Supply Chain Integration

Amazon Supply Chain Integration

In the current era of competition, the success of supply chains increasingly depends on the ability of the management to integrate the company’s networks of business relationships. Supply chain integration is a major contributor to organization’s success. According to John (2014), supply chain integration involves redefining and connecting internal functions within a company with the external processes of suppliers and consumers among other participants to enhance organization performance. In the span of two decades since Amazon was founded in 1995, the company has moved from a small online bookseller to one of the most formidable and dominant forces in the supply chain market. Amazon is a prime example of a company that has successfully managed its supply chain to achieve their current growth, profitably, and market position. Considering Amazon’s progression in the supply chain integration, we address seek to address multiple questions to get a comprehensive understanding of the importance of supply chain integration in business success.

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Sales and Operations Planning

At Amazon, sales and operations planning in supply chain integration have resulted in significant growth of the company over the past decades. The sophisticated and unique sales and operations planning processes have enabled Amazon to be the driving force of innovation and change in the current competitive world. According to an article by Hook (2016), Amazon Prime is one of the key strategies that has enabled the growth of the company’s sales in the United States and as a result, the company is replicating it in its international markets. Recently, Amazon introduced the patent drone technology that is expected to deliver packages in an automated manner and fast (Coombs, 2018).

Amazon’s Medium and Long-term Forecast

In organizations, medium-term forecasts are often used to inform minor strategic decisions concerning the operations of the businesses. According to Lancaster and Massingham (2011), the forecasts are important in budgeting for operating budget. On the other hand, long-term forecasts inform major strategic decisions involving the organization and often relate to resource implications. At Amazon, the medium and long-term forecast will help the operations management to identify the consumer needs and the best ways to meet them. Through the forecast, the company will also be able to manage effectively the supplies, reduce inventory, and save the company from any serious and negative implications. 

Logistics, Transportation Modes, and Warehouse Locations

According to a report by Kim (2015), by 2015, Amazon had 173 logistics facilities all over the world. Out of the 173 facilities, 104 are located in North America region, and the rest spread across Asia and Europe. The logistics facilities include large fulfillment warehouses, sorting facilities where packages are presorted before shipping, and a Prime Now hub used to store one-hour delivery items. Having such logistics facilities in an expansive network helps Amazon provide faster service to their consumers all over the world, increasing their competitiveness. It also helps the company to have more control over its shipping expenses. 

Global Sourcing and Procurement Impact on the Supply Chain

Ideally, the interest in global purchasing has significantly increased. According to Haartman and Bengtsson (2015), global sources contribute to cost reduction, especially when goods and services come from low-cost regions. Another important rationale when considering global sources is the desire to acquire knowledge and technology from external suppliers. Using global sourcing and procurement affects the overall effectiveness of the supply chain by lowering the procurement pricing and enabling the company to acquire new technology and knowledge about products. 

Benefits and Challenges of Outsourcing Logistic and other Functions

Amazon has been outsourcing logistics and other functions for years. While ensuring that operations go smoothly and goods move quickly from one place to another, benefits and challenges have occurred. For instance, Amazon has benefited from outsourcing by gaining competency in the global market. Amazon continues to increase its customer base and expand its market share because of its outsourcing strategies. Notably, from its outsourcing logistics, Amazon attracts millions of customers from all over the world. Along with that, the company has significantly achieved economy of scale. The ability to have larger logistics facilities has increased the company’s networks and purchasing power. Outsourcing logistics also reduce the cost it takes to deliver shipments and in return drive the company towards profitability. Unfortunately, outsourcing has also various drawbacks. For instance, existing employees may feel threatened and fear they might lose their employment contracts creating a challenge for the company and the employees. 

Leveraging e-commerce Strategies

Over the last two decades, Amazon has managed to grow from the small online bookseller company started in 1995 to the giant retailer the company is today. Notably, the company has successfully maintained its competitive position by leveraging its e-commerce strategies. One of the strategies linked to Amazon’s success and effective supply chain integration is the company’s strong customer relationship (Matthews, 2012). More specifically, Amazon’s relationship with its customers is one-to-one, akin to what banks have with their clients. The relationship enables the company to collect endless and useful information about its shoppers and use it to customize their products targeting consumers through their e-mails and company website. Another strategy that Amazon has used to leverage e-commerce is the Kindle universe. Amazon realized that e-commerce would shift from the traditional computers to mobile devices. The Kindle has managed to maintain the company’s strong presence in the digital-media businesses. 

Amazon Setting an Example for other Companies to Model

In slightly over 20 years, Amazon has expanded from an online bookseller startup company to one of the largest multinational retailers. Amazon business model holds lessons for other companies who want to evolve, grow, and survive in the current competitive global market. For instance, looking at the way Amazon relates to its customers, other companies should emulate the one-to-one relationship, which has significantly contributed to Amazon’s e-commerce success. Additionally, Amazon is always evolving and embracing new technology, which has enabled them to gain a competitive advantage in the market. In the current business world, technology is constantly disrupting the way companies operate through rapid changes in the market, competition, technology, and customer expectations. Consistently, Amazon has maintained a precedence of embracing the current technology as it emerges and companies should emulate its strategies.

To succeed in the current digital economy, organizations must be able to integrate their internal processes with the external processes. Supply chain integration enables activities involved in supply chain management to be integrated to ensure proper coordination and enhance organizational performance. Amazon is a prime example of an organization that has successfully managed its supply chain integration and enabled it to achieve unprecedented growth and profitability. The company has set an example for other companies to emulate its e-commerce business model to achieve competitiveness in the global market. 

References

Coombs, C. (2018). Driverless delivery: Amazon’s latest patent combines autonomous trucks with drones. Business Journals. Retrieved from: https://www.bizjournals.com/seattle/news/2018/03/27/driverless-delivery-amazon-patent-trucks-drones.html

Haartman, V. R., & Bengtsson, L. (2015). The impact of global purchasing and supplier integration on product innovation. International Journal of Operations & Production Management, 35(9), 1295-1311.

Hook, L. (2016). Amazon’s prime challenge is international growth. Financial Times. Retrieved from: https://www.ft.com/content/6486476a-e122-11e5-8d9b-e88a2a889797

Kim, E. (2015). The latest data shows where Amazon might be headed next — and it should terrify UPS and FedEx. Business Insider. Retrieved from: http://www.businessinsider.com/amazon-logistics-facilities-update-2015-10?IR=T

Lancaster, G., & Massingham, L. (2011). Essentials of marketing management. New York: Routledge.

Matthews, C. (2012). Will Amazon take over the World? Time. Retrieved from: http://business.time.com/2012/07/16/will-amazon-take-over-the-world/Wang, J. (2014). Encyclopedia of business analytics and optimization. Hershey: Pennsylvania

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