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r 1995Ͷ1998 Establishing
r 1999 Building Addition Fulfillment
r 2000Ͷ2002 Optimizing the Customer
(fulfillment network)
] —ely on distinctive procurement strategy
] Hold modest inventories and rely on wholesalers
] Amazon opened direct account with publishers to
obtain better purchasing discounts
] Built up its infrastructure and systems
] Expanded its product lines



= = 

] Face tougher competition from different players
] To remain the ͞e-tailing͟ leader, Amazon decided to
follow Š 

] For supporting its transformation and its projected triple
growth , Amazon adapted its supply chain and distribution
o How many DCs it should have and where to location them
o Which product types each of new DCs should carry
o —egarded the equipment in new DCs
o Maintain high level of quality and productivity in its DCs



o `treamlining U` distribution centres processes
o Inventory costs
o Delivery processes
o Other company initiative to gain profitability
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>aunching Amazon in UK & Germany
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>aunching Amazon in France
] V #   0,,,


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Globalization >ocalization


Ë Maintain Web sites functionalities are unique to each country.
Ë Build 24-hours-a-day customer centers with native-speaking
1 Ë customer service representatives.

Ë Address selling regulations in each country.

2 Ë Free shipping.

Ë ayment options (e.g. Credit CardmCheckm ostal Order).

3 Ë This decision come with cost

Ë Find out it could not replicate its U` procurement strategy in

4 Germany and France, because of different supplier market factor.
4 V   /
# .    5
] 6
] 7  

] 7
] 2      
] 4V  


] &    
Organization of European subsidiaries
] Each country had its own organization (decentralization).
] >ocal employees headed by country manager.
] >ocal experience was critical in every facet operations.

] By 2001 Amazon Embarked on a major

˜ Cost-cutting.
˜ —estructuring effort to reach profitability.
˜ Unify the marketing and branding functions of three
subsidiaries, to build an identical set of values for the
Amazon Brand.
`upply chain of




† #

r rovides conforms to individual
information.(customization †

service) r Customer can͛t skim through
r Up-to-date technology and the book before buying it.
r 1-click ordering; select and r >arge inventory risk
purchase the products on line.
r High brand name recognition
r Distribution centres ʹgeographical
r High inventory turnover
† #


r `ince the internet is developing
quickly, the electronic r Aggressive competition
commerce market has r Ease of entry into the
significant potential. market
r Increased number of internet
users and amount of purchases r rone to identity theft











>ocation should be strategically


Expand its operations into other

European countries.

`et up an independent operating unit

in a new country would prove to be
very expensive for Amazon Europe

ush- ull `ystem
(1999-present) ?
ull `ystem (1996-
Has 23 warehouses
1999) ?
worldwide M
The company did not
Keeps stock of the
have inventory. It
high selling products
relied on M
and M
Ingram Book Group
partners up with a
to meet its demand
large number of

Why the switch? ?

Margins, service M
Increase in volume
T r
alt r ativ
sig f E N

1) T `ING>E 2) T TWO C 3) T TH—EE

Ct ry t ry Ct ry
|  j ,
r Decrease in demand
variability across the supply
chain due to location
pooling in a single DC. r Increase in outbound
r —isk ooling leading to transportation cost
decrease in inventory levels r Customer service levels
and associated costs. may be affected with
r Decrease in inbound the increase in lead
transportation cost. times.
r Bullwhip effect is lessened
r —elatively easy to
|  j

r This design may pose

r —ealizes advantages of
some challenges on
location and lead time
scalability once
pooling without the
expansion plans are
concern of inconsistent
underway as two DCs
postal delivery service
may not be enough to
and transportation
serve a huge
customer base.
The sþþ DCs Theory
|  j ,

r Decrease in demand variability

across the supply chain due to
r This design results in bigger
virtual pooling.
inventories than in a single DC
r —educed inventory and
that enjoy the benefits of
transportation cost along with the
inventory pooling.
ability for postal injection by
r A high degree of coordination
bypassing poor postal service
increases the complexity and
between countries to deliver
IT costs of the system and
products through road
makes implementation that
transportation provide added
much more difficult.
r —eduction in implementation cost


r Analysis of past data of what all items are

brought together and placing these items
together in DC to overcome the  
r The transportation team should work
collaboratively with customer service to
educate customer to associate a different
shipping price to the delivery service level
r Centralized procurement system
r Better coordination among different
department, good IT infrastructure and
a collaborative environment for better


] Õuestions & Discussion͙?