In 2004, 10 years after Amazon was founded, its annual revenue was
just under $7 billion. According to Statista, by 2018, revenue reached
almost $233 billion,
becoming the fastest company to reach $100 billion in sales revenue,
taking only 20 years. Thanks in a big part to outsourcing business
techniques, Amazon has been growing approximately 20% per year and
enjoys nearly 14% of gross global e-commerce sales, (How Amazon Is
Changing Supply Chain Management, 2020).
Amazon’s supply chain is dependent on the outsourcing of Amazon
inventory management and transportation services, allowing Amazon
to reduce excessive inventory, free up working capital and allow the
right products in the right quantity in the right place at the right time,
(Robinson, 2021). For example, over 50% of Amazon’s sales are done
by third-party sellers, who restock products when the stock is low,
(2021). Not only does global outsourcing cut costs for Amazon and
the customer, but it also offers the availability of price comparison,
helpful feedback, and convenience, generating further growth,
increasing innovative technology advancements, and
satisfying all shareholders.
Specifically, Amazon owns and operates 3 types of fulfillment and
ownership opportunities, (da Silveira, 2021).
Retail – owned and fulfilled by Amazon
FBA – fulfilled by amazon, owned by 3rd party seller
Marketplace – owned and fulfilled by 3rd party participant
Based on consumer preferences and manageable trends, Amazon
uses strategic techniques to choose the location of each center, as
well as the inventory it will house and maintain. In other words,
certain buildings are responsible for specific merchandise relevant to
market and economic statistics. Further, this reputable company
developed an IoT inventory management software that digitally
manages all the inventory within the network to ensure accuracy and
quality, (da Silveira, 2021). The most unique part about this system?
It manages inventory IN REAL TIME – from the time the customer
places its order, until it reaches their doorstep. Not only does it
manage inventory and track its deliverance, but it also clarifies
business statistics and combines data in a way that makes it easily
comprehended by supply chain managers that oversee CPTs, “critical
pull times”. Beyond 3rd party inventory outsourcing, Amazon also
uses outsourced call centers and global transportation services like
FedEx, UPS, plus their own managed fleet to control quality metrics,
delivery time and shipping accountability, (How Amazon Is Changing
Supply Chain Management, 2020). The company also revised their IoT
inventory system to incorporate location tracking and carbon
footprint monitoring to further evaluate geographical trends,
consumer demand stats, and sustainability measure accordance.
Although Amazon does operate its own delivery fleet, warehouse,
inventory, and supply chain internally, the decision to outsource has
benefitted the company immensely; especially considering the
organization started as an online bookstore owned and operated in a
rented garage, (15 fascinating facts you probably didn’t know about
Amazon, 2019). Amazon has also instilled outsourced management
structures through contributions to the community like Amazon Flex
(like UBER), Smart Lock system (stationary lockers used to pick up
orders), and Echo Dot (Alexa accessibility), (da Silveira, 2021).
Amazon has not earned the title of most valuable brand at $334
billion by just sitting still; outsourcing capabilities, operations
management, IoT software, and sustainability prioritization has
influenced this company to continue developing in a way that makes
their customer’s life easier, (Wilde, 2020). Globally, Amazon owns
and operates 175 fulfillment centers, 84 sortation centers, 105 Prime
Now Hubs, and 651 delivery stations, (How Amazon Is Changing
Supply Chain Management, 2020). Not to mention, the company has
been able to reduce management, transportation, overhead, and
other costs by increasing their geographic range of accommodating
buildings as well as offering the world’s biggest collection of
differentiating products. Further, 3rd party outsourcing combined
with liquidation techniques and multi-tier inventory management
also led to less storage costs, a quick delivery network, and increased
employee/customer satisfaction. Without Amazon taking the leap
and choosing to outsource in a variety of sectors, the innovative
shop from home opportunity may not have been available for much
longer. Ultimately, the rate of Amazon’s participation in outsourcing and
expanding supply chain management responsibilities has been
mesmerizing, making it difficult for lower-volume competitors to keep up.
Amazon is forcing its major competitors to invest more in supply chain
automation, lessen the overall product delivery time, increase the number
of warehouses, and even engage in product manufacturing, (How
Amazon Is Changing Supply Chain Management, 2020).
References
15 fascinating facts you probably didn’t know about Amazon. (2019,
June 17). Business Insider Nederland.
https://www.businessinsider.nl/jeff-bezos-amazon-history-facts-
2017-4?international=true&r=US
da Silveira, S. (2021, December 26). Amazon Global Online Retail
Operations - Supply Chain Analysis | by Samantha Da Silveira | Medium |
The Startup. Medium. https://medium.com/swlh/amazon-global-
online-retail-operations-88c20633260f
How Amazon Is Changing Supply Chain Management. (2020, November
14). The Balance Small Business.
https://www.thebalancesmb.com/how-amazon-is-changing-supply-
chain-management-4155324
Robinson, J. (2021, November 5). How Does Amazon Manage
Inventory? | Sage Seller. Sageseller.Com.
https://sageseller.com/blog/amazon-inventory-strategy-why-
amazon-outsourced-its-inventory-management/
Wilde, A. (2020, February 12). 5 Leading Brands That Rely on
Outsourcing for Profits. Market Star.
https://www.marketstar.com/impact-blog/5-leading-brands-that-
rely-on-outsourcing-for-profits
