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OMGT 709 Integrated Logistics

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OMGT 709 Integrated Logistics

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OMGT 709 Integrated Logistics

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Course Code: OMGT 709
University: Centennial College

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Country: Canada

Question

You are required to critically evaluate the logistics design and logistics operations of your organisation or an organisation with which you are familiar.
Identify an organisation and write a report which covers the following:
 
A brief overview of the organisation, its supply chain and logistics.
A critical evaluation of the following areas in the organisation and/or its supply chain:
transportationwarehousingpackaging and handlingnetwork design.
One detailed recommendation to improve performance and competitive advantage based on your evaluation.

Answer

Introduction
In this report Amazon’s supply chain network and logistic operations is examined and discussed with focus to understand their different aspects in context to transportation, packaging and inventory management and warehousing and logistics network design. Further recommendations are given after evaluation and understanding of aspects for improvement in these supply chain drivers of Amazon. Lastly discussion is made on use of big data and integration to improve operational effectiveness at Amazon.
Discussion
Overview of Amazon
Amazon is exceptional e-commerce Retail Company that is ideal in its approach of doing business and is one of the most globally successful retail firms in the world that was established in early 1994 by founder Jeff Bezos. It is in online shopping industry which is headquartered at Seattle, US. Amazon is one of the biggest online retailer in measure by revenue and market capture; the other one being Alibaba. It is estimated that in future around 85% of overall products available across the world will be purchasable over Amazon. In 2017, the net income of Amazon was 3.033 bn USD, operating income was 4.106 bn USD and revenues earned was around 177.86 bn USD (Martin and Holweg 2017).
The name Amazon was given by Jeff Bezos after getting inspired from Amazon River which is best defined as being fascinating and unique and projects the trail that Bezos has planned to follow which is similar to path of river Amazon that is greatest in its kind. It initially began as online bookstore and now offers a range of wide products that includes different merchandise items, furniture, food, software, video games etc and recently they have added online video streaming and music download service through their platforms.  They have a large extension in different markets that comprises North America, Western Europe, Brazil, Japan, India and China with future plans to extend to South East Asia and Eastern Europe (Chopra and Sodhi 2014).  Amazon is customer centric company that focuses on four major customer types i.e. consumers, sellers, enterprises and content creators. Amazon continuously works on product development and innovation to satisfy customer needs and meet their expectations with their wide variety of merchandise. According to Bharadwaj (2015) after Kindle, Amazon recently introduced Alexa which is a cloud based smart voice service. Another of their creative products which is at testing phase only in parts of America and London are Amazon Locker which was launched in early 2011 and has been extensively extended in 2016. Amazon locker is self service product that was developed mainly for users who are unable to receive parcels due to stretched working schedules that makes it impossible to reach to post offices on time. In future Amazon has more plans to introduce technologically powerful products in market to meet emerging customer needs.    
Supply chain & logistics at Amazon
The effectiveness of supply chain of most of the successful companies have relied on their focus of building and rebuilding supply chains to facilitate better service delivery as promptly and inexpensively as possible with world class technology and competitive talent that boosts performance. Along with streamlining of process, high technical and service standards, strong investment in infrastructure development all these companies have continuously aimed on speed and cost effectiveness. Recently the focus has shifted more on reducing supply chain costs to build better effectiveness.  Similarly Amazon too focuses on Triple A approach to build effectiveness through agility, adaptability and alignment to offer sustained competitive advantage (Monroe 2017). Amazon’s supply chain is one of the robust across the world as it is firstly Agile which means that Amazon’s supply chain & logistic are capable to react promptly to any sudden changes of demand and supply or uncertainties. Next it is Adaptable which means that supply chain of Amazon is greatly adaptive to changes in market structure and approaches. Lastly it is Aligned which means supply chain of Amazon is capable to maintain alignment of interests of all their participants in supply network indicating that more optimised the performance of supply chain better is the maximisation of interest of participants.
This Triple A approach offers Amazon competitive edge and their supply and logistics chain is composed on two major sections. Firstly they are engaged in customer order cycle where a customer buys merchandise from Amazon online and they indicate buyer while Amazon is supplier. However when Amazon orders merchandise that are not stored in their warehouses or are out of stock then they are engaged in replenishment cycle as buyer (Varma and Khan 2014). This means that once customer confirms order online then two kinds of processes initiates, if Amazon stocks the item itself, their ERP recognises nearest distribution centre to customer that has item stored.    
In alternate case the distributor who fulfils the customer order is recognised by Amazon’s ERP. For first option the orders are delivered at distribution centre through flow master that allocates order to particular employees and once item order is confirmed it gets highlighted till the picker receives the item from its bin. Using conveyor, these picked items get transported to central point where specific barcodes are matched with order numbers, after which items are packed, weighed, labelled and put on delivery trucks.  From 2015, Amazon has introduced their own logistics network so as to depend less over third party logistics provider such as DHL or UPS. The aim of this self owned logistics network is to compliment partners and not to displace them and Amazon started developing this network to leverage their capability so as to respond promptly when third party logistics services are incapable to meet needs. So Amazon’s logistics is referred as self transportation service provider.   
Evaluation of Supply chain at Amazon:
Transportation: Amazon not only offers physical merchandise but also offers platform for music download, video streaming, software etc that helps to balance cost elements correlated to their transportation aspects of supply chain.  However for physical items Amazon’s largest challenge is to maintain a balance between inbound and outbound transport costs. Amazon gets very massive truckloads of merchandise on inbound transportation while on outbound they ship small packages which contains commonly few items. As such this generates high cost correlated to transportation and additionally elevated with many types of shipping that are free of charge for customer. Hence based on effective drivers of supply chain performance, Transportation is weakest aspect for Amazon (Potter, Towill and Christopher 2015).   They have different alliances and cooperation’s with global logistics providers and parcel services such as UPS, FedEx. So along with Amazon various others rely on these providers that promise to offer same day delivery which due to larger workloads on these logistics services becomes practically difficult to attain for all companies with which they have partnered.  So after Amazon realised that full dependence on third party logistics would affect their effectiveness of transportation aspects in offering advanced and faster services to customers, as third party logistics were incapable to meet Amazon’s expectation and demands, they started planning for alternative solutions. To overcome their dependency on third party services that would negatively impact Amazon’s in time of busy operations, they decided to launch their own logistics services which were introduced in 2015 under name Amazon Logistics.
Warehousing: in order to offer continued fulfilment services for customer it is vital to optimise warehouses of Amazon so as to make them more effective in operations as well as in costs. This is major challenge being encountered in supply chain aspects of Amazon as replenishing warehouses with merchandise for distribution of items is a lengthy procedure and needs greater manual efforts on regular basis considering Amazon’s huge demand and delivery requirements in context to number of orders. In order to address issues in warehousing Amazon has developed a process to find, chose, pick and pack orders with support of automation in warehousing and through KIVA robots so as to optimise warehouse procedure with less of manual efforts included in operations. Moreover automated process has improvised conventional warehouse management process of Amazon which was based on two points. Initially, in conventional warehouse management, Amazon realised that relying on manual contributions to feed sales information into inventory management software was ineffective and inefficacious as they had to encounter several difficulties in communication with their warehousing collaborators. As such new automatic warehousing management of Amazon resolved this concern through establishing channels and interactions with collaborators within automated procedure where as soon as customer puts orders, the details of their expected arrival date gets automatically processed in real time (Carter, Kosmol and Kaufmann 2017). Moreover Amazon can make sure either item order needs single delivery or separate parcels on separate dates to reach to customer destination in case of more than one item ordered. Additionally to improvise warehouse management process Amazon started using KIVA robots which handles automated material management of orders through fulfilment systems. Amazon initially introduced KIVA robots in their US warehouses where whenever a customer confirms orders, robot is allocated naturally through the system to identify location of product and to carry them to picker. Then to complete the order the picker has to chose item, scan and proceed for packaging. Moreover currently Amazon has plans to develop picking and packaging robots to even speedup the process and optimise warehousing management along with fulfilment procedure with less human efforts.  
Packaging and handling: Amazon handles billions of packages each year and hence to keep these on track they make every possible effort to make their packaging boxes more efficacious so that more packages can be delivered possibly every year without transit damages and inaccuracies. As Amazon continues to increase their shipment orders it became significant for them to focus on better ways to package materials and handling them. As such they have created series of new packaging approaches that involves developing envelopes for smaller shipments and a procedure for items to ship with their original packaging. This approach has helped Amazon reduce waste as well as size of their shipments as since long they had been criticised for their practise of packaging small items in huge boxes; as such Amazon launched new initiative to address this issue along with mitigating environment impact of packaging materials. So now Amazon packages their small items in bubble mailing envelopes instead of using boxes and also use machine learning to generate custom sized boxes (Minculete and Olar 2014). They even have machines in their warehouses that make small boxes and envelopes for packaging to reduce cost and Amazon has improvised their packaging and handling systems with better shipment algorithm. Machine learning is applied for scanning reviews, customer feedbacks so that they can build choices for each individual shipment and take better decisions regarding which item can be packaged together and in which box size. Also Amazon has recently focused on frustration free packaging approach where selective shipment items are packaged in their original boxes and then shipped to customers which helps in minimising wastage and averts the requirement for items to be shipped in bigger boxes.     
Also for effective handling of ordering and delivering process Amazon has maintained sharp focus on their inventory management to avert the situation where customer would not find their desirable item on their website, so as to maintain high customer fulfilment and very high standards of services compared to rivals. Amazon outsources some of their inventory management systems for restructuring warehousing through chaotic storage.
Unlike conventional warehousing Amazon currently arranges their inventory through product category or labels and to overcome issues of rearranging entire isle in event of new product launch or deliveries of large shipment of items, Amazon has created simple grid for items that are frequently allocated to isles, section and shelves and these can conveniently be identified with aid of barcodes. Amazon now assigns individual barcodes on each items, stored products so that these can be easily located and at greater speed. Additionally, Amazon has started registration system with their barcodes which are capable of updating item availability on real time basis. This means that once a shipment is packaged and shipped to customer and scanned by employees the available quantity of items gets lowered automatically (Monroe 2017). Further for high demand items Amazon currently is working on reorder implementation points which would consist of automatic re-ordering systems where once inventory drops below a specified level, then automatically order for re-stocking would be generated without human involvement.    
Network design
                             
                                                                                  Fig: Network design of logistics at Amazon
                                                                                              Source: research gate (2018)
Amazon uses a systematic network design to ensure flow of activities and their coordination with logistics operations as illustrated in the above figure. The network design of Amazon is a simple process that is applied in their supply chain. The demand forecast information and service requirement policies are put into the Inventory, Planning and Control system of Amazon which ascertains order quantity for each item that is to reach at individual fulfilment centre (FC). Orders are put through automatic systems or retail managers work stations, where these orders are accumulated into Purchase order by Procurement execution systems and then sent to vendors through Electronic data Interface (EDI). Each supplier can either accept or reject the lined items contained in Purchase order while some items are backordered in case the item is not available at time of order confirmation. When purchase order is accepted by supplier then vendor accumulates items for each Purchase order or part of Purchase order into single shipment. After this decision is made on time of shipment of ordered items and there places as vendors at Amazon can select different FC locations for separate items (Chopra and Sodhi 2014).  Before the shipment is ready the vendor gives Amazon information on shipment with help of Routing request at Vendors Management portal.  After then Amazon tenders the shipment to their preferred logistics providers or their own Amazon Logistics. After the shipment information is provided the chosen carrier coordinates with vendor directly for pick up and Amazon FC for delivery. This full network design process is maintained with various departments at Amazon as well as external logistic providers and vendors. 
Recommendation
Amazon can further improvise their effectiveness of supply and logistics design as well as operations by reducing their time for delivery and lead time with help of Anticipatory shipping systems. Amazon can recommend items to customer’s prior real purchase through machine learning information by anticipating demands through browsing history, cart contents, bucket list to inform customers on better deals for pre-order items and these can be stacked to proximity fulfilment centre until real order is placed. Also, to build a resilient supply chain in today’s competitive retail scenario Amazon has to build better and responsive enterprise systems that would be powerful enough to handle complex challenges. These systems need to tackle even Amazon’s smallest reactions to volatile changes like changes in customer expectations, market variations and competitor moves. This would leverage Amazon considerable capability to offer cutting edge competitive differentiation by permitting them to capitalise on fleeting opportunities and respond to changes in days instead of weeks. Predictive analytics and machine learning simulative tools can help Amazon assess and model the implication of changes and responses effectively. Powerful computing applications which are inexpensive can make effectiveness possible in supply chain of Amazon with use of advanced technologies like IoT (Internet of Things), social analytics and customer sentiment tools to manage supply chain levels at refined level. For instance, Amazon can spot high selling items at one location than at other and can shift their inventory to avert out of stock situations and increase their market penetration. In this manner supply chain of Amazon can become resilient to act promptly on valuable data gleaned through regular operations to avert loses and facilitate benefits. 
Further to improvise the logistics operations Amazon can use big data by investing in information technology integrations where sustained development in operations can be attained with applications like website management, customer communication, page traffic management, transaction processing and realisation empowered with analytics derived from big data. For instance Amazon web services can collaborate with Appath cloud based applications to offer edge to supply chain of Amazon with use of controlled navigation systems and sensor technologies that can track transportation and delivery process to make them more effective with smart logistics networks that is digitally powered and connected with fulfilment centres, fleets and information systems. These can use Artificial intelligence to access real time valuable data to make supply chain more effective and optimised with tracking and processing of packages; synchronisation of transportation fleets. The application of big data will provide better operational effectiveness with improvement through better accuracy and speed for customers. Example Amazon has plans to build centres where based on customer orders they can come and pick items and machines would process transactions without need for human interventions. These pick up centres will be using powerful sensors, cameras and big data analytics to track and deliver order. Also RFID technology can be used where tags can be put on shipments that would be capable to locate inventory errors and uncertain shrinking rates, so that application of RFID tags could improve replenishment in inventories which are vital part of supply chain driver. Also big data can be used for network planning of routes of delivery for optimisation of transport operations and fulfilment centres where by using AI and advanced analytics tools packages can be effectively delivered to customer pick points or other desirable locations on real time tracking (Sanders 2016).  Further real time data can enable decision making inside inventories and fulfilment centre of Amazon to facilitate improvement of supply chain operations to make effective inventory planning, sorting of items and then distributing to customer destinations.
Conclusion
Hence from above analysis it can be said that effectiveness of supply chain and logistic depends on aspects of transportation, inventory management, fleet operations, package handling and network planning so that items are sourced from vendors, stored in fulfilment centres and then distributed to customers as per demand without arising situation of out of stock or mis-management of items. Moreover to build effectiveness the supply chain architecture can be integrated with IoT and advanced analytics that would provide access to real time information to enable better decisions based on accurate information which all together will improve customer services, satisfaction and high fulfilment in delivery of services. 
References
Bharadwaj, P. N. (2015). The success of global supply chains: An exploratory analysis. Competition Forum, [Online]  13(1), 99-107. Available: https://search.proquest.com/docview/1755486057?accountid=30552[Accessed on 11 Oct. 2018]
Carter, C. R., Kosmol, T., and Kaufmann, L. (2017). TOWARD A SUPPLY CHAIN PRACTICE VIEW. Journal of Supply Chain Management, [Online]      53(1), 114-122. Available https://search.proquest.com/docview/1858057061?accountid=30552[Accessed on 11 Oct. 2018]
Chopra, S.,and Sodhi, M. S. (2014). Reducing the risk of supply chain disruptions. MIT Sloan Management Review, [Online]  55(3), 73-80. Available: https://search.proquest.com/docview/1514709899?accountid=30552[Accessed on 11 Oct. 2018]
Martin, C., and Holweg, M. (2017). Supply chain 2.0 revisited: A framework for managing volatility-induced risk in the supply chain. International Journal of Physical Distribution & Logistics Management,[Online] 47(1), 2-17. Available: doi: https://dx.doi.org/10.1108/IJPDLM-09-2016-0245 [Accessed on 11 Oct. 2018]
Minculete, G., and Olar, P. (2014). New approaches to supply chain management concept. logistics integration of “hub and spoke” model. Valahian Journal of Economic Studies, [Online]      5(2), 21-32. Available https://search.proquest.com/docview/1699251721?accountid=30552[Accessed on 11 Oct. 2018]
Monroe, R. W. (2017). Analyzing inventory and primary resources in the supply chain: Integrating supply chain, analytics, and sustainability. Journal of Strategic Innovation and Sustainability, [Online]   12(2), 85-90. Available https://search.proquest.com/docview/1990802529?accountid=30552[Accessed on 11 Oct. 2018]
Potter, A., Towill, D. R., and Christopher, M. (2015). Evolution of the migratory supply chain model. Supply Chain Management, [Online]     20(6), 603-612. Available https://search.proquest.com/docview/1748939305?accountid=30552[Accessed on 11 Oct. 2018]
Sanders, NR (2016). How to use big data to drive your supply chain. California Management Review, [Online] vol. 58, no. 3, pp. 26–48. Available https://doi.org/10.1525/cmr.2016.58.3.26 [Accessed on 11 Oct. 2018]
Varma, T. N., and Khan, D. A. (2014). Information technology in supply chain management. Journal of Supply Chain Management Systems, , [Online]    3(3), 35-46. Available https://search.proquest.com/docview/1733231032?accountid=30552[Accessed on 11 Oct. 2018]

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