How Amazon Is Reshaping Supply Chain Management Innovatively?
- by eSellerHub
The online retailer Amazon has rapidly found its way to the top by adopting various innovative techniques. The face of retail has been altered by using boldly innovative amazon supply chain management strategies.
Ten years after the post establishment of Amazon, it generated just under $7 billion annual revenue. By the end of 2018, its revenue reached almost $233 billion, according to Statista. Amazon’s growth has been recorded to grow 20% per year approximately. Presently, it revels in almost 14% of gross sales in global e-commerce. A perspective prevails that Amazon is taking aim towards $1 trillion annual revenue, which, if calculated with the present growth rate, should attain that goal by 2027.
Whether the company reaches that goal by then or not, the transformation from a meek online bookseller to the most intimidating force in the retail industry is noteworthy. One of the major driving forces is its highly efficient and innovative supply chain. Amazon’s unceasing efforts to deliver products in the shortest possible time to the customers are creating extreme pressure on other retail industry giants worldwide. It totally changes the way that supply chain management works.
Game-Changing Delivery Schemes
In 2005, Amazon launched the Amazon Prime service. Customers can avail of it by paying an annual membership fee. It entitles the customers to guaranteed two-day shipping on several of its products. This two-day delivery concept established Amazon’s dominance in the online retail industry.
When many other retailers were trying to match with the started free two-day shipping, Amazon raised the bars by providing its customers with one-hour delivery in its Amazon Prime Now service. It has been changed to a free two-hour delivery ever since. Its timely innovative strategies have always made life difficult for its competitors.
Advanced Supply Chain Management Practices
Amazon takes delight in a cult following. It stays as customers’ favorite choice because of the one main central reason: fast and efficient Amazon supply chain management. It is made possible with the combination of the following:
- sophisticated information technology
- an extensive network of warehouses
- multi-tier inventory management
- excellent transportation
It enables Amazon’s supply chain management to be the most efficient among all the top companies globally. Those efficiencies have made the present shop-from-home world alive.
Outsourcing Inventory Management and Insourcing Logistics
Amazon’s supply chain is rested heavily on outsourcing of its inventory management. The infrequently ordered items are not stored in Amazon warehouses. Over 50% of Amazon’s sales are in the hands of third-party sellers. Amazon’s logistics made two-hour or same-day shipping possible. Depending on third-party logistics for order delivery would only delay product delivery time. That’s the reason why Amazon customarily uses its delivery vehicles, too, to make one-hour delivery possible.
Delivery Options for Customers
Amazon has various warehouses for diverse products and customer preferences. Amazon customers can avail the following delivery types:
- Prime delivery
- one-day delivery
- first-class delivery
- free super-saver delivery
Thus, Amazon’s never-ending efforts to cater to every customer’s delivery choices make it a logistics giant.
Push-Pull Strategy for Supply Chain Success?
Amazon’s own warehouses are located and stocked strategically, moving closer towards main metropolitan areas and the cities’ heart. Consequently, it makes use of a push strategy for the products stored in its warehouses, predicting the specific region’s demand.
Conversely, it makes use of the pull strategy while selling third-party sellers’ products by employing an order fulfillment model.
Supply Chain Cost
Owing to the vast economic scale and leading supply chain strategies, Amazon can have a bare minimum cost per unit supply. It has been challenging for other companies with much lesser sales volumes and only their own warehouses.
Drones: The Future of Amazon Supply Chain Management
Started in 2014, the concept of drone-based delivery is still continuing research and regulatory compliance updates. There is no definite date yet for Amazon’s drones to take off officially. However, this development is a chief indicator that Amazon is doing its best to leverage the entire supply chain technologies to keep its crown as the reigning market leader.
Entering Manufacturing Sector
Amazon not only makes retail sales but produces a range of products such as batteries, Bluetooth speakers, backpacks, dog poop bags, iPhone chargers, and more. Its product manufacturing segment continues to magnify to consist of more and more categories.
Amazon understood that the company’s colossal volume obviously gives itself to low-cost production. Therefore, Amazon’s manufacturing sector helps it become financially stronger while getting hold of market share from several manufacturing companies. It also provides Amazon with the essential revenue growth opportunity.
The Bottom Line
The rate of Amazon’s inventive growth in supply chain management is enthralling, making it hard enough for fewer volume competitors to keep up. It forces the significant competitors to expend more on supply chain automation, raise the warehouse numbers, reduce the whole delivery time, and take part in product manufacturing. Even sellers are recommended to use third-party tools like Amazon order management software and Amazon inventory management software to keep pace with the competition.
Most importantly, Amazon’s unique supply chain strategies and continuous technological innovations have already changed how supply chain management works. It’s redesigning the supply chain and making it challenging for competitors to catch up.
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