In the last decade, Amazon has grown to be the largest online retailer. A large part of Amazon’s success is its ability to build out one of the world’s most sophisticated supply chain management. Specifically, it has built out a very sophisticated and increasingly automated warehousing system.
A great warehousing system is crucial to Amazon’s operations, because it can ensure the right levels of inventory across SKUs and fast fulfillment at low costs. That is key to Amazon’s differentiated value proposition: large selection, low prices, fast delivery, and convenience.
In 2006, the company laid the foundation of Fulfillment by Amazon (FBA). This fundamentally monetizes their incredible logistics network so that small business owners can borrow some benefits from the network of large companies without the complications of large companies.
Many retailers, both physical and online, do not have their own warehouses. While they may have their own back rooms, their main products are stored in storage rooms that they rent or lease. This is done to fulfill the needs of customers or corporate retail stores.
This is not a problem for Amazon. Amazon stores most of the things it sells on its platform and is increasing the things that other companies sell on its platform. The company manages an enormous amount of space.
At the heart of Amazon's success is of course the focus on scalability and customer satisfaction. You know what makes customers happy when they shop online: instant satisfaction. (Or the satisfaction sooner rather than later, to be more realistic).
From the beginning, Amazon recognized that one of the biggest challenges in e-commerce is the consumer's desire to get their hands on a product right away, like it is possible in a physical store.
They concentrated on continuously reducing his delivery times. Most Amazon users got used to two-day delivery, while some areas even have access to same-day delivery, leaving physical retailers to run for their money.
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From a strategic perspective, the answer is that Amazon has always invested in the best possible customer experience. While other retailers have been happy with keeping delivery times long (and competition didn't force them to speed them up), Amazon has pushed for fast delivery. As a result, they have become a standard that other companies have found difficult to meet.
Perhaps the most interesting thing for you, however, is that from a logistical point of view, the answer is transportation and warehouse management. This affects the delivery time for obvious reasons. If you have a warehouse in Mumbai, it takes time for an order to be placed on a Delhi customer.
A less obvious but equally important challenge to fast delivery is finding the right items in the warehouse to ship to customers. This process, the picking process, has traditionally been a labor intensive activity. Amazon has prepared to be successful in both areas of logistics.
Warehouse Facilities used by Amazon
Amazon Warehouse Facilities
As mentioned above, Amazon manages a lot of land and much of this land consists of warehouse space.
As Amazon is Amazon, warehouse management is not monolithic, but has created a well thought-out warehouse ecosystem to give structure to the Amazon system. A better way to imagine this ecosystem is through a distribution network. Amazon's system divides its distribution network into five types of facilities:
Crossdock center: Parcels from foreign suppliers stay here until the fulfillment centers require more inventory.
Fulfillment Center: This is the environment a warehouse specialist would be in, where Amazon stores its products and Amazon employees collect and package products for customers. The company operates more than 175 fulfillment centers worldwide.
Sorting centers: The sorting of the centers introduced in 2014 is intended to improve delivery on the last mile. "No product is kept in these places.Instead, customer-ready packages are transported on conveyor belts while Amazon staff and robots sort and route packages by zip code before sending them to a carrier for final delivery.
Delivery System: The last mile of many Amazon shipments is handled by USPS, FedEx, or UPS, and the delivery stations offer Amazon flexibility in high volume areas.
Amazon Prime Now Centers: Amazon's system for urgent items such as groceries is based on Prime Now Centers. These centers manage items that are usually delivered within 2 hours of purchase.The two types of facilities most important to Amazon's inventory management are fulfillment centers and sorting centers.
In May 2017, AFT decided to migrate the system to Amazon Aurora. Aurora, a MySQL and PostgreSQL compatible database for the cloud, offers Oracle performance and availability at about a tenth the cost.
Amazon Aurora is fully managed by the Amazon Relational Database Service (Amazon RDS), which automates time-consuming administrative tasks such as hardware provisioning, database configuration, patching, and security backups.
PostgreSQL was chosen as the database because it can process complex write transactions at a speed comparable to the Oracle system. "Our writers have many components," says Michael Wu, Amazon's senior software development engineer. and financial operations The PostgreSQL-compatible edition of Amazon Aurora offers high performance for these scenarios.
Amazon transformed the supply chain by digitizing traditional warehouse processes to gain greater agility. What started as using barcode scanners to track inventory has evolved to a fully digital warehouse, distribution and fulfillment network that moves goods between locations with incredible efficiency.
Going digital sets the foundation for a flexible, fast-moving modern operation. However, a digital enterprise is only effective if its data is accurate. Focusing on inventory accuracy has allowed Amazon to make dramatic strategic changes critical to its success.
Supply chains can learn a valuable lesson from this new idea of fulfillment. Instead of having to process the order in a central warehouse and send it over an extended shipping network, the e-commerce giant can pair a warehouse with an order to identify which location makes the most sense and accelerate order delivery accordingly.
This type of strategic change is only possible, however, because of data collection technologies and mobile inventory. Real-time integration with the central and multi-tier backend system, like an ERP or WMS software, ensures accurate information across geographically distributed locations. A mobile warehouse is an agile warehouse.
Automated optical tracking is making deeper inroads into the process in an attempt to reduce the need to use handheld scanners to read codes to record the movements of products. Cameras also scan codes on totes to monitor their progress through the system of conveyor belts.
An optical computer vision system also monitors the contents of every bin in a pod. Handheld barcode scanners can get in the way of picking and packing.
As Eli Gallaudet, a software development manager at Amazon described it, seeing pickers tucking a scanner under their chain as they tried to stow items in bins, prompted the search for better ways of keeping track of items. The quest was on to “get this hand-held scanner out of the way,” explained Gallaudet.
The idea of “wiring up” workers with wrist straps did not go down well when news got out. Instead, the engineers set out to devise a computer vision system that watched workers hands as they stowed items. “It has to be highly accurate,” said Gallaudet.
The answer was to use two cameras and complex algorithms to track hands and objects, to match that to the layout of the bins on a pod and to figure out which bin an item went into. Gallaudet wouldn’t disclose how accurate the system is, but admitted that initially it was not accurate enough.
The Amazon Effect has changed more than just consumer expectations. As the e-commerce giant has transformed retail and the world, it has also forced businesses to accelerate supply chain operations to keep pace with new evolutions, like two-day and same-day delivery. So far, big-box titans like Walmart have been one of the few companies able to compete.
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For those impacted by the Amazon Effect but not directly competing with Amazon, there are critical lessons to be learned from their continuous drive to innovate inventory management, warehouse automation, and the supply chain of tomorrow.