Amazon: A Global Retail Giant with 4 Pillars of Success - Essay Sample

Introduction

Amazon Company is an American multinational online retailer specializing in selling various merchandise such as music, books, clothes, electronics, toys, movies, and many others. For over two decades, Amazon Company has grown from a garage operated enterprise selling books online into one of the largest internet-based enterprises in terms of revenue earned in the world (Mcfadden, 2019).

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Amazon’s success is mainly attributed to four pillars, namely customer-focused practices, innovation, long-term planning, and operating brilliance. Operational excellence includes the systems and processes that make up the supply chain of the business. As Amazon Company has proven, employing the right strategy in the supply chain is one of the key pillars in an organization that can determine its success or failures.

Applying the right strategies in the supply chain can save the business both time and money, vital to running the business (Tabaka, 2015). Amazon's move to use audacious supply chain strategies accompanied by innovative technologies has led to its rapid growth, which has led to the remodeling of the supply chains, leaving its competitors trying to catch up.

The Evolution of Supply Chain Models

The supply chain is a system that involves a company and its dealers to develop and distribute particular merchandise to the final consumer. Companies strive to establish supply chains to reduce costs, remain competitive, and to ensure a steady supply of products to their clients. The supply chain involves a series of activities and steps, such as manufacturing, transportation, and distribution. The supply chain network consists of many stakeholders that work hand in hand for the system to work effectively. The supply chain stakeholders include producers, vendors, retailers, transport companies, warehouses, and distribution centers (Kenton, 2020).

The supply chain systems and networks have experienced tremendous changes, especially in the last couple of decades, shifting from simple and easy to manage the supply chain to a more complex and complicated supply chain network. The changes in the supply chain models have also influenced the way companies and organizations strategize to meet the customers' needs and keep up with the competition. The choice of supply chain model depends typically on the type of product or service produced by an enterprise since each organization has different needs.

Brick and Mortar

Brick and mortar refer to the traditional physical shop around the corner that offers face to face products and services; examples of the brick and mortar shops include the local grocery store and the local bank.

The brick and mortar shops use the oldest and most accessible form of supply chain model. The model involves a straight-line model that consists of the movement of goods from the manufacturer to the final consumer. For example, the product may move from the manufacturer to the warehouse, then to shipping, and ultimately to the ultimate consumer.

The brick and mortar enterprises are currently facing difficulty and stiff competition from online businesses such as Amazon and eBay that employ technology and innovation in its supply chain models, eliminating the need for physical stores.

Click and Mortar

As with the emergence of the digital space accompanied by its increase in popularity, the need for business to adapt to the trend led to the development of the click and mortar stores. Hence in definition, click and mortar is a type of business enterprise model where a business establishes online and offline operations, which is a physical store and a website or an app (Twin, 2019). The click and mortar combine both the online and physical experience in shopping. Click and mortar enable the customer to browse a product offline before buying online or viewing it online and buying offline. Alternatively, click and mortar empowers a consumer to buy online and pick the product on the offline store when he/she doesn't want to wait long periods for delivery.

As a result of going online, click and mortar businesses have appreciated the need to step back and re-strategize their supply chain approach. Click and mortar business have changed its supply strategy of stockpiling their products in their various warehouses. The supply chain plan consists of stocking the high volume goods in the local stores, and the low volume products are stored centrally for the online market purchases. The low volume products include fashion items such as clothes and shoes that have high levels of uncertainties in terms of demand (Daspal). With online sales, the vendors and suppliers benefit from customer purchasing data hence enabling them to plan for prospective orders during the low seasons, high season, and holiday seasons.

The Online Store

Often termed as the new retail, the online store usually is a website that sells products and services, where an individual can view a product on the internet buy, pay and receive the product while sitting at home or office. The increased popularity of E-shopping has revolutionized the way we do shopping due to the several advantages that online shopping offers. Some of the benefits include, one can shop at the comfort of his own house without having to move, the online store is open 24 hours, and no need to stand in long lines, especially during the holidays (Sunitha & Ghanadhas, 2014). The new retail store employs the supremacy of digitization and massive data to create a new dynamic between the stakeholders that include producers, consumers, wholesalers, and the physical store. The online store majorly employs two models in the supply chain. One can either outsource logistics and insource inventory or do the reverse of insourcing logistics and outsourcing stock.

Amazon Supply Chain Model

Amazon’s founder Jeff Bezos did not discover the supply distribution network it has been existing way before time, the only thing he did was to come up with a strategy that all the other retailers were not able to spot, thus with the plan and technological innovations he single-handedly revolutionized the workings of the supply chain. Amazon's supply chain strategy consists of warehousing, delivery, and technology that work hand in hand to provide fast, efficient, and reliable services.

Warehousing

Warehousing in the supply chain refers to storing goods as they await delivery to the final consumer. A huge chunk of Amazon’s achievements is owed to its professional storage strategies, which easily warrants merchandise accessibility from everywhere in the world. Hence the warehouses are advantageously positioned near large urban centers and populace hubs with stock distributed among them to ensure that demand can be met with supply. On top, there are mini warehouses dotted all over the small geographical areas to supplement the significant warehouses. The warehouses are divided into storage areas, and robotically operated to enable easier retrieval of products for delivery (Johnson, 2020).

Delivery

The delivery unit of amazon is what probably sets it apart from the rest of its competitors. Amazon provides a wide range of delivery options from the more traditional methods to sophisticated delivery options. Some of the delivery options include the free delivery, prime two-day delivery, and the prime now option (Johnson, 2020). The company has also been one of the first few companies to employ innovative ideas such as drones to make deliveries. Other methods include the use of bikes, trucks, and delivery vans. With all the options on the table, the customer can acquire his/her delivery faster, more relaxed, and more efficiently.

Technology

One of Amazon's core strategies in its supply chain management is the approval of the technology. Amazon employs uncountable computerization and robotics machinery in picking, packing, stacking, and storing inventory (Johnson, 2020). The amazon prime's launch that seeks to deploy drones in the delivery process shows its dedication to technology use. When all these elements combine, they create a system that is efficient with fast delivery and enables the company to cut down on costs, thus releasing funds for other logistical and supply chain needs.

Amazon’s Supply Chain Strategies

Inventory Strategies

Unlike some of its competitors who stockpile products on the local store, Amazon’s strategy in managing inventory was to reduce its inventory and focused more on service delivery by offering quality products through establishing a relationship with the manufacturers and suppliers and by developing a distribution network infrastructure to provide its clients with a quality product that is fast delivered directly from the company.

Another strategy that Amazon employed is outsourcing some of its products through third parties, and this move enables amazon to cut operational costs for it to focus on service delivery. For example, in books, it's impossible to store all the books in the world in a local store; hence outsourcing enables the customer to access the book wherever he/she is.

Amazon inventory strategy also encompasses selling of competitors' products on its platform, giving amazon an advantage on two fronts. Amazon can sustain its competitive advantage and maintain its customer relationship. Amazon can control its competitors in its platform by providing its customers with the ability to compare the pricing on the products, hence giving it control in determining what its customers view.

Logistics Strategies

Outsourcing Supply Chain Model

Outsourcing is the process of contracting the most convenient third party service provider; hence it involves the transfer of some operational activities from a company to an external provider who accounts for the outcome of the agreed task. Outsourcing is usually done when the company believes the subcontracted company is more suitable for efficiently completing the given task. Amazon, since its inception into the global scene and still currently conducts most of his operations through outsourcing, especially in the logistics sector. Amazon has partnered with third-party Logistics Company's such as DHL and FedEx to take advantage of its vast distribution network to make its deliveries.

Insourcing supply chain model

Insourcing is the process of using the internal structures of an enterprise in performing specific tasks. Amazon quickly realizes the importance of insourcing, especially in logistics, as it loses more money in outsourcing. To curtail the over-dependency on third-party transport services, Amazon is developing its own logistics system by forming a partnership with air transport companies to lease aircraft to build its fleet. Amazon is increasingly seeking to shift its strategy of outsourcing. This has been witnessed through its massive investment in logistics and transportation services through the purchase of delivery trucks and drones (Longman, 2020). The shift will enable Amazon to meet its customers' demands on timely delivery through the same day and next-day delivery options of its prime members.