Overview
This lecture detailed how Amazon's supply chain operates, spotlighting its technology-driven efficiency, key components, and comparison of FBA vs. FBM fulfillment models.
What is Amazon Supply Chain Management?
- Amazon supply chain is an automated system moving products from manufacturers to customers worldwide.
- It covers inventory management, warehousing, pricing, and global delivery.
- Automation and robotics are core to its speed and accuracy.
How the Amazon Supply Chain Works
- Sellers (especially FBA) send products in bulk to Amazon's fulfillment centers via professional carriers.
- Products are checked for accuracy and quality, then barcoded and logged into inventory systems.
- Advanced robotics handle storage and movement within fulfillment centers, reducing human labor and speeding up operations.
- Orders are managed via Amazon's platform and fulfilled by methods like FBA, FBM, SFP, or MCF.
- Customer orders are tracked and delivered, with a streamlined and algorithm-driven returns process.
Key Elements of Amazon Supply Chain Success
- Warehousing: Extensive, standardized network with various facility types for efficient storage and sorting.
- Delivery: Relies on Amazon Logistics, air cargo (Amazon Air), third-party carriers, and delivery partners for fast shipping.
- Technology: Robotics (Kiva, Sparrow), automation, drones, and data analysis optimize the supply chain.
- Pricing: Prime and standard customer segmentation, with storage fees influencing inventory management.
- International Reach: Operates in multiple regions, facilitating global sales and distribution.
Amazon Supply Chain Models: FBA vs. FBM
- FBA (Fulfilled by Amazon): Amazon stores, picks, packs, ships, and handles customer service and returns for sellers.
- Pros: Convenience, fast delivery, Prime eligibility, higher sales potential.
- Cons: Fees, less seller control.
- FBM (Fulfilled by Merchant): Sellers manage all aspects of fulfillment themselves.
- Pros: Greater control, potentially lower costs, direct inventory oversight.
- Cons: Slower shipping, higher operational complexity, seller handles all service.
Factors Driving Amazon's Supply Chain Efficiency
- Automation and AI enable large-scale, rapid order processing.
- Strategic warehouse placement ensures fast delivery.
- Data-driven forecasting and optimization adjust to demand and shipping variables.
- AWS Supply Chain provides unified, ML-powered supply chain data and insights.
Key Terms & Definitions
- FBA — Fulfillment by Amazon; Amazon handles storage, shipping, and service.
- FBM — Fulfillment by Merchant; seller fulfills orders directly.
- Amazon Logistics (AMZL) — Amazon's in-house delivery network for last-mile deliveries.
- Kiva Robots — Amazon's mobile robots that move shelves to workers in warehouses.
- Prime Air — Amazon's drone delivery initiative.
- SKU — Stock Keeping Unit; unique identifier for products.
Action Items / Next Steps
- Review differences and suitability between FBA and FBM for sellers.
- Explore related concepts in supply chain automation and data analytics.
- Examine AWS Supply Chain for insights into cloud-based supply chain management.