Discuss about the Measuring and Managing Sustainability Performance.
Supply chain management is the important part of the business today. There are many companies who are adopting the process of supply chain management in the business. Each and every company has own supply chain strategy to produce or sort out the goods. There is the need to manage the supply chain by the companies to maximize the benefits. This report has described the supply chain process of a company. For discussion, the famous online retail company Amazon has taken. Amazon is the popular company which has best supply chain practices to provide high level of responsiveness for the customers. This report has analyzed the supply chain of Amazon and provided the recommendations to implement for the future (Wisner, 2011).
Amazon is the famous American commerce company which is established in Washington, USA. In starting period, the company was only a bookstore but in present time, it is diversified into various types of products. The aim of the Amazon is to provide one stop shop experience to the customers so that they can find everything on the Amazon. Amazon is considered as the pure internet retailer in which the delivery of products is done by the Amazon’s network of distribution centers. By this operation, the company is able to provide wide range of goods and products with higher quality and at lower prices. The effective supply chain strategy of the Amazon makes the company able to provide high level of responsiveness to the customers. Still, there is strong competition in the market for the company but the company knows to make stability between the distribution cost and the service levels with the effective allocation centers and multi-tier inventory system (Simpson, 2016).
There are various ways to define the supply chain management in a company. The supply chain management can be defined as the total system approach to manage the flow of the money, material and information between the suppliers and the customers. For the effective and efficient supply chain, it is important for the company to focus on the key flows of supply chain management. By understanding the flow of product, information, return and the cash, company can get good position in the market (Stefan & Roger, 2014). The various flows in the supply chain management of Amazon are as follows:
This is the flow of information between the customers and suppliers. In the supply chain, the flow of information goes in both directions such as supplier to customer and customer back to supplier. Amazon uses its ERP system to process and manage the orders and details of the transactions which need to be carried out. The order in the Amazon starts with the searching, selecting the required items by the customers. For this, the email Id of the customers is considered to keep the record and to send the information regarding products (Pamela & Pietro, 2011).
This is the flow of product from the suppliers to all the customers. This flow is uni-directional as the direction of this flow is from supplier to customers. It moves basically suppliers to the customers. Amazon uses market place model in which buyers can deal directly with the sellers and the delivery will be done by the Amazon. Along with this, the company also uses just-in-time process to serve immediate orders. The products are procured by the company on order-to-order basis (Rashid & Aslam, 2012).
It includes the movements of the money from customers to suppliers. There are various modes of payments in the Amazon. Customers can pay the sellers through the net banking or can pay at the time of delivery of the products. It is the choice of customers to use the mode of payment. Customer verifies the product and pays the money to the suppliers (Ou et al, 2010).
The return of the product to Amazon can happen if the third party is not able to delivery to specified address or customers do not accept that product. When any customer requests for the return of product than there are three main steps for return process i.e. replacement, store credit and actual cash-back (Schaltegger & Burritt, 2014).
Although the company is popular for its effective supply chain management but there are several areas on which business has to focus. In the supply chain flow, Amazon is doing well. There are some recommendations for the company. Amazon is much depended on the courier companies such as UPS and FedEx. Due to the unreliability of these courier companies, the image of the company can be hit. So, Amazon can set up its own transportation for the last mile delivery. Company can do this by creating its own delivery vehicles and personnel.
The make process is important for the company as it manages the production and operations process in the business. Along with this, it is also helpful in providing the products to the customers in time.
There are three main processes which are carried out in the production planning process i.e. inward processing, store management and outward processing. In the inward processing, there are the process such as physical inward of products, quality check and scanning and pre-packing of products has been done by the company. In the store management, put-list generation, order pending check and physical placement on shelves is done. At last in the outward processing, final packaging and placements in the respective delivery hub is done by the company (Yu et al, 2013).
The company uses continuous review model. There are many strategies adopted by Amazon in material requirement process. Amazon is basically focused on the excellence of the products and producer on the publisher of products. The company has developed allocation infrastructure to provide fast delivery of products form the company directly to the customers. Further, Amazon is also outsourcing some of its inventories to the third party. It is helpful in cutting the operational cost and focusing on the core activities. In the Amazon, the material requirement process is unique. Once the item arrives, the staff scans and sorts it immediately. The policy of the company is to scan the incoming item within first 12 hours of its arrival. At the time of shipment, the company uses an algorithm to know the best shipping route and estimated time (Gao, 2014).
It is noted that Amazon does not depends upon the computer system completely. Rather than using hybrid data gathering methodology, the company uses humans armed having barcode data collection software. This system is very helpful for the Amazon to make sure that the company can keep up with the shipment as the demand truck will leave to the fulfillment centre of Amazon in every 105 seconds. Along with this, to keep record of the material, the staff of Amazon keeps the similar items separate from each other and popular goods are stored in the various parts of the warehouses. Company keeps comparable items separate from each other so that employees do not keep wrong record of inventory. This is also helpful to locate the popular consumer goods in multiple locations to prevent from the blockage or inconvenience (Master, 2012).
Amazon has implemented the supply chain to stay competitive over the competitors in the market. Amazon has used up lots of amount and effort to expand the competency of supply chain. Here are some recommendations for the Amazon for effective supply chain management. Amazon should do efforts for the long term success and growth. The company should set new international values for the long terms tactics in the ecommerce. Further, there is the need of careful management in the company to prevent the failure of supply chain management (Qi, Zhao & Sheu, 2011).
Forecasting plays an important role in the business operations of every company. The forecasting can be considered as the most beginning input in the supply chain management of the organization. In each company, there are meeting holds monthly on the forecasting or products supply, production status, inventory value etc. all the user department must report in the meetings for the implementation of forecast related activities. There are mainly two types of forecasting methods which can be used for Amazon i.e. qualitative method and quantitative method. In case of e-commerce, only qualitative method is appropriate as the managers try to use only judgmental facts and forecasting approach in product oriented companies (Wu, Li &. Xu, 2013).
Under the quantitative approach, there are two models i.e. time series model which uses historical data to predict the future and associative model which uses explanatory variables to predict the future. Basically, quantitative forecasting uses statistical methods to analyze the future values of the company. Under the quantitative forecasting, models take current and historical trends.
This forecasting is less mathematical and intuition-based. For some unique products such as original iPhone, the statistical methods can provide inaccurate data and outcome as such types of products do not have enough data in the past so analyze the demand in the future. So, qualitative forecasting methods can be appropriate for some companies who do not have enough past data.
This model uses historical demand for forecasting the sales of a company. This model is based on the assumption that to analyze the future demand of the products, past history of that product will be the best way. These methods are suitable at the condition when demand pattern does not differ from one year to next year.
This method assumes that the demand forecast is connected with some features in the environment such as interest rates, state of economy etc. This method uses estimate to analyze the future demand with the environmental factors in the company. For instance, product proceeding is strongly linked with the demand. So, companies can adopt casual method of forecasting to identify the impact of environmental factors on demand (Acar, Everette & Gardner, 2012).
In case of Amazon, statistical forecasting method will be suitable for the company. There are lots of statistical methods including moving average, linear regression, weighted average, exponential smoothing, and Bayesian analysis which have been used for sales forecasting. This method provides accuracy in the forecasting of sales. In this method, large number of items and criteria are required for the forecasting procedures. Amazon is large online retailer having unlimited number of products. It is observed that the forecasting of bulk items is more accurate by the statistical methods. Under the statistical method, Bayesian forecasting model for online retail provides superior quantitative results as compared to other method of forecasting. Selection of right forecasting method is not an easy task as online retail business is affected by various factors such as fashion trends, seasonality and highly irregular pattern. So, statistical method can be able to provide desirable forecasting outcome in some areas as compared to other methods (Soon, 2011).
Conclusion
The report is discussed about the importance of supply chain management in an organization. From the above discussion, it is observed that supply chain management is a significant element of business. By adopting proper and effective supply chain management, the company can better in the business. Although organizing raw material and inventory is not easy in the production process but Amazon is getting competitive advantage by proper and effective management of inventory and supply chain. Amazon is achieving competitive advantage over its competitors with its effective resources in the retail industry.
Having supply chain in the business, employees of the company feel relaxed in the company as supply chain is very effective process in reducing the stress in the daily operations. Amazon has implemented the supply chain management process for the key business operations i.e. managing supplier and customers, managing inventory and providing services to the customers. The objective of Amazon is to provide best quality product which can meet the demands of the customers. So, supply chain management plays an important role to achieve the goals of the company in the competitive market.
References
Acar, Y., Everette, S., & Gardner, J., (2012), Forecasting method selection in a global supply chain: International Journal of Forecasting, 28(4), 842–848
Gao, Y., (2014), Amazon’s Inventory Strategy, accessed on 21st March 2017 from https://cmuscm.blogspot.in/2014/09/Amazons-inventory-strategy.html
Master, N., (2012), Amazon’s inventory management secrets, accessed on 21st March 2017 from https://www.rfgen.com/blog/bid/246924/Amazon-s-inventory-management-secrets
Murray, M., (2016), Forecasting In The Supply Chain, accessed on 21st March 2017 from https://www.thebalance.com/forecasting-in-the-supply-chain-2221207
Ou, C.S., Liu, F.C., Hung, Y.C., & Yen, D.C. (2010), A structural model of supply chain management on firm performance, International Journal of Operations & Production Management, 30 (5), pp. 526-545
Pamela, D., & Pietro, R. (2011), Supply chain integration and efficiency performance: a study on the interactions between customer and supplier integration, Supply chain Management: An International Journal, 16, pp. 220-230
Qi, Y., Zhao, X. & Sheu, C., (2011), The Impact of Competitive Strategy and Supply Chain Strategy on Business Performance: The Role of Environmental Uncertainty, Decision Sciences, 42 (2), pp. 71-389
Rashid, K and Aslam, M (2012), Business excellence through total supply chain quality management: Asian Journal on Quality, 13(3), pp.309 – 324
Schaltegger, S., & Burritt, R. (2014), Measuring and managing sustainability performance of supply chains. Supply Chain Management: An International Journal, 19 (3), pp. 32-241
Simpson, S., (2016), The secrets behind Amazon’s success, accessed on 21st March 2017 from https://www.cips.org/supply-management/analysis/2016/february/the-secrets-behind-Amazons-success/
Soon, W., (2011), A Review of Multi-Product Pricing Models: Applied Mathematics and Computation, 217(21), 8149–8165
Stefan, S., & Roger, B (2014), Measuring and managing sustainability performance of supply chains Supply Chain Management: An International Journal, 19 (3), pp. 232-241
Wisner, J D (2011), Principles of Supply Chain Management: A Balanced Approach, Cengage Learning
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