why is amazon building more warehouses as it grows

PROF. JAISON MATHEWS 3/10/15
PROF. JAISON MATHEWS 3/10/15 1. Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located? Amazon, started as an online bookstore, has evolved to an online retailer selling anything possible under the sun. The business model that Amazon operates is pretty easy to replicate and hence the differentiating factors would decide the winner. Factors like price, delivery time and ease of usage of the online portal. For a company that has is completely online, Amazon has invested more than $14 billion since 2010 (Bloomberg, 2013) in brick and mortar warehouses. Amazon is expanding its warehouses (called as fulfillment centres) in order to reduce the response time. Hence more warehouses means better response times (same day delivery being the new benchmark) which in turn leads to more new customers and retaining old customers and hence increased profit. Location of warehouses is based on proximity to major target markets, delivery time and cost of setting up warehouses (based on real estate).


For example, Amazon need not have a warehouse in New York city since that would mean unimaginable expenses. Instead these customers can be serviced from New Jersey warehouses. Number of fulfillment centres around the world is 139 with many more to operate. As long as inbound transportation economies of scale are maintained, increasing the number of facilities decreases total transportation cost. 2. What advantages does selling books via the Internet provide over a traditional bookstore? Are there any disadvantages to selling via the Internet? A traditional mega book store can hold around 200000 titles whereas selling over internet means any number of titles. It is a virtual bookstore. Q1. Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located? Ans. Amazon plays a vital role in E-shopping at global aspect, when they started they were having very limited warehouses but as they started growing on a large scale and as a unique E-shopping organisation they started welcoming new products and got new extension.


Amazon is a company which sells its product online. They are mainly into books and music but as time goes they are widespread and available for many other categories. Amazon has an Organisational structure which is on the basis of effective and efficient service which affects mainly on price and easiness of usage of online products. Amazon has two out sourcing services UPS and FEDEX for the U. S. portal service to send the product to customer. When focusing on the selecting an appropriate location it depends on the targeted market. * There should be appropriate customer service. * The cost should matter, 1. The cost of warehouse 2. Cost of production Example: when we select any warehouse in a suburban area location is in the suburban area or near to the county it would be cost efficient and easy. Q2. What advantage does selling books via the internet provide over a traditional bookstore? Are there any disadvantages to selling via internet?


Ans. Firstly, selling books online is a milestone in the 1990вs but after a decade itвs on rose. When selling books in a traditional way (in store sale). Which has a limited access to sale, but when selling it virtually online it has a in numerous statistics Customers can purchase books from around the globe. There are different denominations in prices at. Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located? Amazon is building more warehouses in order to: Decreases transportation costs which I assume is very high since itБs a global online company; decrease response time to its customers by delivering the good fast and increasing the customer experience/service. The most important aspect why a company like Amazon builds more facilities is also to try to decrease total logistics costs. However, Amazon should not exceed the number of facilities that decreases the total logistics costs otherwise at a certain point response time will start increasing.


They should have warehouses next to their main target markets; choose strategic location based on road facility access etc. Б in order to minimize their total logistics costs. б Should Amazon stock every product it sells? Since Amazon tends to have many facilities thus they also have high inventory levels and costs. Thus they shouldnБt store all products they have. In my opinion Amazon should use both Push and Pull process in order to minimize their level of inventory costs. In fact with a Pull process cycle, Amazon will only place the order from their supplier when the customers places theirs. This process should not be used a lot since it could decrease Amazon response time to deliver the product but it should be used at a point where it could minimize inventory without impeding that much on response time. On another hand, Amazon should use push process more in order to forecast the demand accurately and to get in its inventory exactly what is needed in order to not have overstock products which will increases inventory costs.

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