Unit 9 – Supply Chain Designs (Units 7–9). Purpose:Explain the ongoing evolution of an industry ecosystem and evaluate associated risk, resilience, logistics, and emerging supply chain designs for a s

Running Head: LOGISTICS 0

Logistics and Supply Chain Operations

Stanley Thompson Jr.

DB 8035

24 May 2020

INTRODUCTION

Am azon is one of the fastest growing online retailer company in the United States of America that has been able to overhaul its business structure by using innovative strategies in supply chain management. Amazon has left most of its competitors have a hard time trying to catch u p. The firm has made huge investments in the management of its inventory to include recent forms of technology to beat its competition. The firm has optimized every link in its supply chain to ensure its customers are satisfied and well attended to (Leblanc, 2019). This paper hence seeks to discuss Amazons supply chain operation factors such as; transport and security, procurement and inventory management, technology and information management, and articulate some of the global risk factors affecting the firm.

TRANSPORTATION AND SECURITY

 Transportation cost structures, modes, and distribution centers, inventory control systems, and inventory costs reduction strategies

Amazon initially launched a two-day delivery program for its customers to ensure that its customers had fast delivery of products but soon other competitors started catching on. Amazon hence had to make another adjustment in its freight services and now offers a two-hour delivery service to Amazon Prime customers. For product freight, Amazon has equally sub-contracted firms such as the United Parcel Service to transport its products to its customers. Amazon has been relying on third-party couriers to make their deliveries as they have a better-established delivery route and path that they can leverage for efficient delivery services (Leblanc, 2019).

However, due to the consideration of numerous factors involved in using third-party carriers for deliveries, Amazon has developed its privately-owned freight service. Amazon hence uses its privately-owned vehicles to carry products to its clients specifically for same-day del iverie s. In recent times, Amazon has been developing cargo freight service in certain specific areas where the firm uses drones to carry items straight to their clients who are within a 10-mile radius from their warehouses. This has cut product deliveries to half an hour or less. Amazon is progressively incorporating newer technologies in its supply chain that systems can hence run without human supervision . This strategy has been articulated to be efficient so far as there are has been reduced inventory management costs over the last few years since the acquisition of Kiva Systems (Leblanc, 2019).

Relationships between freight rates and consignment weight

Amazon offers freight services for all products irrespective of their size. Customers hence have a wide area of flexibility in as far as product freight and its weight are concerned. It has however been articulated that small packages tend to make most courier services incur huge freight costs as they charge as per their weight. Upon making an order on the Amazon website, the firm has developed a standard shipping rate upon which the customer is charged. The firm charges a standard four dollars shipping fee and an additional half a dollar for every pound of weight that the product weighs. There are however other factors that come into play in calculation of the shipping fee such as how fast the client expects the item (Amazon, (n.d.)).

Issues that can impact the efficiency of transport

Amazon prefers to outsource delivery services of their sold products to outside delivery couriers. Amazon however, does own several vehicles that they also use but their main use is deliveries between warehouses. Amazon's strategy is to leverage other courier services to deliver its products as the firm lacks a well-defined delivery network as opposed to firms such as the United Parcel Service and FedEx. Outsourcing for delivery service has a direct influence on the cost incurred. Amazon had found it cheaper contracting other firms for their deliveries and have even further greatly encouraged some of their employees to start up small cargo delivery services (Onstein, Tavasszy, & Van Damme, 2019).

Similarly, still on costs and efficiency of warehousing operations, Amazon has greatly found favor in incorporating more recent innovations in technology. More than half of every aspect in each of the firm’s warehouse has been upgraded to include a complex and automated inventory system. Amazon’s warehouses are largely run by robots that have been equipped with the ability to go about various activities within the warehouse without any human supervision as previously mentioned. Through the automation of the firm’s warehouses, Amazon has been able to seamlessly achieve efficient ways of delivering to its clients and influence the rate of satisfaction in their c lien ts (Onstein, Tavasszy, & Van Damme, 2019).

Alternatively, geographical location is also a factor that influences efficiency in transportation. Amazon’s warehouses have been strategically positioned in numerous locations around the globe. Their location ensures there is easy accessibility to a well-defined road network for purposes of deliveries. With most of the firm’s deliveries being handled by road, this greatly favors the effective delivery of products. For clients within a ten-mile radius, deliveries are often done within half an hour placing the order with the help of cargo drones (Onstein, Tavasszy, & Van Damme, 2019).

Impact of relevant security initiatives, logistics and transportation risks, and transport security technical systems

Most if not all of Amazon’s customers expect that deliveries of their products can be handled in a time-sensitive manner. Therefore, this means that the firm ought to find ways to guarantee timely product deliveries . For Amazon, this would mean that to ensure that there are timely deliveries, there is a need to take up newer technologies and find other measures such as contract outside delivery services. Similarly, there would also be a need to take up newer and innovative technologies such as the use of drones for air freight (PwC, (n.d.)).

Most of the firm’s warehousing operations are largely handled by unmanned robots. This move to automate has proved to be of great help to the firm. Orders are seamlessly being processed as the warehouses have a complex inventory system that can run without any human presence. This cuts the time taken in processing and delivery of orders. Warehousing activities can hence run on a 24-hour basis with orders being processed on a real-time basis and efficiently being delivered to meet the client’s expectation hence influencing the satisfaction levels in customers (PwC, n.d.).

Numerous firms offer stiff competition to Amazon in as much as it is articulated to be one of the world’s largest retailing firms. As a way to ensure that the firm keeps ahead of its competition, Amazon needs to find ways to ensure it offers satisfactory service and goods to their clients. Amazon has then opted to manufacture as well as form partnerships with some small retailing stores that supply to the firm most of the ordered items. Amazon has hence redefined collaboration in business (PwC, n.d.).

PROCUREMENT AND INVENTORY MANAGEMENT

 Sourcing and procurement strategies

Most of Amazon’s supply chain depends heavily on outsourced measures. Vendors can ship their products to Amazon’s warehouse locations where they are stored anticipating a client to make an order upon which they can hence be shipped to a specified location. Amazon’s sourcing and procurement strategies hence mandates that the firm stores most of the frequently bought products while products that are not frequently bought are not stored at the firm’s warehouse. This hence greatly facilitates same-day deliveries to clients which are mainly handled by the firm’s own logistics means. Depending on outsourced logistics could greatly compromise same-day deliveries due to delayed shipments (Leblanc, 2019).

 Inventory control systems used by Amazon

Amazon as the leading online retailer in the U.S has been articula ted to greatly rely on innovative technologies. Amazon warehouses are largely automat ed as a complex inventory management system has been incorporated to run the firm’s facilities. With most operations being automated , robots are responsible for handling products within the warehouse without any human supervision. Amazon boasts of a huge customer following and to ensure the firm delivers its services to its large clientele, Amazon has a sophisticated information technology that can concurrently run its extensive network of warehouses. With the multi-tier inventory management and well-defined logistics plan, it can beat its competition in the market (Leblanc, 2019).

 Inventory cost reduction strategies used by Amazon

Amazon, as a way to hit back on its competitors, the firm has incorporated various strategies to out-do its competition. Most of the logistics operations are mainly done by third-party carriers. This reduced the pressure off the firm’s back in trying to develop delivery routes yet some firms can be leveraged upon to handle shipment on behalf of the firm. Similarly, amazon outsources its inventory. Most of the items in Amazon’s warehouses are obtained from third-party sellers whose goods are stocked based on their demand in the market. With the help of information technology systems, the firm can forecast the projected inventory and stock their warehouses cutting on delivery times (Leblanc, 2019).

TECHNOLOGY AND INFORMATION MANAGEMENT

 Logistics automation and logistic systems costs

In the year 2012, Amazon acquired Kiva Systems which is a company that mainly dealt with the development of robots. Kiva Systems late became Amazon Robotics which now developed robots that picked and packed items in Amazon’s warehouses with barely any human supervision. Warehouse operations became automated hence time was cut in processing orders before deliveries. In recent times, Amazon has been developing drones to deliver goods to their customers through a drone-based delivery system dubbed Amazon Prime Air that operates within a radius of 10 miles from any Amazon center and for products below five pounds (Leblanc, 2019).

Data capture methods used

With Amazon’s great involvement in using newer technologies in its business operations, the firm has been articulated to use big data methodologies in understanding its clientele. Amazon hence uses big data to gather information of their customers as they browse through the firm’s website. This way, the firm can develop a recommendation list that is specific to their customer based on their previous searches. This innovative strategy tends to streamline the convincing power urging the customer to purchase whatever they can see on their product feed. Big data is hence more collaborative filtering which gathers data of who their customer is based on their searches and develops a profile of each cust ome r (Marr, n.d.).

Data flows in the supply chain

It has been articulated that Amazon’s success comes from its effective supply chain management. Amazon’s supply chain is simple as it starts with an order being placed by a customer which sends an alert to the warehouse indicating the order details of the items ordered. With the complexity of the inventory system in the warehouse, by automation a robot can pick and place an item ordered and the item can be processed ready for shipping. The item is cross-referenced by the order details and sorted automatically then packaged for delivery. The item can then be delivered based on the details of the customer’s preference in the shipping method (Ovenden, 2018).

GLOBAL RISK FACTORS

The effectiveness of Amazon’s approach to GSCM

Amazon has been ranked as one of the largest and fastest-growing online retailer firm in the United States of America. The firm boasts of a large customer following who has built a close preference and relationship due to the effectiveness of the firm’s services. Based on statistics, Amazon’s strategies in supply chain management have been articula ted to be effectively working. Amazon has been able to significantly cut down its delivery times over a rather short time. With the inclusion of innovative technologies in the firm’s inventory control and logistics, the firm has significantly reduced costs incurred in logistics and procure of its inventory. This has only enabled the firm to seamlessly serve its customers better.

CONCLUSION

From Amazon’s strategies, it is apparent that adopting new technologies is a worthy measure in influencing the firm’s growth and development. Amazon has been able to reduce its cost that were previously incurred in business and been able to pose a great challenge in its competitors such as Walmart within the same market share. Through Amazon’s innovative strategies, the firm has in recent times been ranked as the fastest-growing retailer. The inclusion of innovative technologies in a firm’s supply chain management can hence be of great advantage. Amazon has been able to reduce logistics costs and cut down on delivery times as a result of automation and outsourcing of certain key activities and focused on core areas of the firm (Leblanc, 2019).

References

Amazon. (n.d.). Set your shipping rates - Amazon seller central. https://sellercentral.amazon.com/gp/help/external/G201841310

Leblanc, R. (2019, October 15). How Amazon Is Changing Supply Chain Management. Small Business. https://www.thebalancesmb.com/how-amazon-is-changing-supply-chain-management-4155324

Marr, B. (n.d.). Amazon: Using big data to understand customers. Bernard Marr. https://www.bernardmarr.com/default.asp?contentID=712

Onstein, A. T., Tavasszy, L. A., & Van Damme, D. A. (2019). Factors determining distribution structure decisions in logistics: a literature review and research agenda. Transport Reviews, 39(2), 243-260. DOI: 10.1080/01441647.2018.1459929

Ovenden, J. (2018, March 19). Amazon’s supply chain process | Articles | Chief supply chain officer. Innovation Enterprise | Channels. https://channels.theinnovationenterprise.com/articles/amazon-s-supply-chain-process

PwC. (n.d.). The future of the Logistics Industry. https://www.pwc.com/gx/en/transportation-logistics/pdf/the-future-of-the-logistics-industry.pdf