Table Of Content„To
E
or
not
to
Be“
Amazon's
role
in
the
retail
industry
How
is
Amazon
able
to
differentiate
itself
from
its
competitors
and
why
is
its
supply
chain
strategy
so
significant
for
its
success?
Bachelor
Thesis
for
Obtaining
the
Degree
Bachelor
of
Business
Administration
in
Tourism
and
Hospitality
Management
Submitted
to
Miguel
Suarez
Nicole
Bluschke
1311069
Vienna,
13
June
2016
Affidavit
I
hereby
affirm
that
this
Bachelor’s
Thesis
represents
my
own
written
work
and
that
I
have
used
no
sources
and
aids
other
than
those
indicated.
All
passages
quoted
from
publications
or
paraphrased
from
these
sources
are
properly
cited
and
attributed.
The
thesis
was
not
submitted
in
the
same
or
in
a
substantially
similar
version,
not
even
partially,
to
another
examination
board
and
was
not
published
elsewhere.
13
June
2016
Date
Signature
2
Abstract
This
study
aims
to
clarify
the
position
of
Amazon
in
the
retail
industry
which
it
primarily
gained
through
high-‐level
supply
chain
and
logistics
developments.
The
first
part
of
this
research
describes
the
retail
industry,
especially
E-‐Commerce,
as
well
as
supply
chain
practices
whereas
the
second
part
focuses
on
Amazon
as
a
representative
company.
Drivers
of
the
company's
supply
chain
as
well
as
numerous
product
and
service
developments
such
as
Anticipatory
Shipping,
Amazon's
Chaotic
Storage
Model
and
Amazon's
Logistics
Network
Plan
are
identified
and
discussed.
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
Apple,
Google,
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.
Amazon's
supply
chain
may
be
described
by
an
efficient
and
flexible
inventory
management,
fast
delivery
fulfillment,
effective
collaborations
with
partners,
strategic
acquisitions
of
supporting
systems
and
companies
and
a
high
level
of
customer
service.
The
results
of
this
research
paper
may
direct
future
studies
towards
the
investigation
of
further
competitive
advantages
of
Amazon
as
well
as
how
potential
threats
and
weaknesses
a
company
faces
may
be
overcome
in
a
supply
chain
context.
3
Table
of
Contents
AFFIDAVIT
2
ABSTRACT
3
LIST
OF
TABLES
7
LIST
OF
FIGURES
8
LIST
OF
ABBREVIATIONS
9
1
INTRODUCTION
10
1.1
RESEARCH
PROBLEM
AND
RESEARCH
QUESTION
11
1.2
METHODOLOGY
12
2
LITERATURE
REVIEW
13
2.1
INTRODUCTION
TO
THE
RETAIL
INDUSTRY
13
2.1.1
ORGANIZATIONAL
CONCEPTS
13
2.1.2
TOP
250
RETAILERS
WORLDWIDE
14
2.1.3
RETAIL
TRENDS
AND
PREDICTIONS
2016
15
2.1.4
SUPPLY
CHAIN
APPLICATIONS
IN
THE
RETAIL
BUSINESS
16
2.2
E-‐COMMERCE
16
2.2.1
FRAMEWORK
FOR
ELECTRONIC
COMMERCE
17
2.2.2
E-‐COMMERCE
CLASSIFICATION
AND
CONTENT
18
2.2.3
BENEFITS
OF
E-‐COMMERCE
18
2.2.4
LIMITATIONS
OF
E-‐COMMERCE
19
2.2.5
IMPACT
ON
MARKET
AND
RETAILERS
20
2.2.6
IMPACT
ON
SUPPLY
CHAINS
AND
THEIR
MANAGEMENT
20
2.2.7
MASTERCARD
OMNISHOPPER
REPORT
21
2.3
SUPPLY
CHAINS
AND
THEIR
MANAGEMENT
25
2.3.1
DETERMINANTS
OF
SUPPLY
CHAIN
SUCCESS
26
2.3.2
SUPPLY
CHAIN
STRATEGY
26
2.3.3
DRIVERS
OF
SUPPLY
CHAIN
PERFORMANCE
27
2.3.4
SOURCING
28
4
2.3.5
INVENTORY
28
2.3.6
TRANSPORTATION
29
2.3.7
FACILITIES
AND
NETWORK
DESIGN
30
2.3.8
PRICING
31
2.3.9
INFORMATION
31
2.4
INFORMATION
TECHNOLOGY
APPLICATIONS
AND
SUPPLY
CHAIN
AUTOMATION
31
2.4.1
RFID
33
2.5
FINANCIAL
MANAGEMENT
IN
LOGISTICS
33
3
AMAZON
CASE
STUDY
34
3.1
GENERAL
INFORMATION
AND
COMPANY
BACKGROUND
34
3.2
BUSINESS
STRATEGY
AND
BUSINESS
MODEL
35
3.3
AMAZONS'
FINANCIAL
POSITION
36
3.4
AMAZON'S
SUPPLY
CHAIN
38
3.5
SUPPLY
CHAIN
DRIVERS
OF
AMAZON
40
3.5.1
INVENTORY
PLANNING
AND
MANAGEMENT
40
3.5.2
AMAZON'S
FACILITIES
42
3.5.3
AUTOMATED
WAREHOUSES
AND
KIVA
ROBOTS
44
3.5.4
FBA
–
FULFILLMENT
BY
AMAZON
45
3.5.5
PRICING
ADJUSTMENT
STRATEGY
46
3.5.6
TRANSPORTATION
47
3.5.7
AMAZON'S
LOGISTICS
47
3.5.8
ANTICIPATORY
SHIPPING
48
3.5.9
AMAZON
DASH
BUTTON
DELIVERY
48
3.5.10
INFORMATION
AND
TECHNOLOGY
49
3.5.11
RFID
50
3.6
AMAZON'S
CUSTOMER
SERVICE
51
3.6.1
RESPONSE
TIME
TO
CUSTOMERS
51
3.6.2
PRODUCT
VARIETY
AND
AVAILABILITY
51
3.6.3
CUSTOMER
EXPERIENCE
52
3.6.4
TIME
TO
MARKET
52
3.6.5
RETURNABILITY
52
3.7
SUPPLIER
CODE
OF
CONDUCT
53
5
4
AMAZON'S
COMPETITION
55
4.1
GARTNER
LIST
59
4.2
TOP
50
E-‐RETAILERS
60
4.3
THE
Q
RATIO
61
5
DISCUSSION
AND
ANALYSIS
63
5.1
SWOT
ANALYSIS
63
5.2
PORTER'S
FIVE
FORCES
64
5.2.1
THREAT
OF
SUBSTITUTE
PRODUCTS
OR
SERVICES
65
5.2.2
THREAT
OF
NEW
ENTRANTS
65
5.2.3
BARGAINING
POWER
OF
CUSTOMERS
65
5.2.4
BARGAINING
POWER
OF
SUPPLIERS
66
5.2.5
COMPETITIVE
RIVALRY
WITHIN
THE
INDUSTRY
66
5.3
GLOBAL
VALUE
CHAIN
ANALYSIS
66
5.3.1
GLOBAL
VALUE
CHAIN
CLASSIFICATIONS
66
5.3.2
PORTER'S
GLOBAL
VALUE
CHAIN
67
6
CONCLUSION
70
6.1
IMPLICATIONS
AND
RECOMMENDATIONS
74
6.2
LIMITATIONS
75
6.3
DIRECTIONS
FOR
FUTURE
RESEARCH
76
BIBLIOGRAPHY
77
APPENDICES
86
APPENDIX
1
AMAZON
Q4
2015
FINANCIAL
RESULTS
86
APPENDIX
2
MWVL
OVERVIEW
AMAZON
FACILITIES
104
APPENDIX
3
AMAZON
SUPPLIER
CODE
OF
CONDUCT
105
6
List
of
Tables
Table
1:
Organizational
Concepts
in
Retailing
(Kalakota
et
al.,
e-‐Business
2.0
–
Looking
over
the
New
Horizon,
2000)
Table
2:
Top
250
retailers
(Deloitte,
Global
Powers
of
Retailing
2016.
Navigating
the
new
digital
divide,
2015)
Table
3:
E-‐Commerce
Classification
Models
and
Characteristics
(DigitSmith,
E-‐
Commerce
definition
and
types
of
E-‐Commerce,
n.d.)
Table
4:
Benefits
of
E-‐Commerce
(Turban
et
al.,
Electronic
Commerce
2008,
2008)
Table
5:
Amazon's
Competitors
Table
6:
Global
Value
Chain
Classification
(Gereffi
et
al.,
The
governance
of
global
value
chains,
2005)
Table
7:
Amazon's
Global
Value
Chain
7
List
of
Figures
Figure
1:
The
Dimensions
of
Electronic
Commerce
(Önder,
I.
New
Media
&
E-‐
Business
Applications
-‐
Electronic
Commerce:
Definitions
and
Concepts.
(2014))
Figure
2:
How
has
technology
changed
the
way
that
you
shop?
(MasterCard,
The
Omnishopper
Project,
2015)
Figure
3:How
often
do
you
use
technology
when
shopping?
(MasterCard,
The
Omnishopper
Project,
2015)
Figure
4:
Why
don't
you
shop
more
online?
(MasterCard,
The
Omnishopper
Project,
2015)
Figure
5:
Where
online
is
better
than
in-‐store
(MasterCard,
The
Omnishopper
Project,
2015)
Figure
6:
Where
in-‐store
is
better
than
online
(MasterCard,
The
Omnishopper
Project,
2015)
Figure
7:
Supply
Chain
Strategy
Dimensions
(Lee,
Aligning
Supply
Chain
Strategies
with
Product
Uncertainties,
2002)
Figure
8:
IT
systems
classification
in
a
SCM
context
(Mangan
et
al.,
Global
Logistics
and
Supply
Chain
Management,
2008)
Figure
9:
The
Gartner
Supply
Chain
Top
5
for
2015
(Aronow
et
al.,
The
Gartner
Supply
Chain
Top
25
for
2015,
2015)
Figure
10:
Top
20
e-‐retailers
(Deloitte,
Global
Powers
of
Retailing
2015,
Navigating
the
new
digital
divide,
2015)
Figure
11:
Top
10
retailers
by
Q
ratio
(Deloitte,
Global
Powers
of
Retailing
2016,
Navigating
the
new
digital
divide,
2015)
Figure
12:
SWOT
Analysis
Amazon's
Supply
Chain
8
List
of
Abbreviations
ASEAN
–
Association
of
Southeast
Asian
Nations
AWS
–
Amazon
Web
Services
B2B2C
–
Business
to
Business
to
Consumer
B2E
–
Business-‐to-‐Employee
BRIC
–
Brazil,
Russia,
India,
China
CEO
–
Chief
Executive
Officer
CFO
–
Chief
Financial
Officer
CPFR
–
Collaborative
Planning,
Forecasting
and
Replenishment
EDI
–
Elecfronic
Data
Interchange
ERP
–
Enterprise-‐Resource-‐Planning
EU
–
European
Union
FBA
–
Fulfillment
By
Amazon
IT
–
Information
Technology
MRP
–
Materials
Requirements
Planning
MRPII
–
Manufacturing
Resource
Planning
R&D
–
Research
and
development
RFID
–
Radio-‐frequency
Identification
ROA
–
Return
on
Assets
ROI
–
Return
on
Investment
SCM
–
Supply
Chain
Management
SWOT
Analysis
–
Strenghts,
Weakenesses,
Opportunities,
Threats
Analysis
UCLA
–
University
of
California,
Los
Angeles
VMI
–
Vendor
Managed
Inventory
WMS
–
Warehouse
Management
Systems
9
1 Introduction
Until
approximately
25
years
ago,
a
product
order
that
was
placed,
took
between
15
to
30
days
to
be
entirely
fulfilled
(Ali,
2015).
Nevertheless,
even
when
planning
was
accurate,
this
time
frame
often
extended
to
more
than
30
days.
Reasons
for
delayed
deliveries
and
long
lead
times,
meaning
the
time
frame
between
an
order
initiation
and
the
completion
of
a
production
process,
were
mostly
inventory
shortages,
misplaced
orders
or
wrong
shipments
(Bowersox
et
al.,
2007).
Today
it
is
not
imaginable
or
acceptable
for
any
customer
to
be
forced
to
wait
longer
than
a
week
for
an
order.
The
combination
of
wide
choice,
constant
availability,
IT
systems
and
quick
transportation
has
created
“perfect
orders”
(Bowersox
et
al.,2007).
According
to
the
authors
mentioned,
perfect
orders
are
defined
as
„delivering
the
desired
assortment
and
quantity
of
products
to
the
right
location
on
time,
damage-‐free
and
correctly
invoiced“
(Bowesox
et
al.,
2007).
As
years
ago
the
above
mentioned
requirements
were
exceptions
in
the
retail
industry,
today,
those
are
every
customer's
expectations.
This
shows
that
in
the
past
20
to
25
years
the
retail
industry
has
gone
through
various
changes,
shifts
and
optimization
processes.
One
development
which
mainly
influenced
and
revolutionized
the
industry
and
the
linked
customer
approach,
was
the
introduction
of
E-‐Commerce.
Another
business
aspect
which
has
gone
through
numerous
developments
and
changes,
and
which
has
therefore
gained
importance
in
previous
years,
are
companies'
supply
chains.
As
evaluated
by
Mahdavi
et
al.,
changes
and
adaptions
in
global
economy
are
omnipresent,
fast
and
dynamic.
This
also
implies
that
today
special
emphasis
is
put
on
the
role
of
supply
chains,
supply
chain
management
and
supply
networks
(Mahdavi
et
al.,
2011).
One
of
the
most
successful
companies
in
the
E-‐Commerce
sector
today
is
Amazon
which,
according
to
Chopra
et
al.,
is
„one
of
the
pioneers
of
consumer
e-‐
business“(Chopra
et
al.,
2007).
The
great
impact
of
Amazon
on
the
E-‐Business
industry
cannot
only
be
explained
by
the
fact
that
the
company
constantly
strives
for
innovation
and
development
and
continuously
introduces
new
products,
but
also
by
the
fact
that
Amazon
is
retailer
and
marketplace
at
once.
This
strategic
combination
creates
economies
of
scale
which
are,
according
to
The
Economist,
unreachable
by
rivaling
companies
(The
Economist,
2011).
Amazon
has
10
Description:with partners, strategic acquisitions of supporting systems and companies and a high level of customer service. 3.4 AMAZON'S SUPPLY CHAIN. 38 .. which were identified, are increased and eased payment options for consumers. An Examples for major components are web servers, electronic.
