Free Paper Example on Cost-Reduction Methods at Amazon

Introduction

Amazon is a renowned international B2B procurement company that deals with an array of products. The company is reputable for streamlining businesses through its efficient procurement process. In its procurement process, Amazon focuses on E-commerce with the business-only pricing system, efficient shipping, multi-user systems alongside vast products. Besides, Amazon uses Invoicing as a payment method, catalog curation, and coupa open buy as its new procurement methods (Thierry & Lescop, 2015). The Coupa Open Buy feature was mainly innovated to cater to countries that use the system in its transactions. For inventory management, Amazon relies on the Warehouse Management System (WMS) and Warehouse Control Systems (WCS), which are integrated to exchange data in real-time and help maintain a well-orchestrated inventory system (Cui, Zhang & Bassamboo, 2019).

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Impact of Cost Reduction Methods on Customers and Suppliers

Global sourcing of products has impacted Amazon specifically through its inter-continental distribution of goods and its vast procurement supplier database (Parida, Sophonthummapharn & Parida, 2014). Besides, bulk purchases are beneficial to its customers as the logistics process is hastened alongside cost reduction.

Benefits and Risks of Cost Reduction Methods

The procurement and inventory processes at Amazon accrue it a regional competitive advantage, a higher profit margin, economy of scale, and an efficient and accurate online platform. On the other hand, increasing cybercrimes pose a major security risk to Amazon’s network security risk. Therefore, Amazon should adopt a big data mining platform that would work in tandem with the AWS expansion system (Wu & Gereffi, 2018). It also faces a risk of imitation from other companies shifting from brick and mortar operations to digital marketing.

Conclusion

Many companies enjoy higher bottom line margins during the peak season, as there is traction in sales compared to the low season (Németh & Gobbo, 2020). Amazon needs to invest heavily in annual digital advertisements to remain relevant due to fear of missing out their customers during the lower season. For instance, for the farm implements, customers can be able to track the products and make informed choices even in the low season. Regular advertising creates positive disruption and finally leads to conversion and a trail of sales.

References

Cui, R., Zhang, D. J., & Bassamboo, A. (2019). Learning from inventory availability information: Evidence from field experiments on Amazon. Management Science, 65(3), 1216-1235.

Németh, A., & Gobbo, M. (2020). Demand Management for Highly Seasonal Products-A case study at Avero AB.

Parida, V., Sophonthummapharn, K., & Parida, U. (2014). Understanding E-procurement: Qualitative case studies. In ICEB+ eBRF 2006: 28/11/2006-02/12/2006. Institute of Business Information Management at the Tampere University of Technology.

Thierry, I., & Lescop, D. (2015). Open innovation within business ecosystems: a tale from Amazon. com. Communications & stratégies, (74), 37.

Wu, X., & Gereffi, G. (2018). Amazon and Alibaba: Internet governance, business models, and internationalization strategies. International business in the information and digital age, 13, 327-356.