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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Please note:
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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Background Note
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In the early 1990s, several entrepreneurs recognized the massive potential of
the Internet and decided to cash in on it. One of the first to do so was Jeffrey
Preston Bezos (Bezos), a graduate in Electrical Engineering and Computer Science
from the Princeton University.
After his graduation in 1986, Bezos turned down offers from Bell Labs and Intel
and instead took up a job in a startup company run by two professors from the
Columbia University. The company built tele-communication networks for Wall
Street firms. Bezos left the company in 1988 and joined Banker's Trust where he
led the development of computer systems.
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In early 1990, he became the youngest vice-president of that company but quit
the job to work for D.E.Shaw's hedge fund till 1994.
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At D.E.Shaw,
he built technically sophisticated and successful quantitative hedge
funds6 and in 1992, at the age of
28, became the firm's youngest senior vice-president. Around that time
Bezos came across an article on the impact of the Internet on online
shopping. He found out that the Internet was growing at the rate of 2300
percent per month and realized that within a few years many people would
be making money by selling over the web. He desperately wanted to start
a new venture on the web as early as possible. As a first step, Bezos
conducted a study of the different items that could be sold on the web.
He wanted to offer low-priced products that customers would not hesitate
to buy online. |
Said Bezos, "I used a whole bunch of criteria to evaluate the
potential of each product, but among the main criteria was the size of the
relative markets. Books, I found out, were an $82 billion market worldwide. The
price point was another major criterion: I wanted a low-priced product. I
reasoned that since this was the first purchase many people would make online,
it had to be non-threatening in size. A third criterion was the range of choice:
there were 3 million items in the book category and only a tenth of that in CDs,
for example. This was important because the wider the choice, the more the
organizing and selection capabilities of the computer could be put in good use."7
Excerpts >>
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