Amazon.Com’s European Distribution Strategy Harvard Case Solution & Analysis

Amazon.Com’s European Distribution Strategy The case solution 

The additional storage capacity was also required to cover the load of holiday season. To meet the requirements, management leased 6 off site facilities having the area of nearly 1.1 million square feet.There was the storage cost associated with every item in the distribution centres. To counter this management decided to modify the software used to forecast the demand patterns. Then the software was able to forecast the regional and seasonal demands as well.

Certain buy rules were also established in some divisions. For instance in books area wholesalers were kept as an alternate options in case any order of any item received was out of stock or if the demand of any less demanded product increased all of a sudden.Amazon integrated its suppliers, for instance any product that was not available on amazon DC was taken from other sources generally from the wholesalers (who were also listed in the category) and then was delivered to customer.

Six Sigma DMIAC was introduced in the United States’ distribution centres. A tool to reduce the variations and defects in process. DMIAC identified issues related to temporary workers that were keeping things in wrong place at the distribution centres.DMIAC enabled management to take appropriate actions and reduced accuracy errors in inventory control up to 50% in a years’ time.

Amazon implemented cascading system which enabled it to automatically check the order with its suppliers along with the comparison of prices as well. And the system recommended the supplier with best suitable prices.

Management also considered avoidingthe holding of excessive inventory. For each product category they got tailored software to evaluate the options available. Amazon started this with books’ line.Certain categories were made and items were shipped according to that. For instance a CD and a barbeque grill were not to be delivered in a single shipment.

Amazon partnered with multiple firmsto handle the order related process against a fees on the percentage of sales. Whereas the inventory cost was also to be covered by the partner. Amazon co. created the online store with ToysR’Us for selling toys and baby products. Amazon handled customer service, order fulfilment and order processing. Whereas;ToysR’Usmanaged merchandising and buying of the inventory.Orders were proceeded either from amazon’s distribution or from vendors, according to the cost incurred. In addition the items listed on amazon’s distribution were available in 24 hours; whereas items listed as out of stock were supposed to take 2-3 days to be delivered upon confirmation of order.

Certain buying rules were initiated for allocating the volumes among wholesalers and the direct vendors of products.The company’s philosophy of delivering the items at any cost brought extensive growth but also caused it to face a decline in the revenues substantially for certain period of time.

Question No 4

Executive summary

Amazon would have to make few critical decisions by adoption a new distribution centres in Europe. Amazon has an option of not replicating the products and supplying the products through the established channels even after the distribution channel opens. Historical data also has shown that existing European distribution centres have at least faced the issue of systematic failure. To cover all these issues the communication between all the concerned departments is very necessary. Moreover, all the transportation plans will require modifications according to the future distribution plans.

The product selection of the existing sites from the United Kingdom can be carried forward to the sites of France.There would be no need of additional buying team and whole of a management team for purchasing the inventory. The replication of products will be minimized. Rather other products having potential would be availing the space without interrupting the operations.

Costs associated with the whole bunch of new purchase division can be minimized to some extent.Quantity of order in whole will increase over the distribution centres in the UK.Incentives obtained by the vendors will increase in accordance to the growth in order.It would reduce the risk of relying on one or two distribution centres, to serve a larger base of customers.Historical data also showed that each European distribution centres have been experiencing the systematic failure at least once.It would help in balancing the load on distribution centres in Europe. For instance in this manner amazon will be able to select the most appropriate distribution centre for the fulfilment of order.

Transportation time and costs will be saved on regular basis, for instance order placed from Switzerland or Spain of UK’s products can be fulfilled through German distribution instead of UK’s distribution. If Amazon decides to have an expansion of its operations further in European countries, then it can supply from its existing distribution rather than setting up a whole new distribution incurring huge fixed costs.

Covering the huge geographical area will not be possible without active presentation.2/3 of the shipments are being made through the UK’s distribution centre, yet still it is necessary to continue with the other two distributions in Europe.Amazon would have to redesign all of its transportation plans in order to include or exclude any of the geographical area, regardless of the distribution.

Inter departmental communication and coordination would be very important. Thus educating and training the concerned employees about the practices would be essential. For instance when shipping policies are altered then employees in customer service would require all the updates immediately to resolve the customer’s queries.

Question No 5

Executive summary

  • New distribution centre will be generating a lot of revenues according to the huge demand predictions, yet the possibility of demand fluctuation exists, and relying solely on the predicted demand would not be a wise business decision.
  • The dependency of company’s European division will significantly rise upon the transportation section.
  • Full new transportation plans would be required but it would be in the favor of customer as there will be other distribution centres and if one distribution centre would be unable to meet the demands then the other centres would be able to meet the demands. Both inbound as well as outbound shipment network will expand.

Meeting the demands would be easier, yet the support needed from transportation function will rise exponentially.New distribution centre will lessen the burden from the UK’s distribution centre, which is currently catering 2/3 of the total sales.More distribution centres will help lowering the transportation costs in both dimensions of inbound and outbound shipments. Under the formulation of new distribution centre amazon will be able to negotiate with its vendor higher and much more.Full functional human resource will be needed in a new state.

An entire new management team would be required to supervise the operations from very start till the end.If any of the distribution centre is unable to fulfil the demands due to any reason, then the customers wouldn’t have to wait for an extensive period of time.The option would always be there to deliver the product from other distribution.................

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