Supply chain and Distribution Network of Amazon in European Case Solution
- The country law of European region is rigid and does not allow the businesses to set the prices, thus refrains amazon from reducing the prices of goods and operate through cost-leadership strategy.
- The number of suppliers is low, which creates great dependence of amazon on the suppliers for its function and operation,thus raising the bargaining power of suppliers.
- The region has intense local competition that have the competitive advantage of high understanding of the customer preferences and market behavior.
In order to cater the market of Europe, while keeping the supply chain efficient and cost effective, there are three option the company can choose to deal with the challenges.
The company should establish three independent warehouse each in every region, to meet the demand in high sales period, by channeling the product across the DCs.
The company should introduce the process of cross-docking, in order to meet the demand of each region through centralized point. This will allow the company to maintain and reduce the inventory cost. The option can be pursued by understanding and analyzing the buying preferences.
European distribution Network
Amazon should establish an integrated Distribution center and maintain the supply chain by offering the product through centralized location by implementing the Supply chain picking software’s to efficiently deliver the product in every region.
Marketing-logistics Integration Issues
Amazon faced immense challenges, in maintaining and establishing its supplier base in Europe. Since, France have no wholesaler system, the company faced the issues of distributing the goods and products on the promise time. Moreover, due to the scarcity of suppliers in Germany and UK, amazon faced the challenges of maintaining its supply chain, by depending on one single Suppliers.Raising the risk of inefficient supply chain, along with the dissatisfaction of the customers. The trend gave rise to the relationship building with the local publishers and distributors to serve the purpose, and hence incurred additional cost. Though publishers seem to be less costly, but it lacked the efficiency to deal with bulk orders at time.Hence, effected the efficiency of supply chain, making a bad impact on customer experience, while shopping with amazon.
The Alternative selected for resolving the problems is “EURPEON DISTRIBUTION NETWORK”. The alternative is selected, because of the impact of the alternative on the transportation cost, inventory cost and cost of dealing with multi-order. The alternative will allow the company to reduce the additional inventory cost, assigned in every DC in UK, France and Germany. It will allow to improve the cash cycle and the inventory turnover will also Decrease, making the cash rolling. Also, the option will allow the company to maintain the transportation cost, as all the items order from all region will be delivered from same point, hence will decrease the transposition cost occurred due to partial shipment.In addition, the option will allow the Amazon to offer a wide array of products to different regions, increasing the number of sales through mixed offerings.
Alternatives for Future Consideration
The company can consider the option of cross docking in future, once the supply chain is established. Since, cross-docking will require the platform containing many suppliers, which is decrease in current situation.The company can consider it in future, once it develops a strong market share in European region. In addition, at current state the company cannot adopt the cross docking option,due to high bargaining power of suppliers that would hinder the supply chain efficacy of the company,and thus will disturb the value proposition of Amazon. The other option will also increase the transportation cost occurred due to multi-orders.
The company should integrate the supply and distribution of the goods, through integrated DC namely European distribution Network.
- It will enable the company to reduce the inventory turnover,thus will allow the company to free up the tied cash therefore, increasing the revenues and effective allocation of investment
- It will allow the company to reduce the repeated transportation cost, due to the multi-order status.
- It will enable the company to offer a wide array of products through single source. In doing so, the company can integrate the websites of all three regions, and thus will offer an extended products and services to the customer.
- It will reduce the dependence on suppliers, reducing the bargaining power of suppliers.
- It will offer the company low labor cost, due to cheap labor in Germany.
- It will increase the time of delivery, due to the delivery from one centralized Distribution center.
- It will create hurdles and bottlenecks in competition of orders on time.
- It will require the company to plunge deeply into different regions and conduct the research survey, to forecast the sales and preferences of the customer and market……………
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