Amazon Case study Essay

As seen from 2014, virago.com is a no brainer of a logical argument proposition. Today you tin can buy most things from amazon.com book of accounts, movies, health and beauty products, appliances, sporting goods..online and the company bequeath ship these purchases to your home the same day and often at flyspeck or no cost to you. The typical 2014 university student has grown up with the World Wide Web and eCommerce and allow ins these works for granted. For its part Amazon save revenues of $17.09 billion dollars in 2013 but for all that activity, the company did not fork oer a attain. According to its founder and CEO Jeffrey P. Bezos, Amazon strives to be the retailer of choice for all things and for all people globally. To this end, Amazons profit margins on most products are razor thin and its business practices regarding handsome shipping and generous return policies erode earnings. Still there is no question that Amazon.com is ane of the darlings of the new millenn iums Internet frugality and a trend-setting retailer in the era of online retailing. In contrast, Amazons early history was marked by startling losses and much of red ink. Why was this so?To understand Amazons origins, we must go back to 1994 when Bezos worked for the Shaw grocery store chain and read a study that predicted the Internet would explode in popularity. He figured that in advance long people would be making money selling over the Web. After con berthring any number of products to sell online, he settled on books, a standardized product already electronically cataloged, that could be advantageously managed through an automated supply chain system. Most notably, the typical book store typically managed an inventory of twain to deuce-ace thousand books whereas his imagined online service that would carry them all. In Bezos business model, he would disintermediate the retail process, eliminating stores and stores. preferably his customers would purchase their books from catalogs on his companys Web site. Orders would be make full from a new kind of facility, a fulfillment center. In implementing this business model, Bezos quickly discovered that the only way to ensure a collateral customer sense was for Amazon to operate their own fulfillment centers, peremptory the transaction from start to finish.All of this may sound quite aboveboard directly but Bezo and his backers were treading in totally unchartered waters in 1995. To compete in this space, Amazon.com required a huge infusion of capital. Those fulfillment centers cost almost $50 million apiece. The first of these in Fernley Nevada housed threemillion books, CDs, toys, and housewares in a building a quarter-mile long by 200 yards wide. What distinguished this facility from the typical retail warehouse was that it was altogether computerized. The associated business processes were largely automated and information intensive. Once customer orders were set(p) via Amazon.coms Web s ite, the companys information systems would send these orders to fulfillment center pickers who would in turn roam the shelves in a arrogant manner assembling customer orders. Along the way, these information systems would capture tiny information on the time and steps involved in make full individual orders, worker error rates, the flow and turnover of inventory and of track down associated cost of operations information. Amazon managers employ this information to squeeze all last drop of productivity out of their processes.For example, as reported by Fred Vogelstein . by redesigning a bottleneck where workers transfer orders arriving in green credit card bins to a conveyor belt that automatically drops them into the appropriate chutes, Amazon has been capable to increase the capacity of the Fernley warehouse by 40%. In 2003, Amazons warehouses handle three times the volume they could in 1999, and in the ultimo three years the cost of operating them has fallen from nearly 20% of Amazons revenues to less than 10% percent. The company doesnt hope it will even have to think about building a new warehouse for another year. The warehouses are so efficient that Amazon turns over its inventory 20 times a year. Virtually all other retailers turnover rate is under 15. Indeed, one of the fastest-growing and most profitable parts of Amazons business today is its use of its supply chain management processes to service the eCommerce business ineluctably of other retailers, such as Toys R Us and Target. All of this helps explain Bezoss larger point, one hes been making since he started Amazon but that people are only now starting signal to believe In the physical world its the old sawing machine location, location, location, .. The three most important things for us are technology, technology, technology. But technology is real the means by which Amazon manages its most valuable asset, its data. Data about products, data about customers, data about supply c hain management, data about suppliers.There just arent other companies that let a consumer order two out of what are millions of products in a warehouse and then quickly and efficiently, at low cost, get those two things into a single box.. But success was not aforgone conclusion. Amazon set about a lot of red ink in its first tail fin years. Ultimately its devotion to data paid off. As its competitors disappeared from the scene, Amazon leveraged its data management capabilities to drive error out of operations, personalize the Web experience for its customers, and add value to its relations with suppliers by providing them with deep business knowledge concerning the publics interest in their various products. To achieve these results, Amazon developed its own methods and built its own Web-enabled information systems from scratch. Fortunately, the company could take advantage of established supply-chain management (SCM) systems for the backend of the business. In the final analysi s, it was Amazons dedication to collecting and using information to run its business, an effort spearheaded by the companys Chief Technology Officer Werner Vogels and his MIS team that morose the enterprise profitable. Now that Amazon has mastered both the fulfillment side of eCommerce and the data and information management side of global business management, two major profit centers at Amazon that help feed its roll in the hay line include back-end fulfillment services for other global retailers and calumniate computing services for the likes of iTunes and Netflix.