Amazon strategies to manage its inventory

Amazon strategies to do it its ancestryAmazon .com c altogethered itself Earths Biggest Book gunstock because it has been class-conscious as the best consumer e-business. It exchanges books, music over the internet. From both market and t on the wholey chain get offment point of views, Amazon has some challenges and strengths. Managing scrutinise is nonp aril of the follow opportunities to overcome its financial barriers regarding the warehouses and shipping costs. Amazon follows some strategies to be intimate its inventories. It had the decision to outsource its armory to reduce its inventory costs and to sell competitors wares on its site to achieve both managing its customer relationship and sustaining its competitory advantage. As its competitors estimate that Amazon.Com has the highest percentage of the e-business bookstore. So, Amazon tries to share its nurture and outsources this country of its business to improve inventory cost and customer service take aims.1- Amazonstrategies to manage its inventoryAmazon found the decision of armourying the stores with all the possible products was not the right champion. Although that the customer might choose not to purchase if at that place are not enough goods in the stock, It decided to manage its inventory in the season of 2000, following certain strategies. It started from reducing the warehouses, concentrating more on the quality of the products and the inventr or the publisher of the products. Then it had to decide the heart of distribution it washbasin send its products to and know how to receive and track the product once it was in the warehouse. Amazon also decided to debase its products straight off from the manufacturer to sustain its vendors relationships to gain the best deal from them.Amazon.com developed a distribution home to provide its customers with the fast deli very(prenominal) from the company deportly. Its distribution facilities postulate the great impact on incr easing its products that are delivered and shipped very fast to the customers. The quick shipping process comes out of the great availability of the goods to achieve its customer satisfaction. This network distribution is called manufacturer storage with direct shipping which is one of the six distinct distribution network designs. It has advantages and disadvantages. finished this network, manufacturer storage with direct shipping can be appropriated for a large variety of low demand, high value items with several uncomplete shipments. Drop-shipping model is also suitable if it allows the manufacturer to postpone customization, and there should be few sourcing locations per order. Drop shipping is not be suitable to be used if there are sixfold locations that have to shipped directly to customers on a regular basis. Amazon can centralize inventories at the manufacture and then save inventory costs. Also, Drop shipping offers the manufacturer the fortune to further lower invent ories by postponing customization until after the customer order has been placed. However, when a customer orders several items from several manufacturers such as Ingram and Amazon, this include multiple shipments to the customer and thus increase costs. Also, this business model can has invalidating effect on Amazons competitive advantage by making no entry barriers for competitors because of its popularity and better margins (Chopra, 2001 ) . In terms of handling costs because the manufacturer has to deliver the order directly to the customer, Amazon developed its software to manage the split shipment if multiple items are ordered. So Amazon inevitably to share its reading with the suppliers to provide the customers with the product availability and order treat to save m and reduce inventories. However, Cachon and Fisher point in their root word Supply Chain Inventory Management and the Value of Shared info that information technology or software give the retailer the for tuity to share demand and inventory data faster and cheaper. They investigate how information sharing whether it is traditional information sharing or full information sharing between the retailer and the supplier affects submit chain inventory management regarding reducing lead times and increasing delivery oftenness by reducing shipment batch sizes. The result of the study they have done is that the average of full shard information policy in supply chain costs is lower than of traditional information policy. notwithstanding from Chopras and Meind perspective IT must be fully shared between all the stakeholders suppliers and retailer. Amazon.com provides its customers with witness from beginning to end and own the whole data which gives them all the information they strike about the product availability though the inventory is located at the manufacturer. At the same time the buyers should have a clear idea about the order processing that is placed at the retailer. By owning such a system, Amazon could achieve high level of customers services because the information is directly linked to the customers in the system. As the company expands its operations, these systems are replicated across the distribution centers. Amazon.coms case is a good examples that illustrates how evolving industry standards can affect data-sharing strategies between customers and suppliers because it does not stock all the books advertize on its site, but shares customers order data with suppliers to speed customers orders.. This system solves the paradox of inventory costs because Amazon. com spent US300m in 1999 to outfit the 3 gazillion square feet of warehouse space. Finally Amazon does not need to stock every single item in the warehouse. Instead of that, the retailers or their vendors exit send the products without ever being stocked on the shelves of the warehouses. So, it started to develop its software to increase competitive pressures on all on line retailers in g eneral and to rearrange its warehouses in different regions in particular. Amazons unique dodging is described as change and growing intense competition. Its systems and network infrastructure increase the traffic on its Web site and expanding sales volume by dint of its transaction-processing systems. Amazons main concern regarding its network distribution and software is to quash the unanticipated system disruptions, slower resolution times, weakens customer service and afflicted quality and speed of order fulfillment, or the postpone in backing the customer with the accurate financial information.2) Outsourcing its inventory managementI mean Amazon had taken the right decision to outsource its inventory management. In the case of Amazon did not outsourced all of its inventories but it keeps its popular ounces. This was a good decision for many reasons the major ounces are to cut refine its costs and give particular concern on it core activities. It partnered with opposit e distributors for shipping the inventory like Ingram Micro and Cell Star. At the time the partners shipped the items, Amazon concentrated on its e-commerce expertise. Also, Amazon managed order fulfillment epoch Toys R Us managed the supply processes. Amazon outsourced much of its fulfillment. Although it acquired more than 4.5 gazillion square feet of warehouse space worldwide by the end of 2000, it is apply merely 40 percent of its warehouse space. Through outsourcing Amazon increases its efficiencies in distribution. From a another perspective there are Some risks of outsourcing because of the complexity, murkiness or unclear decision making, and broken information flows in decentralizing, which can be correctedby redesigning processes and improving information technologies. Others thinks that small companies only can get benefit from outsourcing or triplet party because they need experience and supports in technology. However outsourcing leads large companies to have comp lex supply chains and many distribution managers (Razzaque and Cheng 1998). Amazon outsourcing inventory contributes to profits through providing its employees and users with the methods and strategies to maintain the firms competitive advantage, adding value to the goods, enriching customer service and assisting in source new markets. One of the benefits of third party logistics is providing provide their customers experience that otherwise would be hard to acquire in-house. An company should consider certain criteria in outsourcing process such as quality, capacity, labor, scheduling and skill to be big in a make-or-buy decision (Razzaque and Cheng 1998). In Amazons case, it had an agreement with Ingram Micro Inc because it is one of the largest wholesale of electronic goods to provide logistics to services for computers at Amazon. com. Moreover, it has great experience in distributing process and customer satisfaction.3- Selling others products on its websiteThe idea of selli ng other competitors products on Amazons site is very profitable because the clients can be aware of the prices of others product compared with Amazon. This provides the company with more profits without making advertise to their low price products. It opens new stores on its site to give greater availability of the products and draw more customers. IT gives the customers the chance to turn to Amazon to buy more than books and music especially because Amazon handled the site orders, while the third party company handled the inventory. It may seem at first that a customer always wants the highest level of performance along all these dimensions. In practice, however, this is not always the case. Customers ordering a book at Amazon.com are willing to wait longer than those that drive to a nearby Borders store to get the same book. Customers have the advantages to find a variety of books at Amazon compared to the Borders store. On the other hand, firms that target customers who value s hort response times need to locate close to them. These firms must have many facilities, with each location having a low capacity. Thus, a decrease in the response time customers desire increases the number of facilities required in the network. For example, Borders provides its customers with books on the same day but requires about 400 stores to achieve this conclusion for most of the United States. Amazon, on the other hand, takes about a week to deliver a book to its customers, but only uses about 5 locations to store its books.