Segmentation in Supply Chain Management

Alicia DerezaEna Fejzagic

• What is the first thing that comes to your mind when you see this logo?

• “Amazon is a black box.“ (Time Magazine, 2012)

• Amazon's warehouses have more square footage than 700 Madison Square Gardens and could hold more water than 10,000 Olympic Pools

• The first book Amazon.com ever sold was from Bezos' garage in July 1995: "Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought "

• Amazon's current logo was designed to depict a smile that goes from A to Z. "This signifies that the company is willing to deliver everything to everyone, anywhere in the world."

•  Amazon.com, Inc. - an American international multibillion dollar electronic commerce company

• Headquarters: in Seattle, Washington, US• World's largest online retailer• Originally an online bookstore, soon diversified,

selling DVDs, VHSs, CDs, video and MP3 downloads/streaming, software, video games, electronics, apparel, furniture, food, toys, and jewelry

• Producer of consumer electronics – Amazon Kindle e-book reader and Kindle Fire tablet computer

• Jeff Bezos’ critical insight when he founded Amazon was that the Internet allowed a retailer to have both (effectively) infinite selection AND lower prices (because you didn’t need to maintain a limited-in-size-yet-expensive-due-to-location retail space)

• Amazon was founded on the premise of there being a dominant strategy: better selection AND better prices

• Amazon‘s story: systematically taking down an entire existing industry, a story that called for strategic depth, and not technical wizardry, design brilliance or sheer energy

• Vision: to offer Earth’s biggest selection and to be Earth’s most customer-centric company

• Customer-centric strategy and partnership strategy• Customer preference as the operational level of

business - basis for its service differentiation advantage 

• Supply Chain Management Strategy: the Amazon Effect

• Amazon is almost everybody’s competitor• Tipping points - intersection between

business strategy and supply chain strategy

Development Of Warehouses

• Ingram etc.• Space for the

storage of goods did not matter

External suppliers

• For bestsellers only• Base for the

Amazon , but it began to collapse

• 0,25 % profit compared to 30% possible

Few own warehouses

• transportation costs• inventory carrying

costs,• the taxes and a

couple of• other factors to

come up with a network of DCs to service customers in a set of zip codes

Reducing costs

• 3 markets strategy: • same day delivery

in major markets• next day delivery in

secondary markets• two day delivery in

tertiary markets

Warehousing and service

Assessment of Amazon’s Supply Chain

• Items displayed online are unique to each country• Customer Service Representative localized to each country• Each country has access to different kinds of products• Repetitive Inventory at different locations.• Excellent postal services for local shipping but unreliable cross-

border logistics

- Higher prices- Possible competitors on second and third markets- Additional products which need different approach (electronic

devices etc.)

Recommendations

Adopt Centralized Operations Management

Implement European Distribution Network (EDN)

Centralize management office in the United Kingdom where most operations take place.

Use strategic order fulfillment to minimize lead time

Use strategic inventory distribution to reduce cost

Recommendations

Manage Shipping Costs

Continue free shipping for local products, extending the use of Postal Injection for some high demand products

Full truck loads from DCs to major cities

Reduce postal service charges, maintain low shipping cost and offer free shipping in some new places

Recommendations

Offline shops

New products need totally different distribution approach

Diversification from their competitors

New way of delivering orders (to the store)

Saving money

Thank you for your attention

Alicia DerezaEna Fejzagic