How the Amazon Supply Chain Strategy Works

Retailers can learn a lot from the Amazon supply chain strategy – especially with the company preparing to launching its own delivery network, a la Fedex and UPS.

Jeff Bezos and his organization have found a way to optimize nearly every piece of the supply chain puzzle – from warehousing and inventory management to delivery times and prices.

Amazon-FBA-Fulfillment

They’ve even added drones, robots and other high-tech strategies into the mix.

The result? It’s made Amazon one of the most popular – and most profitable – retailers in all the world.

Want to take a page out of Bezos’ book? 

Let’s break down the individual pieces of the Amazon supply chain strategy including:

  • Warehousing
  • Delivery
  • Technology
  • Manufacturing

 

Amazon Supply Chain: Warehousing

A big part of Amazon’s success lies in its expert warehousing strategy, which ensures products are easily accessible from pretty much everywhere in the world.

All the company’s warehouses are strategically placed near big metros and population hubs, and inventory is spread amongst them to ensure supply can meet demand. There are even mini-warehouses in smaller areas to ensure orders can be sent and delivered fast, no matter what is being purchased.

Warehouses are also optimized internally. Each with five unique storage areas, the organization strategy allows team members and pick-and-pack robots to pull products almost instantly and move them toward delivery.

Plugable Technologies, founded in September of 2009, is just one example of a brand who was able to successfully established their goal of “building a better device company” – largely thanks to the implementation of FBA seller strategy & automation.

amazon supply chain

“Plugable bet on Amazon and FBA from day one. I wanted to focus on technology and customer support and not have to worry about selling and the logistics of individual customer orders.”

“I needed our higher investments in product quality and support to be rewarded through positive reviews, so it would all be financially sustainable.”

– Plugable Technologies, Founder Bernie Thompson said.

Plugable Technologies Founder – Bernie Thompson

Amazon Supply Chain: Delivery

One of the biggest differentiators between the Amazon supply chain strategy and other online retailers’ is the plethora of delivery options offered.

Sure, those options include the free, two-day Prime deliveries and even the Prime Now option, which gets products from point A to point B in two hours of less. But what’s the bigger game-changer?

 

 

That’s the number of ways in which Amazon can make those deliveries happen.

Amazon employs a whole host of strategies – from more traditional to super high-tech – to get its products out in lightning fast times and all over the world.

 

amazon-logistics-tracking

Credit: www.ecommercebytes.com

 

There are drones that land in your backyard or on your roof, there are Amazon-branded trucks and delivery vans and there are even deliveries by bike in certain areas.

The retailer also leverages existing delivery routes via Fedex and UPS, too.

These wide-ranging strategies allow the company to get orders out faster, easier and more efficiently to basically everywhere in the world – even remote and rural areas not served by traditional options.

“What makes competing with Amazon a significant challenge for existing Google Shopping advertisers is their trusted brand and Prime membership program,” Pat Petriello, Head of Marketplace Strategy at CPC Strategy said.

 

 

“Many online shoppers already have a deep loyalty to shopping on Amazon and are Amazon Prime members, which makes them much more likely to click on a products being advertised by Amazon.”

“If a shopper knows they can get free two day shipping and the unmatched customer service experience they get with Amazon, they will often choose them over lesser known retailers.”

Amazon Supply Chain: Technology

The Amazon supply chain management approach is to embrace technology. The company utilizes countless automation and robotic solutions, both to pick and pack orders as well as stacking and storing inventory.

These tools not only up the company’s efficiency and delivery speeds, but they also cut down on warehouse and staffing costs – freeing up funds for other logistics or supply chain needs.

The company has also embraced drones as well, launching Amazon Prime Air.

amazon prime air

 

Though the program’s not fully operational just yet, the drones will eventually allow for 30-minute deliveries in some of the nation’s biggest markets.

All customers need is an Amazon-branded landing mat (and to live within 15 miles of the nearest drone-enabled warehouse), and the instant air-side deliveries are within reach.

Amazon Supply Chain: Manufacturing

Amazon still allows third-party sellers, but the company seems to have learned that many of those third-party products can be made for much cheaper – and more profitably. The retailer has taken to manufacturing its own lower-cost products, as well as white-labeling products from other sellers.

Amazon offers branded lines in everything from household products to pets to babies, and the list of labels just keeps growing. This allows Amazon to own the whole lifecycle of its products – from creation to marketing to storage to shipment.

amazon private labels

Amazon Supply Chain: On the Horizon

Though Amazon might have one of the most well-tuned supply chain strategies in the world, the  company’s never one to sit stagnant.

The retailer is preparing to start construction on its second headquarter location in the next year or so (though the exact city has yet to be announced – reports indicate it could be Atlanta or Raleigh), and its recent partnership with Whole Foods is set to change the food delivery game.

To learn more about Amazon supply chain management or strategy, email tara@cpcstrategy.com.

About the AuthorTara graduated from the University of New Hampshire with a B.S. in Journalism / Business. Her passion for creative publishing and quality reporting landed her work opportunities at several companies in Massachusetts, New York and California. She is a leading voice behind CPC Strategy’s Blog. See all posts by this author here.