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How to Reduce Risks in the Amazon Supply Chain for Sellers

Unquestionably, the Amazon supply chain is among the best in the world. The e-commerce behemoth is renowned for its extensive operational ...

Amazon Supply Chain

Unquestionably, the Amazon supply chain is among the best in the world. The e-commerce behemoth is renowned for its extensive operational effectiveness. It begs the question of what it takes to have everything well prepared, doesn't it? So how does the supply chain for Amazon operate?  We reasoned that explaining the operation of the Amazon supply chain model and the underlying technology and managerial strategies would be instructive.


When Amazon started selling simply books in 1996, they rented their first warehouse. Today, they have roughly 185 fulfillment centers worldwide for a wide range of merchandise. Since then, they have advanced significantly, therefore it is critical for both sellers and customers to understand the obstacles that the Amazon supply chain faces.


It's a full procedure from the moment a produced good is sourced to the moment it is housed in a warehouse till the moment you make an order and until the moment it is delivered to your door. The resources used—people, time, and technology—are of utmost significance.


Quick Guide

What is the supply chain strategy for Amazon?

How does the supply chain management at Amazon operate?

Success Elements for Amazon's

The difficulties in the Amazon supply chain

Last Thoughts


What is the supply chain strategy for Amazon?

The activities of storage, delivery, inventory management, and other related tasks are covered by the Amazon supply chain optimization. Let's first examine the two fulfillment choices that sellers and vendors use, FBA and FBM, in order to better grasp this.


Amazon's FBA (Fulfillment by Amazon)

Sellers who use Amazon FBA don't have to worry about any part of fulfillment because Amazon handles it all. This fulfillment option is used by many third-party retailers. They only need to have their products shipped to an FBA center. Amazon will be in charge of organizing the storage, packaging, and shipment of the goods once they arrive at the fulfillment center. We will handle every part of delivery. Amazon also takes care of product returns, swaps, and customer help for any problems relating to purchases.


FBM (Fulfillment by Merchant)

Some sellers prefer managing warehousing, packing, and delivery of their own products and this is called FBM. They will carry out all the fulfillment activities for their products on their own.


They have state-of-the-art logistics and their own Amazon supply chain software in place to conform with the super-fast delivery options they offer their customers. With an Amazon Prime membership entailing same-day shipping and 2-day shipping options, Amazon has advanced technology and equipment like robots and other mechanisms in place to ensure customer satisfaction. 

FBM refers to the preference of some merchants to handle their own goods storage, packing, and delivery. They will handle every aspect of their items' fulfillment on their own.


Modern logistics are in place, as well as their own Amazon supply chain software, to support the lightning-fast delivery alternatives they provide to their consumers. In order to guarantee customer pleasure, Amazon has modern technology and equipment like robots and other procedures in place. An Amazon Prime membership includes same-day shipping and 2-day shipping choices.


How does the supply chain management at Amazon operate?

At this point, understanding Amazon's fulfillment and storage processes is of utmost importance.


The procedure starts at the FBA center when a customer puts an order for a product on Amazon.  After being selected and matched with the order barcode, the product is packed and prepared for delivery to the consumer. Large warehouses operated by Amazon exist all around the world and are used for a variety of purposes.


The following storage sections are present in all of their warehouses and are all uniform:


·       Random storage is designed to hold little items with a moderate demand.

·       Reserve storage is designed for the holding of products with erratic shapes and reduced demand.

·       Pallet Prime storage: This section of storage is for full-case products that are in great demand.

·       Storage space designated as Case Flow Prime is for products with broken cases and those with strong demand.

·       This storage space is designated for books and magazines in the library.


Additionally, Amazon has the following sorts of warehouses:


·       Prime Now: These are warehouses for keeping goods with a narrow range of application but strong demand. They need delivery between one and two hours after the order is placed

·       Storage facilities for frozen, perishable, and dry groceries are called pantry warehouses.

·       Sortation centers: These are the places where packages are organized according to geography.

·       Delivery stations: These handle last-mile logistics by sorting and delivering goods directly to the customer.

Along with having employees on-site, Amazon's warehouses have many of its operations automated. They also use robots to streamline the sorting, picking, and packing processes as part of their superior technology.



Depending on whether they are Prime members or regular consumers, Amazon offers a range of delivery alternatives for customers to select from. Amazon reported 200 million paying Prime members globally as of the first quarter of 2021, up from 150 million paying Prime members globally at the end of the fourth quarter of 2019. Memberships of Amazon Prime have continued to rise since 2014 (source). Delivery options for Prime members include same-day, one-day, two-day, or delivery within 1-2 hours.


Additionally, they provide No-Rush Shipping, which is perfect if you don't require your product right away. This choice offers a savings and 6-day product shipping. Additionally, there are options for Designated Day, Release Date, First Class, and Free Super-Saver deliveries.


Amazon uses vehicles for delivery and transportation, and they even have a service called cargo Amazon Air that they use to fly their items. The package delivery system at Amazon relies heavily on its fleet of trucks, which is always expanding. Drone use has also resulted in a futuristic method of accelerating deliveries. They also have vans and bicycles available.


The items are chosen at the FBA facility and must pass a quality inspection before they can be packed for an Amazon order. It's common knowledge that Amazon places a high priority on quality and client satisfaction. After quality control is complete, the goods are prepared for packaging. Products can be packaged in a variety of sizes depending on their dimensions, and sealing tape is also sized appropriately. 


What are the main success elements for Amazon's supply chain?

The success of Amazon's supply chain depends on the Prime membership option. Amazon distinguished itself from the competition and took the top spot in the e-commerce sector thanks to the 2-day and 2-hour shipping choices.


The primary hubs of the big cities are gradually starting to be closer to Amazon's warehouses. This ensures that the time needed to deliver the order to the consumer is greatly decreased. The fulfillment centers are also quite productive and have robots in them. This kind of automated machinery that picks the products and packages them around-the-clock greatly accelerates the procedure.


One of the factors contributing to Amazon's success is its strategic use of transportation that is appropriate for the degree of demand and with the aid of the most practical method to deliver the goods to its client. Along with other carriers like UPS, the use of Amazon Air has sped up the transportation and delivery of goods from point A to point B.


Additionally, the Amazon European Fulfillment Network has contributed to the success of Amazon's global supply chain. It has made it simple for sellers from many nations to offer in overseas marketplaces with simplicity, thus enhancing the viability of their firms. Customers worldwide trust Amazon, and sellers have access to a sizable international client base. All of this comes with huge potential and without needing to invest a lot of money establishing a strong brand name.


The difficulties in the Amazon supply chain

Despite how effective something may be, it still has a lot of drawbacks or involves certain dangers. Let's look at a few supply chain problems with Amazon.


·       The Prime program may be excellent for customers, but it functions differently for merchants. Although their items are eligible for free shipment, FBA sellers are still responsible for paying the shipping fees for their goods. They are unable to pick which of their goods to provide with free shipping. Since all of their products are covered by this service, the shipping expenses frequently reduce their profit margins.


·       There is a problem with Amazon taking too long to enter all of the merchandise into their database. The packages' readiness for delivery is thus delayed as a result. Customer satisfaction is directly impacted negatively by this kind of delay, which generates poor star ratings and reviews. These kinds of unforeseen delays have an impact on the sellers' capital.

·       Another risk associated with the Amazon supply chain is the potential for your product to be lost among the plethora of goods that are handled hourly. Amazon pays merchants for any missing things, but they choose the amount regardless of how much you paid for it. Sellers suffer loses as a result of this.


·       There are occasions when Amazon supply chain analytics forecasts demand for particular products erroneously, which has an impact on customer happiness. The forecast's reliance on past sales data and current trends presents a challenge. When making choices about what to buy in preparation for the busiest shopping seasons, this cannot always be relied upon.


·       You won't ever encounter obstacles when trying to stock up just the proper amount.

·       During peak shopping seasons, logistics issues might arise with last-mile order deliveries. As a result, many dissatisfied consumers who didn't get their orders on time. To lessen the issues with last-mile deliveries, Amazon has decided to take up this part as well on their own.


Last Thoughts

The Amazon supply chain has shown to be one of the most effective in the world over the years. It has swept the e-commerce industry by storm and inspired other businesses to advance and offer quick delivery to their clients. It certainly has its flaws, but the success it enjoys far outweighs these.


 Read More:

Comparison of FBA (Fulfillment by Amazon) and Dropshipping

10 Tips for Successful Amazon FBA

Sellers with excess inventory have convenience via Amazon FBA Liquidations



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