How does the Amazon supply chain work

Mar 10

While Amazon is today's ecommerce leader for a number of reasons, I believe that its state-of-the-art supply chain model played a significant role. Since Amazon began selling books in 1995, the company has grown considerably. At present, Amazon operates one of the best supply chains in the world, and it is one of the fastest-growing companies.

In 1995, when Amazon sold books only online, its supply chain model was similar to that of today. Although it has a much larger scale and contains a variety of technological innovations, it has greatly improved efficiencies and operations. Here we will explore the reasons for Amazon's success in becoming a global leader in E-commerce through its supply chain model.

What is Amazon Supply Chain?

The Amazon supply chain includes everything from product storage to Amazon inventory management system, pricing, and shipping. In order to ensure that everything runs as smoothly and effectively as possible, Amazon has optimized each of these parts.

Due to the fact that third-party sellers are responsible for 55% of all transactions completed on Amazon, the company provides merchants with two fulfillment options – FBA and FBM.

Amazon FBA and FBM

FBA (Fulfillment by Amazon). Inventory forecasting software will handle all customer service and logistics for you if you choose this option. As a third-party seller, you need to take bulk products to the Amazon fulfillment centers, where they can then be picked up, packed, and shipped by Amazon employees. When third-party sellers are working with small and lightweight items and do not have logistics in place, FBA is usually the best option.

Additionally, Amazon offers its FBA Onsite program through which it uses its warehouse management software to provide optimization services to third-party sellers.

FBM (Fulfilment by Merchant). Third-parties will be given the option of listing their products on Amazon as well as handling all aspects of storage and fulfillment directly on their own, relying on Amazon to handle all of the above.

Amazon's supply chain consists of two main components.

Amazon's supply chain is composed of two components, the Amazon Fulfillment Centers and the Amazon Delivery Fleet. Both play a crucial role in its success.

Amazon Fulfillment Centers

There are 112 million Prime members in Amazon's customer base, and two-day shipping is available to all Prime members. The fulfillment and logistics network Amazon has is crucial to accommodate these orders.

As of today, Amazon has more than 175 operational fulfillment centers operating across the globe-spanning a combined 150 million square feet of floor space. Among California's fulfillment centers, 21 are located in that state, while Texas is not far behind with 14 fulfillment centers. Across the globe, Amazon is estimated to have 500 warehouses, with most of them located close to major metropolitan areas.

Amazon Delivery Fleet

While Amazon's storage capabilities and ability to fulfill orders are crucial, the delivery fleet is equally important. Various transportation and delivery partners help Amazon meet customer demands in order to efficiently fulfill orders.

Starting from the fulfillment centers, Amazon's trucks transport approximately 2,000 boxes or more to sorting centers. From there, Amazon then distributes the packages based on the required delivery speed and the locations of the packages. Afterward, the firm selects the most economical way to move these packages by selecting the best mode of transportation.

It will come as no surprise to you if you've ever wondered how Amazon manages to meet its windows of one or two days for Prime members. For this purpose, Amazon provides a fleet of airplanes to assist with deliveries. Aircraft of this type operate from more than 20 airports throughout the nation and are capable of transporting 30 containers or more. Amazon uses a wide variety of vehicles on the ground, including trucks, vans, bicycles, and even robots. Amazon is now thinking about using drones for delivering stuff to places near their fulfillment centers.

Amazon fulfillment center activities

In what ways does an Amazon Fulfillment Center work? The following steps are the steps taken by a shopper once he has clicked the button that says "Buy."

Receiving the products

Forklifts or lift trucks are used at Amazon Fulfillment Centers to remove products from trailers, while pallets are built manually by employees. A distinction is made between freight that originates from Amazon facilities and freight that comes from third-party vendors who utilize the FBA service.

The storage of items

The items in Amazon's warehouses are stored randomly, unlike those of other warehouses that are organized according to type. Throughout Amazon, yellow containers are filled with a wide range of random items that are all tracked by computers. Amazon associates then transport the bins in accordance with the size of the products.

Picking Orders

Upon clicking "Buy," a robot will bring your order to pick stations, where Amazon employees will receive pods of items. This automated picking system reads the screen, retrieves the items, and places them in a yellow plastic container known as a tote box.

Assurance of quality

A great deal of quality assurance is required to allow robots and humans to work harmoniously. In order for the items to function correctly, the location of the items in the computer must match the location in the robots. In a large-scale supply chain business such as Amazon, fine-tuning is a necessary component throughout the entire process.

Packaging Orders

Furthermore, the items belonging to different shipments must both be scanned and organized before they can be sent to the packing station. In this manner, Amazon associates will be able to recommend boxes and measure how much tape is required.

What is to come in the future

As Amazon continues to grow, it is clear that technological innovation is at the forefront of the company. Below you will find a list of some current developments.

Drones

Prime Air is Amazon's drone-based delivery service. The system is currently being developed. The company plans to deliver products weighing less than five pounds to a location within ten miles of its fulfillment centers through this innovation. It is an incredible innovation that is currently in the pipeline, despite many hurdles that Amazon would need to overcome.

Growth of the manufacturing sector

Despite Amazon's position as the world's largest retailer, it has also diversified its business model. Among the products the company now produces are backpacks, smart speakers, AI technologies for virtual assistants, and more. In light of Amazon's established position in the market, it can sell third-party items at a lower price since it is already established.

Conclusion

Amazon has made impressive advancements at a remarkable rate making it hard for competitors to compete. Supply chain automation has been shaken up as a result of the retail giant's influence and has forced competitors to invest even more to compete effectively. We can't wait to see what Amazon does in the future, from increasing fulfillment centers to expanding their delivery fleet to implementing new technology.