SCMG503 Week 3 Discussion

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American Public University *

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503

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Geography

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Jan 9, 2024

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docx

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Uploaded by BarristerTapirPerson186

Good morning fellow classmates and professor, I chose to continue to build upon the information I researched during the first week on Amazon. This posting will discuss how the company creates a competitive advantage through its supply chain practices, the barriers they face, and how the company overcomes them. To begin, Amazon’s competitive advantage is largely due to its highly efficient and effective supply chain management strategies and deploying cutting-edge technology. Competitive Advantages The company has created an elaborate logistics and distribution network that enables the competitive advantage of being able to deliver products to customers quickly and reliably. This is largely contributed to the advantage of not having expensive high street real estate but instead having large warehouses on industrial land, which reduces costs for the company in the long- term (Hines, 2013, p. 146). In addition, Amazon’s rapid rate of expanding supply chain operations using strategic geographical locations for their logistics and distributions center, has resulted in the company being able to cover more market segments. This provides Amazon with economies of scales by spreading the fixed costs of the facilities over a larger number of items, which reduces the per-item cost (Rodrigue, 2020). Furthermore, their fleet of delivery vehicles, planes for Amazon Air, and collaboration with major carries allows Amazon to achieve cost savings through route optimization and bulk shipping discounts. Achieving these economies of scale is what led to the disruption of being able to provide their two-day deliveries to consumers. The company’s ability to innovate with latest technology is another competitive advantage they have. For instance, the introduction of “Supply Chain by Amazon,” has assisted sellers in

the Fulfillment by Amazon (FBA) program to move products from fulfillment centers to customers through an automated set of supply chain services that is on average 70% less expensive than other fulfillment services (Mehta, 2023). This aligns with what Hine’s (2013, p. 144) mentions about supplier development programs of companies like Amazon that aim to seek out areas for improvement in the supply chain while also developing mutually beneficial solutions for their suppliers. Lastly, their Fulfillment by Merchant (FBM) program is another strategy Amazon use to gain a competitive advantage that builds on the company’s strength of leveraging technology to gain an edge in the industry. This is where the Amazon lists the products for sellers, but the sellers fulfill the order themselves. Similar to the way they sold books online where the products were not stored at warehouses but were listed as available, which Amazon saves on storage and holding costs. Building on their strengths in purchasing and distribution decisions with information technology, they continue to expand their product offerings and continue to gain competitive advantages. Barriers and Resolutions One significant barrier that Amazon’s faces is how fast they have been scaling operations. This creates the challenge of implementing sustainable business practices uniformly across their supply chain. However, the company has been addressing this issue by investing in renewable energy. It has been reported that the company is on their way to powering operations with 100% renewable energy by 2025, and as of 2022 they already had 90% of operations being powered by renewable energy sources consisting of 400 wind and solar projects worldwide (Milanesi, 2023).

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