex etc.) and their own logistics
services (Amazon Prime Air, Amazon Flex) for transporting goods
• Received license from US Government and Chinese Ministry of Commerce to act as fright
forwarders for ocean container shipping
• Buys spaces for container at wholesale rate, uses it or sells it at retail rates
• First to launch same day delivery
• When other companies started this, Amazon held their upper hand by introducing one hour
delivery and Sunday delivery
• Reducing cost of logistics by introducing their own logistics services such as:
o Amazon Prime Air: Leased cargo flights for transporting their goods
o Amazon Flex: Uber like cargo service in major US cities using registered private drivers for
delivering their products
23
Inventory Planning and Management
• Huge number of warehouses (more than 70 warehouses in
USA . Biggest one in Arizona of the size of 28 football
stadiums)
24
Amazon Inventory Model
25
Strong Points In Amazon Supply Chain
• Patience , relentless investment and innovations
• Multi level Supply chain- Other than B2B, B2C & C2B Amazon also uses a C2C
relationship
• Product Development
• Robotics Technology
• Logistics options
26
Upcoming Challenges
• Moving into Grocery Sector AMAZON PANTRY & GO (Competing with TARGET
KROGER & WALMART )
• South East Asian and Eastern European Markets- “Yummy77” With $20M investment in
fresh food E store
• Internet Dependency
27
Strategies /Actions to Mitigate Risks by Amazon
28
Strategies /Actions to Mitigate Risks by Amazon
Maintaining Efficiency/Responsiveness During Peak Seasons
Off Peak Discounting and seasonal high price to tackle high demand during peak seasons
29
Success Stories
• 30 % of American households are Prime users
(Prime members spend $1500 where as Regular
ones used to $650)
30
Future of Amazon Supply Chain
31
Suggestions
• Better strategic Logistic partnerships - UBER , UPS, FEDEX
32
References
• Oliver Wyman on Transportation & Logistics. "Amazon Is Using Logistics To Lead A Retail
Revolution." Forbes. Forbes Magazine.
• Michael Bentley- Partner at Revenue Analytics, a Tech-enabled Consulting Firm in Atlanta, GA.
"Fighting Amazon's Supply Chain Takeover." Recently Filed RSS.
• "The World's Top Amazon Marketplace Sellers." Web Retailer Blog.
• "Amazon's New Performance Metrics, Other Recent Changes, and How to Minimize Your
Suspension Risk." 888 Lots Blog.
• "Supply Chain Management Process." Decide Software.
• "How Does E-commerce Work?" Explain That Stuff.
• "Flywheel Concept." Business Strategy. N.p., 27 Apr. 2012. Web. 06 Apr. 2017.Amor, D. (2000).
The e-business (r)evolution. Upper Saddle River, NJ: Prentice Hall PTR.
• "The Gartner Supply Chain Top 25 for 2015." Technology Research. Gartner, Inc., 13 May 2015.
Web. 06 Apr. 2017.
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References
• IIM Raipur, OPEP. "Inventory Management at Amazon." OPEP. N.p., 18 Jan. 2015. Web. 06 Apr.
2017.
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