Amazon.com's Inventory Management

            
 
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Case Details:

Case Code : OPER023
Case Length : 13 Pages
Period : 2003
Organization : Amazon.com
Pub Date : 2003
Teaching Note : Available
Countries : USA, Global
Industry : Online Retailing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Excerpts

Value Proposition

Amazon built a four-fold value proposition that indicated its priorities in the establishment of the online venture. The four dimensions it focused on were convenience, selection, price, and customer service. The online venture was convenient as it was open for business all the time. The site was so designed as to keep the download time at a minimum. The site also offered its users various facilities such as reviews, e-mail notifications, reference from a previous search and product recommendations. It also provided the users with a wide range of product options, which they could select from. Amazon had an inventory consisting of millions of items which was roughly about 100 times that of a typical physical store...

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Strategic Alliances

In order to expand in a rapid and a cost-effective manner, Amazon decided to partner with other companies. The main criterion used by Amazon for selecting a partner was the customer service provided by the company. During 1998-2000, Amazon acquired ownership stakes ranging from 17 to 49 percent in various online retailers- Greenlight.com, Living.com, Drugstore.com, HomeGrocer.com, Pets.com, Ashford.com, Gear.com, and Della.com. Amazon spent an estimated $160 million on acquiring stakes in these companies...

Inventory Management

When Bezos started his venture, he aimed at hassle-free operations. He wanted to offer his customers a wide selection of books, but did not want to spend time and money on opening stores and warehouses and in dealing with the inventory. He however realized that the only way to satisfy customers and at the same timer make sure that Amazon enjoyed the benefits of time and cost efficiency was to maintain its own warehouse. Building warehouses and operating them was a very tough decision for Bezos. Each warehouse cost him around $50 million and in order to get the money, Amazon issued $2 billion as bonds...

In 1999, Amazon added six warehouses in Fernley, Nevada; Coffeyville, Kansas; Campbellsville, Kentucky; Lexington, Kentucky; McDonough, Georgia; and Grand Forks, North Dakota. On the whole, Amazon had ten warehouses. Most of these warehouses were set up in states with little or no sales tax...

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