Amazon and Walmart Supply Chain

Abstract

The purpose of this project is to study the Amazon and Walmart’s practices which it primarily gained through the high-level supply chain and logistics developments. It describes the supply chain practices with Amazon as well as numerous product and service developments such as Amazon’s Logistics Network Plan. It becomes apparent that constant innovation in a supply chain context has more extensive and significant long-term effects on company success than large profit figures. A comparison of Amazon with Walmart and other relevant companies shows that Amazon’s supply chain is more diverse, implying that numerous services that are offered by competitors are combined within Amazon and its supply chain. This project also elaborates on the strategies adopted by Amazon and Walmart for managing the inventory. Keywords: Supply chain management, Logistics Network Plan, Inventory.

Introduction

This chapter describes the research objective, benefits, and the purpose of the project. The principal objective of this study is to analyze Amazon and Walmart’s supply chain under the scope of integration, distribution, and operations. This study will explain how Amazon and Walmart’s strategy have successfully been implemented in the managerial and operational level by integrating supply chain planning, management, supplier & customer management, supply & demand, forecasting, and inventory management efficiently to achieve the strategy goal.

Problem Statement

This study aims to help the organization to be more competitive in the global market through the implementation of the latest supply chain methodologies. The objectives of this study are:

  • To give the understanding of the full impact of the complexity and the development of the organization for improvements.
  • To investigate the factors causing poor supply chain management practice
  • To provide recommendations for better supply chain practices

Background

Supply chain concept has evolved into an essential business concept. It can be defined as a network of organizations and business processes to select raw materials to transform them into intermediate and finished products and distribute them to the customers. Here Amazon’s supply chain can be described by efficient and flexible inventory management, fast delivery fulfillment, effective collaborations with partners, and strategic acquisitions of supporting systems and companies with a high level of customer service. Walmart’s supply chain consists of cost leadership methodology, and everyday low-price strategy has attracted customers on a consistent basis. Amazon.com has changed the face of retail through its use of bold supply chain strategies and its deployment of innovative technologies. One of the major secrets behind Amazon’s massive transformation from a simple online bookseller to the most dominant and formidable force in the retail industry is its innovative and highly efficient supply chain [Rick Leblanc 2018]. Amazon’s continuous efforts to deliver products to the customers in the quickest possible time are causing intense pressure other giant players in the retail industry across the globe and thus changing the way supply chain management works.

Retail Industry Supply Chain Overview

The retail industry in general can be defined as the composition of companies that sell merchandise to customers. When studying the supply chain practices of the retail industry, we study the retailer and customer relationship, which in turn drives the activities between retailers and suppliers. In retail supply chains, the network consists of many suppliers that serve multiple retailers, and retailers that are served by multiple suppliers. Between the suppliers and the retailers, wholesalers and other intermediaries often reside and provide the link between retailers 17 and suppliers. There have been changes in the dynamics of the relationship between these three key players in the supply chain due to the fourth major player that drives these changes, the retail customer. Through their spending habits, retail consumers drive the level of customer service that is expected. The strategy behind each retailer is focused on being able to fulfill that demanded service. Because of recent changes in consumer spending, the focus in the retail supply chain has shifted from handling customer demands through inventory levels to handling customer demand through changes in the trading partner relationship and the use of technology in their supply chain (Melnyk, 2017).

Also, retail industry supply chain partners are increasing their use of information technology to support and improve their supply chain management initiatives. This trend started in the 1980’s with electronic data interchange and the use of scanning barcodes to keep more accurate track of sales throughout the industry. With more accurate data and a faster way of transmitting these data, information technology has helped increase the speed of activities within the retail supply chain. The ability to respond to customer changes and other sources of supply chain variability has become more efficient with the use of technology. Therefore, research uncovers the methodologies to globally optimize the supply chain by decreasing the overall costs of supply chain management while maintaining or improving service, and ultimately increasing revenues.

Current Supply Chain Technologies

Supply chain sector is seeing a constructive change as new technologies are revolutionizing. Few of the of the technologies that are being used in managing and maintaining the warehouse which includes storage and shipping are, RFID, Automated Storage and Retrieval, Internet of Things, Drones, Automated Guided Vehicles and the very latest technology.

  1. Warehouse Management Systems: Warehouse Management systems optimize all warehousing functions which typically begin with receipts to end shipment for the customers including the flow of inventory in between the receipt and end delivery. This is with the help of a barcode scanner. This technology works by linking warehouse workers to a backend application server where warehouse activities are being recorded a wireless handheld device, which tells the employee the location of the item to pick up in the warehouse, put away, count or move the product by scanning a barcode on the package. The scanned barcode reveals information about the package contents which is then compared to the receipt from the customer and the software directs the employee to put away the scanned item in the suitable location for the next phase.
  2. RFID: Using this technology helps business owners to improve inventory management by having more access to the location of their products and helps to reduce the error rate of workers as this technology eliminates the need for hand scanning. RFID are small electronic devices that consist of a small chip and antenna. It provides a unique identifier for each object which is similar to a magnetic strip on the back of a credit card. RFID device must also be scanned to retrieve the information but need not be placed close to a scanner as the information on tags can be read with ease when they pass through an RFID reader and the information is captured and stored in the system automatically which eliminates the act of storing the information into the system manually by an employer.
  3. Automated Storage and Retrieval System: These systems are fully automated robotic systems controlled by computers that enable all the operations like unloading, sorting, storing, order picking, staging and loading the goods automatically.
  4. Autonomous Guided Vessels and Vehicles: Autonomous is a self-guided, un-manned, computer-controlled mobile transport unit programmed to travel to specific points and perform designated functions. Common procedures include load transferring, pallet loading or unloading, etc. The vehicles come in different sizes and shape based on load characteristics and design specifications. Along with these, other trends like using Drones for delivery is already being used by Amazon, Walmart is still in the planning phase of using this Drone technology and using blockchain technology for supply chain performance efficiency being implemented by Walmart to track the groceries, Amazon is in the testing phase. Further analysis includes the study of comparison of the technologies in the Supply Chain Management across Walmart and Amazon.

Methodology

A structured approach was followed by using the keyword ‘Technologies in Supply Chain’ search on google search engine and found several generic case studies related to current methodologies in the supply chain like inventory management, warehouse management, e-commerce etc. Data was gathered through a literature review (described in next chapter) and some academic sources etc. The information obtained was very generic, hence we decided to concentrate on the analysis of various supply chain methodologies with special reference to Amazon and Walmart. We further compared the positions of the companies by comparing their e-commerce strategy and analyzed the successful implementation of them in their current working process. The aim of this research is to identify the components through case studies of Wal-Mart and Amazon.com to understand how their supply chains reinforce their competitive business strategies.

Review of Literature

The following chapter introduces the two company case studies being researched for the retail industry. These two case studies have been chosen due to their leadership positions, in terms of revenue and supply chain initiatives, in their respective segments of the retail industry.

Case study 1

Wal-Mart Courts Lord & Taylor for Online Challenge to Amazon (Kapner, 2017)

This article is taken from the Wall Street Journal which focuses on dealing with online challenge from Walmart to Amazon. It describes by saying Wal-Mart, seeking to ramp up e-commerce sales after years of sluggish growth, wants to turn walmart.com from a discount site into an online mall that would also feature higher-end brands. For Lord & Taylor, the alliance could bring a boost in web traffic at a time when fewer shoppers are visiting department stores. Wal-Mart is framing itself as the only e-commerce operation that will be able to challenge Amazon directly, even though its website draws about half as many monthly U.S. visitors. The department-store chain now owns the inventory and fulfill orders from the Walmart website. This case study provides an important example of e-commerce challenges to the companies within the industry sector. It was chosen as a case study in this research for a number of reasons, including its disciplinary approach to research, it is keen to build comparison analysis and it is involved in a highly lucrative and economically important industry for United states. The paper also presents Wal-Mart’s successful supply chain. More specifically, this paper focuses on a speed, cost-effective and integrated supply chain of Wal-Mart and key components of its successful integrated supply chain that enhance the supply chain performance. This research confirms that the more integrated a supply chain is, the greater improvement the supply chain performance ensures. In other words, an integrated supply chain will be the first vital pre-requisite for a firm to improve the supply chain performance and achieve an ideal supply chain.

Case study 2

An analysis of current supply chain best practices in the retail industry with case studies of Wal-Mart and Amazon.com (Chiles & Dau, An analysis of current supply chain best practices in the retail industry with case studies of Walmart and Amazon.com, 2018)

This case study focuses on Wal-Mart, Inc. for traditional retailing, or more specifically mass merchandise retailing, and Amazon.com for internet retailing. It describes about the organization’s culture, supply chain management and business strategies. It describes the three business units of Walmart which are Wal-Mart stores, SAM’s CLUB and their international retailing business. Within the Wal-Mart stores there are three different types of retailing facilities; Discount Stores, Supercenters, and Neighborhood Markets. The Supercenter outlet combines both general merchandises found in Discount Stores and grocery products that are found in Neighborhood Markets. The size of the different store types differs due to the amount of merchandise carried in each store. Wal-Mart Discount Store managers have the freedom to determine product selection and store operating processes. The layout of the store and the departments within the stores are given general guidelines but specific details of allocation of space and placement of products are left to the managers. As more inventory management details become automated, there is less of a need for individual managers to make these decisions.

The concept of SAM’S CLUB came as a result of the hypermarkets that were appearing in Europe around the 1970’s and 1980’s. Hypermarkets are generally larger retail facilities that offer both groceries and general merchandise as well as give smaller retailers a place to sell their 70 products. Although SAM’S CLUB carries both grocery and general mass merchandise, it contains a smaller number of independent retail stores than the European hypermarkets (al, 1999). SAM’S CLUB offers general merchandise products in bulk quantities for its customers.

On the other hand, Wal-Mart has grown internationally through mergers, acquisitions, and joint ventures. In 1994 in Canada, Woolco became Wal-Mart’s first international acquisition. Wal-Mart has entered the Asian market through joint ventures with retail companies in China and other Asian nations.

The case study also analyzes Amazon’s position in the retail industry. Specifically stated in the case study, their business strategy is to “offer customers low prices, convenience, and a wide selection of merchandise.

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