E-Business Logistics in India-

Amazon

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 Evaluation of Amazon’s Supply Chain

Laudon (2011) explains that the supply chain conception started in the 1980s and it has evolved into a very important business
concept. The supply chain is a network oforganizations and business processes to select raw materials to transform them into
intermediate and finished products and distribute the finished products to customers. Itconnects suppliers, industrial plants,
distribution centers, means of transportation, retail stores, and information by means of processes such as selection of raw
materials, inventory control, distribution and delivery, for the purpose of providing products and services from the source up to
the point of consumption.
In the past,the relationship between the customer and the supply chain ran through marketing. The customer talked to marketing
and if the information communicated from the customer involved changes to orders, these changes were communicated to supply
chain through the sales and operations planning system (S&OP) and the master production schedule (MPS).There was no need
for supply chain to talk to or even know anything about the customer. However, this system was not working because the supply
chain focused on cost and meeting the schedule but the customer often wanted responsiveness and flexibility. New radical
solution was developed where supply chain would get to know the customers up close and in person. Supply chain would focus
on those things that customers wanted also known as the customer-cientric supply chain. Like many things that have emerged in
supply chain management, the customer-centric supply chain is the result of the convergence of major forces, one of which is the
“amazon effect”.The Amazon effect is changing what customers expect from supply chain management. According to Aronow et
al (2015), Amazon is a modern retail juggernaut. Since its founding in 1994, it has grown from being simply an on-line bookstore
to a one-stop omni-channel retailer for everything from furniture to food to streaming entertainment service. More importantly, it
has changed how customers shop and what they expect, regardless of whether the customers are end users or a business. 24/7
customer service, easy to place orders, continuous flow of information about the order,reliable deliveries are some of its
features.Itcontinues to innovate in both products and services.Amazon manages its physical supply chain with precision and
efficiency, enabling broad adoption of its competitively priced hardware, which acts as a platform for softwareand media content
sold either discretely or through its Prime subscription service.In 2013, Amazon’s CEO Jeff Bezos announced that his company
is developing a drone-based delivery system called Amazon Prime Air which would be delivering products under five pounds in
locations within 10 miles of Amazon’s fulfillment centers within just 30 minutes or less.As per Amazon’s senior VP of
worldwide operations, Jeffrey Wilke, for company’s growth they focus primarily on price, selection and availabilityand all the
three depend critically on supply chain. Amazon has one of the most sophisticated supply chains-system in the world.Its
homemade applications handle nearly every aspect of its supply chain: warehouse management, transportation
management,inbound and outbound shipping, demand forecast, inventory planning and more. Amazon’s supply chain system is
so well integrated that when a customer places order for different items, the order management system communicates with
inventory and warehouse management systems to find the optimal distribution center or centers for fulfilling the order. The
customer knows within a minute how long it will take to ship the items and whether they will come in one package or separately
(Bacheldor, 2004).

Analysis of Supply Chain Management Amazon India

To start with, Amazon’s SCM has a strategic fit with its competitive strategy of being the retailer of choice for its customers. The
combination of multi-tier inventory management, superlative transportation, and highly efficient use of IT (Information
Technology), and its wide network of warehouses are all geared towards aligning its SCM with its competitive strategy.The next
aspect is related to its outsourcing of its inventory management. Amazon outsources the storage and distribution of products that
are not frequently purchased nor ordered for immediate delivery as well as products where the costs of storing them exceed the
marginal returns on their sales.On the other hand, Amazon stocks the frequently purchased and ordered items in its own
warehouses so that it can be responsive to the customer needs as well as not compromise on the delivery times and the lead times.
In other words, by segregating its inventory, Amazon is able to be responsive to the customers as well as cut costs or cut slack
where it is needed (Kotler, 2012, 65).Amazon divides its customer segments and follows a price differentiation strategy. The
various forms of delivery are one day delivery, free super saver delivery, first class delivery, and prime customers delivery.

For all these segments, Amazon offers the customers an option of paying more for faster delivery or retains the traditional lead-
time. Coupled with the inventory outsourcing, the customer segmentation into price-differentiated customers offers the companya
nimbleness and agility in the market that changes with dynamic fluctuations in demand.A key aspect of Amazon’s SCM is that it
has evolved over the years in response to its growth in the market. For instance, Amazon started off as a bookstore, which acts as
an intermediary between the buyers and the sellers and does not stock any product of its own.Gradually, this gave way to holding
some items in its own warehouses and at the present, Amazon follows a push-pull strategy wherein the inventory is held in a
push strategy and the shipment of the orders is done in a pull strategy. Of course, even now, Amazon follows pure pull
strategies for items that it does not stock.Any discussion on Amazon’s SCM is incomplete without an analysis of its multi-tier
inventory system. The first tier is the aggregation in the distribution centers, which ensures that Amazon holds fewer inventories
and responds to demand in a dynamic manner.The next tier is comprised of the partner distribution centers and the wholesalers
wherein whenever an ordered product is not available in its own distribution centers; Amazon can rely on its partners and
wholesalers to supply the customer with the required product. Further, through the use of sophisticated and real time IT, Amazon
is able to leverage efficiencies in its distribution.The third tier is comprised of the networks of third party sellers, publishers,
vendors, and manufacturers who ensure that Amazon acts as an intermediary that fulfills orders from customers by linking them
to this tier.

PROS AND CONS OF E-LOGISTICS-AMAZON

Pros
Amazon’s FBA program has lots of positive points, for sure. It’s not all roses; there are a few negative aspects, but let’s cover the
good stuff first.

1) No hassle for shipping and returns

When you get an order, packing it and sending it out is a lot of work. You have to print a packing slip, print a shipping label, fold up
a box, pack your item properly, tape up the box, stick on the shipping label, and leave it for the shipping guys to pick it up .Of course
it may be an employee doing this work for you – but it’s still quite a bit of work. Now if you got 10, 20, 30, or even more orders per
day, a good chunk of your time would just be lost in shipping !Enter Amazon FBA. You send your stuff to Amazon, they do
everything else for you. You literally just have to watch the sales come in and your numbers rise. That was just shipping. Now for
returns! You have to communicate with your buyer, send them an RMA, receive the item, inspect it for faults, send a replacement or
a refund, and resell your item .The logistics aren’t too difficult, but the communication can get quite tricky and tedious, especially if
you are dealing with a few returns per day .Amazon FBA puts your products into Amazon’s ridiculously simple returns process. You
don’t even have to deal with the customer – all of that is done through Amazon, and they handle all of the logistics, too.

2) Cheap shipping

The next big advantage of Amazon is really cheap shipping and packing costs.. If your product sells through Amazon itself,
you’re looking at $1.04 per unit in packing costs, and between $0.50 to $0.60 per pound of weight in handling costs – shipping
is free. So if you sell items that weigh 3 pounds on average, you’d pay about $2.50 per order for shipping .If your item sells
through any other channel and Amazon is fulfilling it for you, then your standard(media) sized parcel ships for $1.90 for standard
shipping, $0.60 for packing, and $0.45 per pound of weight in handling. So for the same 3 pound product, you’re looking at
$3.80 per order for shipping, which is still very cheap compared to what you’d have to pay if you are doing this in house.

3) Automatic Prime

When you fulfil with Amazon FBA, your items automatically qualify for Amazon Prime shipping, so all Prime members can get free
two-day shipping for your products .Amazon Prime is a huge sales motivator – the prospect of getting your products delivered in just
two days, and for FREE, is awesome. Most of the time, if an item is available from two sellers, one via Prime and the other via
regular shipping, the Prime seller will get the sale. What’s more, you don’t have to pay anything more as a Prime seller – you’ll be
charged the same rate, regardless of whether or not your customer ordered via Prime or regular shipping .Just the benefit of Prime
makes FBA one of the most lucrative online business opportunities around right now.

4) Buy box priority

Along with Prime, you may have noticed two things: sellers using FBA are higher up in the buy box, and they also have a little
emblem saying “Fulfilled By Amazon.” In listings where 20 or more people are selling the same product, every inch you can move
yourself higher in the buy box could mean hundreds of orders.

5) Multi-channel fulfilment
Finally, when you use FBA, you’re not limited to just selling on Amazon’s marketplace. You can sell your products through any
channel you wish to sell on, and fulfil your multi-channel orders with FBA. There are even solutions that will 

Amazon sees FBA as a win-win situation. Not only are they getting paid to store your stuff, they also grow the selection of items in
their catalogue every single day – when sold through the Amazon marketplaces, these are all more things for Amazon to make their
15% cut on.

Cons
Despite all of these overwhelming pros, there are a few cons to the FBA program that you need to consider.

1) Stale inventory/losing track

Like any other warehouse operation, if you have hundreds, if not thousands of products in Amazon FBA, it’s highly likely that not all
of them will sell. You’ll probably end up with quite a bit of stale inventory that you are paying rent for and not selling. The other
issue is that it’s difficult to keep track of FBA inventory once it becomes too much. A hundred to a couple of hundred products are
easy to keep track of, and they’ll fit on one page of your Seller Central dashboard .Once those products reach the thousands, though,
it will be hard to really be abreast of what inventory you have, what you need, and what you should cut back on. Sure, you’ll be able
to track your best sellers, but aside from that, it’ll be difficult – especially since the whole process is so automated.

2 )Pooled inventory

Due to the sheer quantity of products, and sellers, in Amazon’s warehouses, not every merchant gets their own bin location for every
product. Quite often your inventory will be pooled with the same products, from other sellers .This is generally not that big of a deal,
but what it means is that the physical product your customer actually receives may not be the exact one you sent to Amazon. It may
be one from another seller. There is a chance another seller will be selling the “same item” but of lesser quality, or potentially even
counterfeit. There are stories out there of sellers having their account suspended due to defective , or counterfeit merchandise that
was actually supplied by another seller. It’s not common, but it can happen.

3) Difficulty in shipping product to Amazon

The final con factor of Amazon FBA is the difficulty of getting things over to Amazon’s warehouses. Amazon has a very strict
ASIN/UPC system, and you have to label each and every one of your products individually, pack them up into multiple shipments
(that go to Amazon’s multiple warehouses), and send them off. So one shipment to FBA will actually be 3 or 4 shipments, which will
also add to your bottom line costs .Amazon does offer a service where they will label the products for you at $0.20 per product, so
that may be worth considering as you are starting out.

Conclusion

At the end of the day, Amazon FBAs pros clearly outweigh the cons, and it is definitely a solid business model that people are doing
very, very well with.