AMAZON’S SUPPLY CHAIN.

Founded in 1994 and headquartered in Seattle, Washington, Amazon initially started as

an online bookstore and has since evolved into the world's largest e-commerce platform,
offering a wide range of products including books, electronics, apparel, and home goods.
As its business expanded, Amazon has not only dominated the e-commerce sector but
also ventured into cloud computing (AWS), artificial intelligence, smart home devices
(such as the Echo series), and brick-and-mortar retail (Whole Foods Market). (Lu, 2024)

As a recognized leader in supply chain management, Amazon has pioneered numerous

innovations. These include the introduction of Amazon Prime, the exploration of drone
delivery services, and the development of sophisticated algorithms to optimize order
fulfillment, particularly in warehouse environments with randomly stored inventory

- One of the business philosophies from Amazon's Supply Chain by CEO - Jeff Bezos:
First, and considered the 'guideline' for activities at Amazon, is customer-centric. In many
internal meetings, Bezos often sets up an empty chair and tells everyone: The company
should think from the perspective of an important customer who cannot be present to
participate in the meeting. Since then, the “empty chair” has become a symbol of
customer-focused business practices within Amazon's supply chain. In addition, many
executives also have to attend training courses at call centers to be able to better
understand their customers directly through feedback. (VILAS, 2018)

This company significantly focuses on customers. From the user-friendly interface of its
website to its efficient customer service, Amazon consistently prioritizes the customer
experience. This focus is reflected in the company's high customer satisfaction ratings,
with more than half of its consumer base reporting an exceptional online shopping
experience. One of the most notable aspects of Amazon's customer experience is its
emphasis on fast and free shipping. For nearly 80% of Amazon users, this is the main
reason for choosing to purchase from the platform. By removing the friction associated
with shipping costs and long delivery times, Amazon has created a compelling value
proposition that keeps customers coming back. (Lino, 2024)

The science behind Amazon Prime helps surface the most relevant Prime benefits to
customers. When shoppers visit the Amazon Store, they are presented with a variety of
Prime callouts with relevant benefits and related product information. Callouts for non-
Prime members might outline the wide variety of benefits available, while Prime
members might see more options to utilize their Prime benefits. For example, a Prime
member visiting the detail page for the movie Jane Eyre might see a callout saying that
the title is available for free on Prime Reading. Besides, determining the most relevant
Prime benefits to present to users is the first step. Prime’s scientists have also developed
algorithms to determine which formats are most likely to appeal to customers. (Amazon,
2021)

“Every callout has multiple dimensions, which in turn presents a large number of
decisions,” says Nassif. “Do customers like to see their name? Should the callout feature
a single particular product? Or even a grouping of products? To make these decisions,
we have to develop an accurate understanding of customer preferences.”

Amazon delivers more products and faster speeds for customers, while continuing to
lower costs and improve employee safety. When we launched Prime in 2005, the first
benefit we announced to members was free Two-Day Shipping (Jeff Bezos called it “all-
you-can-eat express shipping”) on 1 million items—a revolutionary innovation at the
time that transformed the way many of us shop, my family and me included. Today,
Prime is much more expansive and much faster. With more than 300 million items
available with free Prime shipping and tens of millions of the most popular items
available with free Same-Day or One-Day Delivery, we hit our fastest Prime speeds ever
last quarter. Across the top 60 largest U.S. metro areas, more than half of Prime member
orders arrived the same or next day. (Herrington, 2023)
Prime has grown over the years to include savings, convenience, and entertainment all in
a single membership. Members enjoy exclusive deals and shopping events like Prime
Day, as well as movies and series, music and podcasts, photo storage, gaming benefits,
books and magazines, and prescription and grocery savings. Yet fast and reliable delivery
across a wide selection of products remains the cornerstone of our offering and an
enduring priority for us. If we continue to invest in improving delivery speeds and an
ever-growing product selection, customers will continue to choose Amazon and Prime.
We’ve evolved to make customers’ lives better and easier, allowing them to shop for
pretty much anything in our store and get it quickly—because when you run out of
toothpaste, Same-Day Delivery makes a big difference! (Herrington, 2023)

So how have we achieved our fastest delivery speeds on the broadest selection ever, and
why do we expect to get even faster from here? Here’s a quick summary.
“Regionalizing” our U.S. operations network

In short, we divided the country into smaller, easier-to-reach regions. Previously, we

fulfilled orders from any of our operational sites across the country. Now we have eight
interconnected regions serving smaller geographic areas. We keep a broad selection of
inventory in each region, making it faster and less expensive to get those products to
customers. Today, more than 76% of the orders we fulfill come from within the
customer’s region. Items shipped from nearby fulfillment centers or delivery stations help
packages get to customers not only faster, but also with fewer emissions. (Herrington,
2023)

Placing products closer to customers

We use increasingly advanced machine learning algorithms to better predict which items
customers in various parts of the country will want and when they will want them, and
we work with our vendors and selling partners to store those products closer to
customers. This helps to ensure that we have the right inventory, in the right places, at the
right time. We’re also expanding our capacity to place products in the right fulfillment
center in each region. This allows us to shorten replenishment times while maintaining
the broadest selection of products available to fulfill a customer’s entire order at one time
from the Amazon location closest to them.(Herrington, 2023)
Growing our Same-Day Delivery network

Same-Day facilities are smaller buildings situated close to the large metro areas they
serve, which decreases the distance to customers. I’ve spent a lot of time in these
buildings this year, and I can personally attest to the innovation and customer obsession
happening in them every day. These buildings are designed for speed with smaller
footprints, streamlined conveyors, and picking directly to pack stations. As a result, the
average time from picking a customer’s items to positioning the customer’s package on
the outbound dock is 11 minutes in Same-Day facilities, more than an hour faster than
our traditional fulfillment centers. And these hybrid facilities allow us to fulfill, sort, and
deliver all from one site—making the entire process of delivering customer packages
even faster. Selection varies by city, as we regularly update our product offering based on
what we’re seeing as top customer items purchased or based on seasonal demand in the
area. And with connections to the larger Amazon fulfillment centers nearby, we
dramatically increase the number of items available for fast delivery. Same-Day Delivery
is currently available on millions of items for customers across more than 90 U.S. metro
areas, and we have plans to double the number of sites in the coming years. (Herrington,
2023)
DESIGN THINKING PROCESS

In the “Empathy” step, Amazon's journey towards supply chain excellence began
with a deep understanding of its customers' needs and pain points. Through
extensive customer feedback channels, including call centers, online reviews, and
social media, the company recognized a growing demand for faster shipping times
and a wider selection of products. Customers expressed frustration with traditional
shipping methods, citing long wait times and high costs as major deterrents. This
empathy for the customer experience fueled Amazon's innovation in supply chain
management. By actively listening to its customers and identifying their unmet
needs, Amazon was able to develop solutions that not only met but exceeded
expectations, solidifying its position as a leader in e-commerce and setting a new
standard for customer-centric supply chain practices.

The next crucial step is “Define” that means the data and information collected in
the “Empathy” phase will be synthesized and interconnected to analyze and
identify the core of the problem. Amazon's 2 main problem statements are “How
might we create a membership program that significantly enhances the customer
shopping experience and drives loyalty?” and “How might we deliver a wider
selection of products to customers faster and more efficiently?”.

Amazon has also actually identified four key customer needs including faster
shipping times, wider product selection, competitive pricing, and delivery options.
In more detail, Amazon Prime, with its commitment to fast delivery, has become a
new standard in the e-commerce industry. This shows that Amazon clearly
understands customers' needs to receive products quickly. Besides, the constantly
expanding product catalog, from books to electronics, fashion, and fresh food,
shows that Amazon has succeeded in meeting the diverse needs of customers.
Another good point is that Amazon Prime has a responsible price because Amazon
uses many strategies to maintain competitive prices, such as supplier negotiations,
supply chain optimization, and promotions. Last but not least, flexible delivery
options, such as delivery to automated pickup locations or same-day delivery, give
customers more options to fit their schedules and needs.

In the “Ideate” step of the DSTK process, Amazon engaged in brainstorming to

identify potential solutions for improving its supply chain efficiency. This involved
exploring a range of ideas, such as establishing a network of regional fulfillment
centers to reduce delivery times, leveraging advanced machine learning algorithms
to optimize inventory management and minimize stockouts, investing in
infrastructure to support same-day delivery, and expanding partnerships with
vendors and selling partners to enhance product availability and streamline
operations. These ideas were generated through collaborative discussions and
creative thinking within the Amazon organization.

Amazon exemplifies the importance of “Prototype” step in the DSTK process. By

piloting new delivery strategies, fulfillment center layouts, and technological
solutions in specific regions, Amazon creates tangible prototypes to test and refine
its supply chain innovations. This iterative approach allows the company to gather
valuable feedback from customers, employees, and delivery partners. This
feedback loop is crucial for identifying areas for improvement, addressing potential
challenges, and ultimately optimizing the overall customer experience. For
instance, Amazon's exploration of drone delivery likely involved prototyping and
testing various drone models and delivery routes in controlled environments before
expanding to larger-scale operations. This iterative process ensures that Amazon's
supply chain solutions are not only innovative but also practical, efficient, and
aligned with customer needs.

Amazon's launch of Prime exemplifies the importance of the "Test" step in the
DSTK process. By initially offering two-day shipping on a limited product
selection, Amazon was able to gather valuable data on customer satisfaction,
delivery times, and operational costs. This data-driven approach allowed the
company to refine its Prime offering based on real-world feedback. Amazon's
continuous monitoring and improvement of Prime, including expanding the
selection, introducing faster delivery options, and enhancing the overall customer
experience, demonstrates the iterative nature of the testing process and its crucial
role in achieving success.