Amazon Inventory Management

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bestsellers. Further Amazon entered into contract with Ingram Micro Inc. for distribution of desktops, laptops and other computer accessories. Drop shipment model was very successful so Amazon decided to extend this model to all categories too. The major disadvantage of this model was if the customers ordered only a single item at a time the drop shipment model was extremely helpful, but if a single ordered had several items such as a book stocked by Ingram and a game stocked by Amazon, then the following procedure was adopted: Ingram sent book to Amazon ,Amazon added the game then forwarded the whole box to the customer. Since almost 35 percent of orders placed at Amazon were of different categories the drop shipment model was not very effective. In 2001, Bezos came up with the idea of including the products of competing retailers and some used items on their website. Amazon earned almost the same profit selling on commission as it earned on retail. An advantage of this feature was customers could now verify the prices of Amazon?s products vis a vis those of other retailers. So the company did not need to advertise its low price. By 2003Amazon, s warehouse could handle thrice the volume they used to handle in 1999, while the cost of operating them decreased from 20 percent of Amazons revenue to less than 10 percent. In 2003 Amazon decided to slash down its shipping charges. Customers who visited the site were greeted with a pop up window announcing the company?s decision to provide free shipping for those who bought two or more items in any combination from the sites books, music, or video stores. The company also decided to reduce shipping charges. Though Amazon spent millions of rupees in marketing in order to get new customers it managed to leverage the amount spent because of its lower capital costs.

In the year 2001, Amazon decided to outsource its inventory management as company wanted to focus on its core activiteis. and in order to earn profits. It was risky as Amazon was known to be providing superior servicess.

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, 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. The main distributors of Amazon included Ingram Micro and Cell Star handled cell phone sales while Ingram Micro, a whole sale distributor, handled computers and books. Amazon had external distributors for most of its products except the bestsellers. Further Amazon entered into contract with Ingram Micro Inc. for distribution of desktops, laptops and other computer accessories. Drop shipment model was very successful so Amazon decided to extend this model to all categories too.

I’d say that Amazon was successful in establishing the inventory management strategy and was one of the pioneers in this- they set themselves as benchmarks. Their strenght was the Customer Relationship management and IT which supported Amazons business strategy. Through their strategies, Amazon is now a global brand and have developed a huge customer base. Product diversification (from CD, books to other goods) added more customer base. Strong distribution channel and Low prices were other results