5 steps to optimize Amazon supply chain management process: Proper execution of any operation requires a systematic flow of sequential tasks for optimal use of resources and elimination of waste. A flawless workflow means great profits for companies and great customer satisfaction. Amazon’s supply chain management process helps companies solve this problem.
SCM: What is supply chain management and supply chain management process at Amazon?
Supply chain management (SCM) covers the entire production flow of goods or services, from raw materials to final products delivered to consumers.
SCM is responsible for ensuring that all aspects of production are coordinated and function efficiently to minimize costs while maximizing profits and customer service.
This process includes all steps involved in the acquisition, production and delivery of a product or service to a customer.
How does supply chain management (SCM) work?
Supply chain management includes the coordination and management of all activities related to sourcing and purchasing, production, distribution, delivery and customer service.
SCM seeks to improve the efficiency and cost-effectiveness of supply chains by centrally controlling or linking critical production, shipping and distribution processes along the supply chain.
Each company has its own supply chain management process, which can be more or less complex depending on the size and nature of the business. However, all supply chain management processes have some common elements, which we will discuss next.
The 5 essential steps of SCM (Amazon supply chain management)
There are five stages of supply chain management. Each stage is important for the success of the supply chain and the business as a whole. In this blog post, we’ll take a closer look at each stage and what it entails.
Planning
At this stage, we find out what goods or services need to be produced and in what quantity. This stage also includes deciding how these products will be purchased or manufactured and where they will be shipped.
Supply
The process of acquiring the necessary raw materials and components to produce the desired product.
Production
This is the stage of transformation of raw materials into finished products.
Spreading
It is the process of delivering goods to customers through retailers or directly to consumers.
Reverse logistics
The final step in the supply chain is customer care. This includes resolving any issues, complaints or returns, as well as ensuring that the customer is happy with the product and overall experience. In the supply chain management process, this stage is often referred to as reverse logistics.
Different types of supply chain management processes
Supply chain management (SCM) is the process of managing the flow of goods and materials throughout the supply chain. However, there are several types of SCM processes. Each of these processes has its own unique characteristics and is suitable for different types of business:
Demand management
This SCM process is responsible for ensuring customer demand is met. It involves managing the flow of orders from customers and distributing products to satisfy those orders.
Supply chain management
Supply chain management is the most common type of SCM process. It is usually used by companies that produce goods that are in high demand.
In this process, goods are produced and stocked before customers place an order. This type of SCM process is suitable for companies that have a good understanding of customer demand and can accurately predict future demand.
Sales and Operations Planning (S&OP)
The Sales and Operations Planning (S&OP) SCM is responsible for planning and managing the flow of materials, information, and money between different parts of the supply chain.
The main goal of S&OP is to ensure that the right products are produced at the right time, in the right quantities, and delivered to the customers who need them.
S&OP is an ongoing process that is constantly updated as new information becomes available.
Product portfolio management
Product portfolio management is the management of a company’s products as a group. This process helps businesses decide what products to make and sell, as well as when and where to sell them.
And now let’s discuss directly the chain of posts specifically on Amazon and how it works!
What is Amazon supply chain management process?
The ‘Amazon supply chain management process’ term essentially refers to the entire Amazon process from warehousing products to inventory management, pricing, shipping, and more. Amazon has optimized each of these elements to ensure everything runs smoothly and efficiently.
Because third-party sellers are responsible for 55% of all sales on Amazon, Amazon offers sellers two fulfillment options – FBA and FBM.
Amazon FBA and FBM: what to choose?
FBA (Fulfillment by Amazon) – With this option, Amazon will take care of all logistics and customer support. Third-party sellers will simply need to ship bulk items to Amazon fulfillment centers so that the company can select, package, and ship your items. For third party sellers who don’t have well-built logistics and who work with small and light products, FBA is usually the best choice.
In addition to the above, Amazon also has an FBA Onsite program in which Amazon uses its own warehouse management software to optimize a third-party seller’s warehouse. While third party sellers will take care of the inventory of their own products, Amazon is responsible for getting orders from the seller’s warehouse and choosing the most efficient and effective method of fulfillment.
FBM (Fulfillment by Merchant) – With this option, third-party sellers will be responsible for listing their products on Amazon and handle all aspects of the storage and fulfillment process themselves.
The 2 essential elements of Amazon supply chain
When it comes to Amazon’s supply chain, there are two main elements critical to its success: Amazon Fullfilment Centers and Amazon Delivery Fleet.
Amazon fulfilment centers
With 112 million Amazon customers with a Prime membership and using two-day shipping, it’s vital that Amazon has the fulfillment and logistics network in place to fulfill these orders.
Amazon currently has over 175 operations centers around the world covering over 150 million square feet. California alone has 21 fulfillment centers, while Texas is not far behind with 14. Globally, Amazon has about 500 warehouses located near major metropolitan areas.
With the COVID-19 pandemic causing an e-commerce boom, Amazon has posted record growth over the past year. In 10 months, Amazon had to hire 427,300 employees to keep up with the demand. Third-party seller sales have increased by 60% year-on-year and this trend is expected to continue in 2021. In an effort to respond to growing demand and capacity shortages at its fulfillment centers, Amazon will open approximately 50 new warehouses and fulfillment centers in the US and more globally.
Amazon delivery fleet
While the ability to keep inventory and fulfill orders is key, Amazon Delivery Feet is just as important. To deliver orders to its customers, Amazon has various transportation and shipping partners to help meet demand.
For starters, Amazon trucks help move around 2,000 boxes or more from fulfillment centers to sorting centers. Amazon then distributes packages according to location and required delivery speed. After that, the company chooses the most efficient mode of transport for transporting these parcels.
If you’ve always wondered how Amazon handles the one-day or two-day shipping window for Prime members, Amazon has a fleet of aircraft to help with shipping. These aircraft fly from over 20 US airports and can carry 30 or more containers. On the ground, Amazon uses trucks, vans, bicycles, and sometimes even robots. Interestingly, Amazon is now looking into using drones to deliver goods to locations that are close to their fulfillment centers.
Amazon recently also launched Delivery Service Partners, which provides its employees with $10,000 in start-up expenses and three months’ pay to start their own delivery business. This not only helps in the strategic expansion of Amazon’s delivery network, but is also a great way to make money with Amazon.
Here we are!
And now let’s recap.
Amazon supply chain management: Pros and cons
There are several benefits of following strict supply chain process practices, namely:
- Competent cooperation
- Improved quality control
- Higher efficiency ratio
- Keep up with demand
- Delivery process optimization
- Risk reduction
- Cost reduction
- Income increase
- Use of assets
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