Case Study Report On Inventory Management at
Case Study Report On Inventory Management at
Case Study Report On Inventory Management at
On
Inventory Management
at Amazon.com
Submitted to:-
Submitted by:-
Prof. R.K. Vijaya Sarathy
Rupesh Kumar
Director, DSBS Bangalore Charu
Chandra
B
ajrang Agarwal
Bikash Prasad
Contents
1.Introduction
1.1History
1.2Analysis
1.2.1 SWOT
1.2.2Industrial Analysis
1.Online Marketing
1.1Online Marketing Domains
1.2Types of online Marketers
2.Inventory Management
2.1Inventory outsourcing
3.Conclusion
4. Issues
5. Bibliography
Introduction
The Internet has changed the way that we perceive business and
the way that we as consumers may make our purchases. In fact,
the online consumer today knows the convenience of purchasing
a book online and having it delivered to their door in a matter of a
few days. There is no more need to fight crowds, find a parking
spot, and deal with traffic. The high street and mail order systems
still have a place in the mix of purchase routes; however it is no
longer the only method of making purchases. The Internet
revolution has seen a massive increase in the long distance
purchases made by consumers, as geographical barriers are no
longer as important as they were. The lack of geographical
importance has influenced the strategy of Internet companies.
One of the first companies that took advantage of this was the
online bookshop Amazon.com.
The case provides an overview of Amazon.com's inventory
management. Jeffrey Preston Bezos the founder of Amazon.com
launched the company when he realized that Internet provided
immense scope for online trading. Although the site was originally
launched as an online bookstore it eventually offered several
other products to keep abreast of the competition. The case takes
a look at the different products and features offered on the site.
The case also discusses Amazon's value propositions and its
criteria for choosing strategic partners. It then elaborates on the
strategies adopted by Amazon for managing its inventory. It also
explains Amazon's decision to outsource inventory management
to distributors. The case takes a look at Amazon's decision to sell
the products of competing retailers on its site. It concludes with a
brief note on the future challenges in Amazon's warehouse
management
1.2Analysis
1.2.1Swot analysis
Strengths
Weakness
Opportunities
Threats
1. Increasing transportation costs will directly impact delivery
charges to customers - as these costs are not absorbed into
the direct business but paid to a third party it is assumed
these will be directly passed onto the consumer which can
have a negative impact to brand perception from the
consumer viewpoint.
2. Competition will increase due to the low barriers to entry in
the market: offline companies are coming online
3. Low economic performance of world economy
4. The products that Amazon sells tend to be bought as gifts,
especially at Christmas. This means that there is an element
of seasonality to the business. However, by trading in
overseas markets in different cultures such seasonality may
not be enduring.
5. Hacker’s problem
Threat of substitutes
Buyer’s power Supplier’s power
Barriers to entry
Barriers to Entry
Buyer power
Supplier power
Threat of substitute
Targeted to Targeted
consumers to
businesse
Initiated
by
Initiated
by
consumers
Business
B2C B2B
to
(business to (business to
consumer Consumer) business)
C2C C2B
(B2C)
(consumer to (consumer to
Consumer business)
It is selling
goods and services to final consumers. Today’s consumers can
buy almost anything online from- clothing, kitchen gadgets and
airline tickets to computers and cars. According to the
Associated Chambers of Commerce and Industry of India
(Assocham), Delhi e-shoppers Population was 20 percent in 2006-
07, in Mumbai it was 24 percent with maximum e-shopping taking
place in electronic gadgets, apparel and design purchases,
railways, and air and movie tickets. As more and more people
find their way onto the web
The population of online consumers is becoming more main
stream and diverse. The web now offers marketers a palette of
different kind of consumers seeking different kinds of consumers
seeking different kinds of online experience. Internet consumers
differ from traditional offline consumers in their approaches in
buying and in their response in marketing. In the internet
exchange process customers initiate and control the contact.
Consumers compare prices, visits different sites and then do
purchasing.
This type is used by many online companies like- Amazon.com,
GAP.
Business to Business(B2B)
Consumer to Consumers(C2C)
Much consumer to consumer online marketing and
communication occurs on the web between interested parties
over a wide range of products and subjects. In some cases the
internet provider the internet provides an excellent means by
which consumers can buy or exchange goods or information
directly with one another. For example- Amazon.com auctions, e-
bay.
3.Inventory management
Amazon did not stock every offered on its site. It stocked only
those items that were popular and frequently purchased. If a
book that is not so popular is ordered Amazon requested that
item from its distributor who then shipped it to the company. In
the company, the items the items were unpacked and then
shipped to the respective customers. So basically, Amazon acted
as a trans-shipment centre and ensured that the entire process of
shipping from the distributor to customer was done very
efficiently.
4.Conclusion
Question 1
Answer
Question 2
Answer
Amazon was apprehensive about outsourcing inventory
management because maintaining large inventories for satisfying
all customers was a costly affair; moreover a huge amount of
capital was locked in the form of inventory which can be used for
other purpose such as increasing distribution channel.
Outsourcing inventory was a risky affair as when Amazon
managed its own inventory; it had earned the reputation of
providing superior customer service, which was its biggest
strength.
According to our point of view it was a right decision to outsource
inventory as maintaining a huge inventory was harming Amazon.
Maintaining inventory at the cost of profit cutting was not a good
decision. As we can see in the case Amazon did not fully
outsourced the inventories it keeps things which were popular. It
was a very good way to cut down its expenses and concentrate
on core activities. For outsourcing it used drop- shipping model,
though it faced a lot of problems like reverse logistics and
multiple delivery then also it was profitable.
The idea of selling other retailers products on Amazon.com was
very profitable according to case. When in early 2001, Bezos
came up with the idea of including the products of competing
retailers and some used items on their websites. Amazon earned
almost the same profit selling on commission as it earned selling
on retail. An advantage of these features was that the customer
could now verify the prices of Amazon’s products vis-à-vis those
of the other retailers. So the company did not need to advertise
its low prices. Said Bezos, “giving people the choice to buy new
and used side by side is the good for the customers. Give them
the choice. They are not going to hurt themselves with that
choice. The data we have tell us that customers who buy used
books from us go on to buy more new books than they have ever
bought before. They may not want to plunk down $25 for a brand
new author they’ve never tried. This lets them experiments.” By
2003, Amazon only handled the net orders, the companies
handled the inventory. This service proved to be immensely
profitable for Amazon.
Bibliography
Websites
1. www.wikepedia.com
2. www.wilsonweb.com
3. www.expressindia.com
4. www.siliconindia.com
5. www.amazon.com
Books Referred
1. Principles of Marketing, Philip Kotler
2. Supply chain management and e- commerce, Charles c.
Poirier & Michael J. Bauer