How does Amazon Manage its Supply Chain and Logistics?

Arijit Karan Arijit Karan
Oct 10, 2021 5 min read
How does Amazon Manage its Supply Chain and Logistics?

Amazon is now the world's largest e-commerce company in the world. Many small and medium-scale businesses benefit a lot from Amazon. If you are a curious person and are entrepreneurial in nature, you might wonder very often how Amazon supply chain works. The logistics of Amazon are fairly complex and quite vast. Over the years Amazon has improved its supply chain operations and many other things. Today Amazon's supply chain is one of the most sophisticated ones.

Warehousing Strategy
Sophisticated Delivery Network
Use of Robots
Third-party procurement and Self-manufacturing
Cost-Effective Supply chain
High-level Automation
Outsourcing Inventory Management and Insourcing Logistics
Push-Pull Strategy for Supply Chain Success
FAQ

So, Lets look at the Complete process of Supply chain management of Amazon

The supply chain of Amazon is one of the most sophisticated complex supply chains in the world. It is because of its supply chain, it has achieved such great heights. So, let's look at the basics of how Amazon manages its logistics? and some of the advanced optimization Amazon does in order to work more efficiently.

Warehousing Strategy

Amazon Warehouse
Amazon Warehouse

Amazon is one of the influential e-commerce companies because of its advanced warehousing strategy. It has a strategy by which it can locate the desired product properly. All the products are placed strategically so that they can be found easily. The products are segregated infrequently demanded and rarely demanded. Warehouses are optimized really well so that goods can be procured faster.

They do demand forecasting and keep the products of high demand ready to be deployed. Apart from that they also follow certain quality control rules depending on the product so that the customer gets the best quality product.

Sohpisticated Delivery Network

Amazon Drone Delivery
Amazon Drone Delivery

The delivery system of Amazon is very sophisticated in nature. The supply chain is very well planned which will help the company to deliver the product properly. For members who have a Prime subscription, their products need to be delivered to them within 2 hours or next day depending on the location. Amazon has put in place a number of techniques that can arrange and pack your product and send it to your home.

Amazon has deployed a number of drones, robots, and other logistics technologies to help the goods reach your house faster. There are also many other delivery robots through which they are delivering the goods to their customer.

Use of Robots

Amazon Kiva Robots
Amazon Kiva Robots

Amazon employs technology in its Warehousing to improve its efficiency. It uses a number of robots in its warehouse which helps in arranging the goods, moving them from one place to another.

Amazon had acquired an automation company called Kiva Systems. It was renamed Amazon robotics after acquisition. These robots decreased human intervention and improved the delivery speed.

Amazon also implemented drones so that they can deliver their goods where logistics companies could not reach. Amazon has also deployed many small delivery robots which deliver goods to other people. These technologies enhance the delivery speed and make the whole process very easy.


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Third-party procurement and Self-manufacturing

Amazon Manufactured Products
Amazon Manufactured Products

Amazon is not just a retail e-commerce website now where it sells products from 3rd party. It is a company that ultimately focuses on customer satisfaction. In due course of time, Amazon has looked into possible ways of decreasing the cost of products.

With time, Amazon started manufacturing its own products like Earphones, iPhone chargers and many other things. These goods were much cheaper than the 3rd party manufacturers.

The product quality is also much better as the quality control is done by Amazon themselves. This leads to a lot of simplifications and decreases a lot of complications on the part of Amazon.

Cost-Effective Supply chain

Amazon has kept the cost of its supply chain very low. Due to its huge economies of scale, it was able to keep its cost very low. The per-unit supply is very cost effective. Amazon has several warehouses of its own and it has automated to a great extent. This is why they have a lot less operation cost than other companies.

High-level Automation

Amazon Delivery Robot
Amazon Delivery Robot

From its warehouses to delivery, Amazon has deployed a lot of robots to automate it. There are robots that would move and arrange the goods in the warehouse and also packaging the goods. For the delivery, Amazon has deployed drones, delivery robots, to deliver the product to the customer's house. This decreases human involvement and thus decreases the cost of operation.

Outsourcing Inventory Management and Insourcing Logistics

Amazon outsources its inventory management to third parties wherever they see it's feasible. Outsourcing helps them reduce costs and reduce the unnecessary expansion of the supply chain.

The third party stores the goods in their local storage and it is not stored in an Amazon warehouse. These third-party warehouses are generally located at special places and are supplied with those goods which are in high demand in that area.

Push-Pull Strategy for Supply Chain Success

Amazon implements a push-pull strategy in its warehouse management. The warehouses owned by Amazon are located in more strategic locations. While the Warehouses belonging to the third party are located at other places. So in the case of Amazon's warehouse, it implements a push strategy and in the case of a third-party warehouse, it implements a pull strategy.


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Conclusion

Amazon has designed a supply chain in which it can optimize any part of it. It has introduced high-level automation using robots to decrease human employment. This helps them decrease the cost. From warehouse to delivery it has deployed several robots to arrange pack and deliver the product to the customer's house. The supply chain and logistics of Amazon is one unique entity in the whole world.

FAQ

Does Amazon have the best supply chain?

Yes, Amazons supply chain is counted as one of the most efficient supply chains in the world.

What is the revenue of Amazon?

The revenue of Amazon of 2020 was 21.33 billion U.S. dollars.

What are the tasks that Amazon Outsources?

Product Listing and Optimization., Product Photography Services, Managing Sponsored Ads/ PPC, and Customer Support Services are some of the tasks that are outsourced by Amazon.

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