1.) What is Amazon's IT solution?

Closing Case POM MKT MIS Amazon's Global Supply Chain The Problem More than 20 years after completing its first sale, Amazon has become an online retailing powerhouse that is competing with bricks-and- mortar global retailers such as Walmart and Target. It is also compet- ing in the digital marketplace (e.g., e-books, music, movies, and TV shows) with Apple's iTunes store and Google's Google Play. Amazon's goal is to provide customers with the best selection, price, and availability. Sometimes the best price is not the lowest, but the one that provides the best shipping option. Amazon's website and apps offer a simple, consistent, and reliable user experience. Prod- uct information, prices, customer reviews, related products, recom- mended products, shipping information, and more appear in the same location on the page. Amazon's analytics systems use a customer's or- der and search history to create customized experiences for that cus- tomer, and Amazon's order fulfilment process delivers products swiftly and accurately. Supply chain management is critical to Amazon's success. In 1995, Amazon began with two fulfilment centers. The company has When an order is received, a robots de proper bin and able to meet the dono addition PS.com), which Amazon its par and Forex About 40 percent Amazon's delivery without were ose. now expanded to some 350 distribution and fulfillment centers located the package, and the system would direct the pre-packaged order to around the world. Amazon supports this operation with a proprietary, the appropriate sorting center. When packages arrived at the conter, in-house information system that is completely integrated. When the information system would sort them by zip code. They were then the company receives an order, the order-management, inventory delivered to the local post office or to another carrier for the last milo" management, and warehouse-management systems locate products of delivery. In select cities, Amazon maintains its own delivery service around the world and determine the optimal fulfillment plan. Fulfill In other cities, the company has contracted with the U.S. Postal Service ment is the business term that refers to the steps involved in receiving, processing, and delivering orders to the end customer . For Amazon, (USPS) to deliver on Sundays. a global company with many products in in many distribution centers, The Results and many orders that require cooperation across centers (meaning the The additional step and the enhanced coordination enabled by Ama- entire order cannot be fulfi through hone distribution center), fulfill zon's proprietary information system increased the company's control ment requires a very high level of coordination. over its supply chain and reduced its dependence on parcel-delivery To achieve this coordination, Amazon has to know where every companies. Having learned from om the 2013 holiday delivery debacle, tis located in every distribution center worldwide. For example, expanded operations and achieved a strategic advantage when suppliers send products to be "Fulfilled by Amazon" (FBA), their by gaining more control over its supply chain. products are immediately scanned into Amazon's inventory manage Amazon's sorting centers, updated supply chain management ment system. A "stower" then places the goods in any available bin. system, and agreement with the USPS helped the company achieve a items are not organized in any logical manner. However, the product record year in 2015. The retailer shipped to more than 185 countries, and bin location are recorded by the proprietary information system. and added more than 54 million Prime Members. Amazon also re- go to the ported no major problems with the new delivery system. Finally, the the items the breitems, guided along an optimal route by a scanner by the proprietary information system). The robots bring the items to a company reported sales revenue of $107 billion. Amazon is expanding its Fulfillment by Amazon service, which human, who places them in boxes. Prepared boxes are sent down the provides storage, packing, and shipping for for independent merchants "slam line," where the packages are weighed and "slammed" with a selling products on the To do so, Amazon plans to shipping label. Finally, labeled packages are sent to appropriate load launch a global shipping and logistics operation called Global Supply ing docks based on the shipping company t will handle the delivery. Chain by Amazon (GSCA). This operation will compete with carriers Despite the effectiveness of Amazon's proprietary information such as UPS (www.ups.com) and FedEx (www.fedex.com), as well as system, several key factors, such as the weather, partner delivery com- with Alibaba (www.alibaba.com), the Chinese e-commerce giant. competition, remain beyond the company's control. GSCA plans to connect two huge markets to each other, Chinese example, during the 2013 holiday season, several companies, in- producers and American consumers. About of cluding Amazon, Kohl's, and 1-800-flowers.com, promised last-minute 2016 revenue came from small businesses that buy that buy products from into account the capacity of the parcel-delivery China, manage the complexity of the shipping and import process, companies, FedEx (www.fedex.com) and UPS (www.ups.com.bikers and then sell those products to U.S. customers using Fulfillment by to the demand overload, Amazon. Amazon saves money if it can cut out those middlemen and incent the rained the deliver ved inclement weather also strained the delivery system. Under normal streamline logistics enough so that more Chinese sellers use Amazon as their retail platform. conditions, parcel delivery companies can adjust delivery to account for weather. During the 2013 holiday season, however, these compa GSCA plans to attract merchants in countries such as China and nies were already operating at capacity. a result, they could not then consolidate their products at regional shipping hubs. The large the necessary adjustments to account for inclement weather. volume of goods means that Amazon would be able to buy cargo space After the 2013 holiday season, Amazon tried to smooth things at lower wholesale rates and then offer a lower price to participating over with its customers by offering gift cards or credit. More impor Chinese merchants by by passing on some of the savings. By automating tantly, the retailer determined that it needed to implement certain the shipping paperwork, Amazon can further redu reduce costs structural changes to expand its control over its entire supply chain the process more convenient for the merchant and distribution system. To handle GSCA shipping, Amazon received a license to act as a wholesaler for ocean container shipping from the Chinese Ministry of The IT Solution Commerce and from the U.S. Federal Maritime Commission. Having Amazon needed to develop a method to increase its control over the licenses from the United States and from China means that Amazon delivery of its products. One common strategy to increase efficiencies can buy space on shipping containers at wholesale rates and resell it and control is to reduce the number of steps in a system. Significantly, Amazon adopted the opposite approach, adding more sorting centers To handle air cargo, Amazon signed a deal to lease more cargo to its distribution channel. Sorting centers sort pre-packaged orders jets, in effect doubling the size of its fleet. Amazon partnered with by zip code. This process enables Amazon to control delivery along the cargo airline Atlas Air (www.atlasair.com) to lease 20 Boeing planes. entire route to the local post office for Sunday delivery (in select mar The deal includes the use of the planes, crew, and maintenance for kets). In certain markets where Amazon owns a delivery system, the seven years. company can now maintain control all the way to the customer's door. The strategy puts Amazon in direct competition with Alibaba. Adding a step in the distribution system required Amazon to up- date its proprietary information system. Previously, once the system Both companies are competing in the rapidly growing cross-border e-commerce market. By 2020, this market is expected to be a $1 trillion had "slammed" a delivery sticker onto a package, Amazon was basi industry serving 900 million shoppers. cally out of the delivery loop. The retailer might maintain tracking (if For example, Cainiao, a logistics company formed by Alibaba offered by the delivery company), but it was not in control of the deliv and three others, announced plans in 2016 for a $16 billion supply ery. After adding the new step, the fulfillment center would maintain chain investment. The funds provide enhanced data quality and route planning information, as well as construction of 1,800 distribution centers and 97,000 delivery stations in more than 600 cities across 31 Chinese provinces. Amazon and Alibaba have made significant investments in their supply chain capabilities and they will soon handle more shipments than most specialist delivery postal and courier companies. For exam- ple, Amazon shipped 1 billion parcels of its own goods in 2016. The company is forecast to handle a greater volume than FedEx by 2019. Serating at full make the costs and make at retail rates