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01 - Case Report-Amazon First Draft

amzon

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Pankaj Singh
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31 views

01 - Case Report-Amazon First Draft

amzon

Uploaded by

Pankaj Singh
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case report: Amazons.

com’s European Distribution Strategy

Question: Did the EDN make sense in the context of strong growth? If so, which option
would Taylor choose?

Answer: The problems which are faced by Amazon are basically pertaining to
information exchange, due to the low level of use of EDI (Electronic Data Interchange). In
the European markets the management is facing difficulty in the ensuring order completion
and also the transportation and shipping across the three regions. This is due to lack of
coordination among the local carriers which are different in different countries. All this also
escalate the cost of goods. To solve this Amazon decentralized the operations with three
subsidiaries in UK, France and Germany and to manage the entire issues one a country
managers were appointed.

In 2001,Amazon.com in a major cost cutting and restructuring effort and to achieve


profitability, decided to merge all operations of three countries under a single umbrella. In
2002, Amazon was able to fastest grow its revenues crossing $1.2 billion especially from
international business. Now, Amazon is taking a long term view in the European market and
thereby working on the European Distribution Network. It is essentially related to linking all
the distribution centres of Europe.

The strategy of consolidation of supply chain through European Network provides


benefit to both the customer as well as Amazon
1. It improves distribution and reduces cost, by providing the companies the bulk
discount,
2. It reduces transportation and inventory holding costs.
With EDN and strategically placed warehouses, Amazon can significantly expand their
product selection and improve shipping rates. The warehouses can be located closer to dense
customer areas and nearer to other distribution centres. This also offers Amazon an ability to
reduce inventory cost and minimise risk by better stock utilization by holding decreased
inventory levels. Proximity to customers and suppliers makes supplies efficient and reduce
transportation cost as well.
EDN facilitates the aspiration of Amazon for global sourcing from lowest cost
vendors which allows Amazon to control inventory at a global scale. This reduces risk of
relying on single distribution centre serving large customer populations. Having globalized
system, Amazon in Europe can learn about market trends and understand customer demand at
a large scale. This gives Amazon an ability to purchase products in bulk catering to larger
customer base and provide discount from vendors.
EDN delivers better customer experience. The customers can decide the distribution
centre from which their product is to be shipped and this improves shipping capabilities from
vendors, thus allowing Amazon in customer retention.
With this system in place, Amazon will be able to handle increased volumes and more
customer orders and can look at global trends better than its competitors. After considering
these benefits for both the customers and Amazon, we believe that the company should
decide to implement EDN.
To implement EDN the IT resource located in US will be utilised and implementation
strategy needs to be justified on the basis of Rate of Return. There is a clear indication in 6C
that online retail market for books is growing in Germany which can be extrapolated to the
book sales forecast across Europe. Germany being most populated country in Europe could
be the reference for interpolation of data for various other European countries. Exhibit 6A
gives the overall trend for online purchase among different countries. Thus it is indicating
that people are opting more towards online purchase in Europe. European markets are giving
strong sense of growth in online purchase. Therefore, a network to serve the European market
needs to be established and definitely this makes sense.
To implement EDN, Amazon should work on data integration of three European sites.
The integrated sales data from DC’s of three countries of Europe will help to determine the
trend of sales in different regions. Based on this Amazon can pool the inventory among DC’s.
This also will help Amazon to maintain product mix at each DC. The transportation cost of
shipment can be reduced significantly and the service level to customers can be increased to a
great extent. Steps to implement this type of Integrated Strategy can be enumerated as of
follows:
1. Integrate product sales data of various countries in Europe.
2. Analyze transportation costs in various countries with respect to their distances from
DCs.
3. Frame inventory pooling plan among the DCs, based on transportation cost and the
customer demand.
4. Inventory ownership should belong to the DC that has transported and shipped.
5. DC’s should have some contracts with local transportation agency to ship its product
to the customers.

Taylor should consider implementation of European Distribution Network, as it


provides reach to the different section of customers from various countries. This will
also keep the new emerging markets within the vicinity of expansion as shown in
Exhibit 10.

Assignment Submitted by:


Dr Manvir Singh – X01016
Naveen Kumar – X01018
Pankaj Singh – X01019
Pritam K Saikia – X01020
Dr Sagar Shroff – X01027

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