Amazon.Com's Inventory Management Essays

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Introduction

Launched by Jeff Bezos, the Amazon.com website started in 1995 and is today considered as one of the most prominent retail website on the internet with a record turnover of US$ 14.87 billion in 2007. Jeff Bezos’s intention was to create an internet based company with the most dedicated product portfolio on the internet where customers could find anything they might want. Amazon’s success is based on technology, services and products (Jens et al., 2003).
Controlling inventory is known to be one of the toughest problems for companies. With 39 million active customer accounts and a vision such as being "Earth’s biggest selection of product", Amazon has been putting a lot of effort to be as efficient as possible in their
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Initially this didn’t look like a bad idea but it wasn’t long till Bezos understood that if he had to build on strong customer satisfaction and needed to have his own inventory. This left him with two choices, either improve information system flow throughout the supply chain or build warehouses to manage its own inventory (Hof, 1999).

2. Built warehouses to store inventory
In this stage the objective of Amazon was to build warehouses and gain better control over their Inventory and increase the range of products while reducing their logistics cost (Choen et al., 2004).

Figure 2: Second stage logistic process

As show on figure 2, Amazon used to procure items from their distributor and store them in their warehouses. Customer makes an order and Amazon couriers it to them. This helped Amazon to maximise its storage capacity as well as decrease their logistics costs. However Amazon did face a major problem of managing a large inventory along with high warehouse maintenance costs. This left Amazon with two options, either to use its warehouses more effectively by boosting sales or outsource its inventory management.

3. Entered into partnerships with distributors
This was a huge risk as Amazon had a very good reputation in
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