Presented by :

Ashutosh Kumar Jha(91011)

Deepinder Singh(91016)
Divanshu Kapoor (91017)
Harsh Agrawal (91022)
Nishant Singh(91039)
Sweta Agarwal (91059)

"In the physical world it's the old saw: location,
location, location. The three most important things for
us are technology, technology, technology."
- Jeff Bezos, CEO, Amazon.com
One of the first online shopping sites launched in 1995.

Consistently ranked as one of the best retail sites on the
Internet.

According to an analyst, "When you think of web shopping,
you think of Amazon first."

It is an American electronic commerce company based in
Seattle, Washington with an additional office in Coffeyville,
Kansas. It has six global websites to serve domestic customers in
the US, the UK, Germany, France, Japan and Canada
Features include: one-click shopping, customer review and e-
mail order verification.

The company is in coalition with other retailers and offer
various new, and used items in categories.

It has expanded from its existing business of selling books to
selling a wide variety of products such as DVDs, music CDs,
computer software, video games, electronics, apparel,
furniture, food and more

Jeff Bezos, in 1995, started AMAZON.com as a virtual
retailer no inventory, no warehouses, no overhead; just
computers
Amazon owed its popularity to its excellent customer service,
which was due to its effective inventory management.
Raw materials (items to be used for manufacturing)

Work in process(semi finished items that are stored temporarily)

Finished goods(waiting in stores for delivery)

Transit inventory (need to transport items)

Buffer inventory (uncertainties of supply and demand)

Anticipation Inventory(anticipation of a possible future event)

Customers orders in anticipation
To protect against stock-outs
To take advantage of quantity discounts
To protect against inflation
To protect the uncertainties of supply and demand
Unpredictable events
Seasonal increase in demand
Stocking when customer demands may be uneconomical

Carrying costs- basically opportunity costs
E.g - rent, lighting, staffing etc
Ordering costs basically acquistion costs
E.g purchase order, recording , accounting etc
Shortage costs E.g urgent purchases, loss of reputation etc
Initially Bezos aimed at hassle-free operations

Time and money not to be spent in dealing with the
inventory.

Satisfy customers ; forced to build warehouses.

Each warehouse cost him around $ 50 million and in order to
get the money, Amazon issued $ 2 billion as bonds
In 1999:
Added 6 new warehouses to total to 10

Computerized warehouses

Increased warehousing capacity from 300,000 sq. feet to
over 5 million sq. feet

Automation of events after placement of order to make
inventory management easier
In 1999, when Amazon's sales grew 170% from the previous
year, its inventories ballooned by 650%, Suria pointed out.
''When a company manages inventory properly, it should grow
along with its sales-growth rate,'' he noted. When inventory
grows faster than sales, ''it means simply that they're not
selling as much as they're buying.''
Decided to stock all possible items that customer could
demand during holiday season
Appreciated; but faced a lot of problems in inventory
management
Thus looked for alternatives

Decided to buy directly from publishers rather than
distributors
Upgraded software which helped to accommodate inventory
as per demand
Placed products which were generally bought together at one
point. Eg. CDs and CD player

Initial Changes
Inventory goals: right product in the right quantity to the right
place at the right time.
Reduce redundant inventory
Blockage of working capital.
Low inventory turnover.
Cost of holding > cost of outsourcing
Thus they OUTSOURCED
Deciding the Strategy
Stocked only popular items and rest were outsourced from
distributors.
Outside distributors at Amazon for three kinds of products:
cell phones, computers and books, excluding those on best-
seller lists
CellStar handled the cell phone sales
Wholesale distributor Ingram Micro handled the computers
and books.
Inventory Outsourcing
Concentrate on main activities
To reduce the inventory holding costs.
To earn more profits
To free the working capital and increase liquidity.
Adoption of Drop-shipment model which increased the
overall efficiency and streamline supply chain logistics.
Warehouses could handle thrice the volumes
Reduced the shipping charges.
Advantages of Outsourcing
Drop-Shipment Model
The variable cost incurred by multiple delivery attempts and
reverse logistics.
Multiple delivery attempts cost the company about 20-30% of
the total cost for home deliveries.
35% of orders placed at Amazon belonged to different
product categories.


Disadvantages of Drop-Shipment Model
Amazon.coms Customer Fulfillment Network
Made improvements in its distribution centre which reduced
12% of the wrong inventory to 4% by 2002.
Tightened its operation to ensure that it did not miss any
customer orders.


Steps taken for improvement

Till 2001 Amazon was in deficit of US$2.86 billion.
Earned its first ever profit of $5 million in the 4
th
quarter of
2001.
Year 2002 recorded sales of $3.93 billion which was 26%
higher than sales of 2001.
Cost of operating warehouses reduced from 20% to 10%
where as the capacity increased 3 times.
Inventory turnover was 20 times as compared to other
retailers having 15 times.