ASSESSMENT TASK 2: DESCRIPTION

Under the broad umbrella of Supply Chain Management this individual assignment will
be based around an International Retail Company involved in online selling to customers
globally (not Apple). Your task is to identify and analyse the businesss global logistics,
supply chain channels and sustainability throughout the value chain all the way to the
end user - the customer. You will identify the associated linkages back to the theory you
are studying in LB5230 - Managing Strategic Resources and Operations.
The assignment will broadly cover the material you have studied from session six
onwards (Part II of your text book) as well as, class room discussions, concepts and
Journal articles or other external material, you have covered in class, or as part of your
individual readings. In particular, your answer to assignment 2 will encompass the
following broad themes:

Overview of the business/company selected

Supply chain/logistics management from the source to the customer

Linkage between the company activities and LB5230 theories

Sustainability throughout the value chain

Amazon'sSupplyChain:DeliveringClicksand
Bricks
Bonney, Joseph; Senior Editor. Journal of Commerce [New York] 30 Jan 2012.
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2. Abstract/Details
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Abstract

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When retailers first dipped their toes into online sales, many outsourced their e-commerce
supply chains to Amazon or other third parties. "It wasn't something the traditional companies
understood. It wasn't something that fit their existing models or core competencies," [Rich
Thompson] said. "Now more are taking this in-house. Everyone recognizes this is not a fad."
"Many people are used to Amazon using the USPS for last-mile delivery," [Satish Jindel]
said. "There's no reason why they can't use the post office for the first mile, too."
Amazon and other online retailers often require distribution centers of 500,000 square feet or
larger. "In today's industrial real estate market, they are virtually impossible to find, so you
find yourself in a build-to-suit situation," Thompson said. "Developers in the last few years
have been shying away from 'build it and they will come.' "

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Amazon.com is the biggest thing to hit retailing since Wal-Mart went national. Like Wal-Mart,
Amazon is leveraging its size and scale to overwhelm weaker competitors. And perhaps
even more than Wal-Mart, Amazon is challenging survivors to overhaul their supply chains.
The online sales specialist is extending its impact deep into distribution channels and
causing competitors and service providers to respond.

"E-tailing is the fastest-growing segment of retail," said Rich Thompson, executive vice
president, Americas supply chain and logistics, at real estate company Jones Lang LaSalle.
"Companies like Amazon that grew up as e-tailers have an advantage in terms of learning
curve, but more traditional brick-and-mortar retailers are quickly recognizing they need to
figure this out."
If the traditional retailers didn't recognize the impact of e-commerce before the just-ended
holiday season, they do now. While store sales overall rose 4.1 percent during November
and December, online sales jumped 15 percent.
Related: E-commerce Taxes Retail Competitors .
Online sales now represent more than 8 percent of total retail sales, up from 2 percent a
decade ago. Forrester Research forecasts online sales will grow more than 10 percent
annually during the next five years.
Supply chains are emerging as a key part of the fight between traditional retailers and online
competitors. Amazon is at the forefront of that battle in part because of its scale, but also
because of its business strategy: Much of Amazon's growth has come from managing supply
chains for other online or brick-and-mortar retailers. The company reported third quarter
revenue growth of 44 percent to $10.9 billion, although operating income slipped 71 percent
to $79 million, largely because of heavy investment in new distribution centers.
Amazon is scheduled to report full-year results on Jan. 31.
Amazon started as an online distributor of books and music -- book retailer Borders,
liquidated last year, was a casualty of e-commerce competition. Now that Amazon has
expanded its offerings to encompass everything from socks to kayaks and industrial lathes,
other traditional retailers are feeling the heat. Much of that heat is coming in the distribution
channels and transportation networks that carry the goods.
Retail supply chains used to be organized in a straight line from supplier to distribution center
to stores. Then came the Internet and the proliferation of gadgets that allow shoppers to buy
from home, office or even a competitor's store. Amazon raised competitors' hackles in
December by inviting shoppers to use smartphones or tablet computers to check prices at
brick-and-mortar stores and then get a $5 discount for buying the merchandise from Amazon
without paying sales tax.

Amazon said the effort was just an exercise, but it also marked a new skirmish in a broader
battle Amazon is waging at distribution centers and in shopping carts -- the real and the
virtual kind.
Target, which reported holiday sales up just 1.7 percent at stores open a year or more, this
month asked suppliers for special products and pricing to help keep online-only retailers from
using its stores "as a showroom for their products." Target recently announced it was taking
over its e-commerce business from Amazon and would build an online distribution center of
up to 1.2 million feet in the southeastern U.S.
When retailers first dipped their toes into online sales, many outsourced their e-commerce
supply chains to Amazon or other third parties. "It wasn't something the traditional companies
understood. It wasn't something that fit their existing models or core competencies,"
Thompson said. "Now more are taking this in-house. Everyone recognizes this is not a fad."
Although some retailers are bringing online supply chains in-house, Amazon is parlaying its
size and scope into a dominant position in retail logistics. It also is leveraging its distribution
center and linehaul networks to provide other online retailers with door-to-door parcel
delivery.
"There is an opportunity for Amazon to do something in the parcel space that people have
been hoping the trucking companies would do," said Satish Jindel, president of SJ
Consulting Group.
He said Amazon could operate as an "asset-light parcel carrier" that relies on the U.S. Postal
Service and regional carriers to pick up parcel shipments from small shippers and deliver
them to online retailers and their customers.
"Many people are used to Amazon using the USPS for last-mile delivery," Jindel said.
"There's no reason why they can't use the post office for the first mile, too."
Amazon's expansion has injected life into an industrial real estate market still recovering from
the recession. The company added 17 large distribution centers last year, bringing its total to
69 in the U.S. and abroad. Its expansion has attracted complaints from other retailers that
Amazon enjoys a cost edge by not charging sales taxes.
The Supreme Court ruled in 1992 that retailers don't have to collect sales taxes where they
lack a presence. Amazon and other online-only retailers have interpreted the law to mean a

physical "selling" presence, and have located their distribution centers in states that don't
require them to collect sales tax.
Sales taxes remain a top consideration in site selection for online DCs, but Thompson said
Amazon and others also are influenced by work force quality and availability, proximity to air
and ground parcel shipping hubs, and facility design. In many cases, that requires new
construction.
Amazon and other online retailers often require distribution centers of 500,000 square feet or
larger. "In today's industrial real estate market, they are virtually impossible to find, so you
find yourself in a build-to-suit situation," Thompson said. "Developers in the last few years
have been shying away from 'build it and they will come.' "
Online distribution centers have different design requirements than traditional retail
distribution centers. "You're doing quick turns and a high volume of orders," Thompson said.
"You want a building with depth, so you can have wider column spacing for sorters and
robots and automation. On the other hand, with robotics, you don't need as much ceiling
height."
Traditional retailers have said they can have the best of the online and physical store worlds,
but mixing store and online distribution channels is difficult. "Online distribution and brickand-mortar distribution are two different animals," said Dan Avila, managing partner at supply
chain consulting firm Tompkins Associates in Raleigh, N.C. "The order profiles are
completely different. In e-commerce, an order or a basket may be only one item. You're
handling units as opposed to cases." He said many companies find it better to handle store
and e-commerce distribution separately.
Traditional retailers must balance e-commerce investments against sunk costs of existing
stores and distribution networks that feed them. "The store-based supply chain is a huge
investment that currently yields diminishing returns, particularly in mature retail markets,"
Nikki Baird and Brian Kilcourse of Retail Systems Research wrote in a recent report.
This month's National Retail Federation convention in New York was abuzz with talk of
"omnichannel" retailing, or selling through multiple channels including stores, personal
computers, mobile phones and other technology. It's a big step beyond multichannel supply
chains, which date to at least 1884, when Sears, Roebuck issued its first mail-order catalog
alongside its department stores.

"The retail industry is clearly in a state of flux as it tries to adjust to the omnichannel
challenge. Consumers don't care about channels, but they do care about finding solutions to
their lifestyle needs, and a retailer either satisfies a need or it doesn't," Baird and Kilcourse
wrote.
"An omnichannel 'buy anywhere, get anywhere' strategy requires a rethink of virtually every
aspect of the operational channel, from planning and demand forecasting, supply chain,
customer order management, fulfillment, and of course, the store itself."
Most retailers still handle purchasing from a central point but are experimenting with various
fulfillment strategies. Some use separate DCs for online and store deliveries. Others have
hybrid systems -- for example, supplying customers from store inventories as well as DCs,
and allowing customers to order online for home delivery or store pickup.
Integrating online and brick-and-mortar supply chains raises tricky questions, such as how to
manage transportation between various origins and destinations, how to handle store returns
for online-only merchandise, and how to supply online orders from store inventories without
turning salespeople into order pickers and packers.
As retailers grapple with those questions, they're spending heavily on technology to gain
insights into consumer buying decisions and to mesh that information with point-of-sale and
distribution data.
Nordstrom began integrating its online and in-store inventory systems in 2005. Its online and
in-store operations now share the same inventory platform, enabling them to fill each other's
orders. The company says 15 percent of the company's planned $2.5 billion capital budget in
the next five years will be spent on technology upgrades.
Citigroup analyst Deborah Weinswig said other brick-and-mortar retailers have gotten the
message. She said Macy's now considers its main competitor to be Amazon, not department
stores such as Kohl's and J.C. Penney. She predicts Wal-Mart's online sales, now about 1
percent of its revenue, will jump 12 percent this year.
"They're thinking completely differently; all these guys are," Weinswig said. "I think they have
gotten the wakeup call of a lifetime."
-- Contact Joseph Bonney at jbonney@joc.com . Follow him on Twitter @josephbonney .

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(Copyright 2012 Commonwealth Business Media. All rights reserved.)

References

https://www.researchgate.net/publication/261440748_A_STUDY_ON_AMAZON_INF
ORMATION_SYSTEMS_BUSINESS_STRATEGIES_AND_e-CRM