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Amazon’s European

Distribution Strategy

By:
Ananda Neogi
Aditya Ramachandran
Bhavana Gundboyina
Alagupiraisoodan
Abdul Aqeeb Arshad
Shaik Abdul Salam
Amit kumar Sahu
Facts
 Established in the year 1998.

 Started with the acquisition of bookpages.co.uk(United Kingdom)


and Telebuch.de(Germany)

 Amazon international comprises of Amazon Europe and Amazon


Japan, 35% of total revenue.

 To sustain its growth Amazon has replicated the broad array of


product line structure of U.S into Europe.

 It is expected that Amazon Europe would exceed Amazon U.S in


terms of revenue by 2004
Evolution of SC and distribution in
U.S
 Amazon was founded in 1995, to enable book buying into the
easiest, fastest and most enjoyable shopping experience.
 It offered 2.5 million titles, but had only 2000 books in stock(5% of it
orders).
 Out of warehouse orders were sourced “as-needed” basis.
 As orders increased, Amazon opened direct account with the
publishers.
 Warehouse expansion and starting of new DC’s in 1996-97
 Strategically positioned DC’s to reduce lead time and reduce
dependency on main supplier Ingram
 Major investment was done to improve their software.
 Expansion of product line from books to other items(cd’s, videos).
Evolution of SC and distribution in
U.S
 In 1998, they adopted “Get Big Fast” to increase revenue.
 Introduced SC strategist software to located the best possible
warehouse locations.
 Their next decision was regarding the variety of product to be kept
in various DC’s.
 Introduction of latest technology: “pick-to-light”, RFID, voice.
 Formation of “pick-profile”, for the fastest selling items.
 “Pick profile” would contain 100 items kept according to title, ASIN
and slot-location.
 Pick list: 1) single item
2) multi item(pre-sortation, sortation)
 Companies mantra “deliver at any cost”, helped Amazon sell
20million items and acquire 2.5 million first time customer.
Evolution of SC and distribution in
U.S
 Introduction of “six-Sigma” and “total quality Management” in 1999.
 Taught staff about DMAIC(Define Measure Analyze Improve and
Control).
 Simulate holiday season’s condition to prepare staff for high
demand situations.
 Improve the software to introduce “Available-to-promise” and
“cascading”
 Amazon started having their wholesalers “drop ship” orders.
 Partnering with other companies to reduce the financial risk. Eg.
ToysR’Us
 To reduce shipping cost, they started with “Zone Skipping”.
 In 2001, Amazon was able to cut their total cost by 17% and had
their first profit.
Launching Amazon in europe
 In 1998 Amazon entered the European market of UK, Germany and
France.
 Duplicated the “Get Big Fast” strategy.
 European market was as aggregation of regional market.
 Built 24-hours customer service(native language)
 Introduced free shipping in 2001 and clearance sale.
 Amazon offered the option of “pay by checks” to French customers
and postal order German customers.
 Establish relationship with hundreds of publishers and distributors,
due to lack of wholesalers
 Unifying marketing and branding team of Europe.
SWOT ANALYSIS
Strength:
 Multiple expansion options
 They use to differentiate from its Brick and Motor

competitors.
 They have better supply chain and Distribution

network.
 Pick to light system-radio frequency technology.
 Key metrics to measure

Worker performance
Number of items picked per hour
Free replacement rate
Number of hours from order confirmation to shipment
Cost per unit shipment
Strength:
 Used Six Sigma DMAIC
(Define,Measure,Analyze,Improve and
Control)
Used to improve inventory record accuracy
 Drop ship- shipping directly to the customer.
 Postal injection-arranged for full truck loads

driven to major cities.


Weakness
 Temporary employees
 Split shipment(paid separate shipment cost)
 Delivery at all cost
 Using country postal service
Opportunity:
 Tying with Ingram’s inventory
 In 1998, Amazon acquired Bookpages.co.uk

(united kingdom) and telebuch.de (Germany)


and relaunched as Amazon.co.uk and
amazon.de
Threat:
 Competitors(1998)
◦ Buy.com
◦ Barnesandnoble.com
 Wall street began to put profit pressure on all
dotcoms . The stock price began to fall.
 In Europe , They faced several challenges

particularly in operational and organizational


choices.
Recommendations:
 Implement European distribution network(EDN).
 Centralize management office in the UK in order to
perform more operations.
 Create cross-docking enabled warehouses, preferably
in Southern Europe where higher demand is observed.
 Make use of strategic order fulfillment to minimize
lead time
 Utilize strategic inventory distribution to reduce cost.
 By continuing free shipping for local products,
extending the use of postal injection for some high
demand products.
Contd:
 Leveraging Amazon techniques:
1. Drop-shipping
2. Pick profiles
3. Technology Investment.
 Full truck loads from DC’s to major cities.
 Reduce postal service charges, maintain low
shipping cost and offer free shipping in some new
places.