Supply and demand highlight the interactions between resources that impact the availability of products and the desirability by customers based on the price. The supply chain and demand model for Amazon is one of the most extensive and most efficient operations globally. Yet its fundamentals resemble that of its inception approximately 28 years ago, albeit on a larger scale. Amazon, at its core, is a vast online-based enterprise that sells various forms of merchandise directly or as the middleman between retailers and its customers. Founded by Jeff Bezos, Amazon initially sold books in an online store. The core purpose of the online platform was so that anyone could buy a book anywhere. Initially, people were skeptical about the online sale of merchandise, but Bezos took the risk to develop Amazon into one of the most successful retailer online stores today. A more significant part of Amazon’s success in being the world’s number one retailer store lies in efficiently managing the firm’s supply and demand. Technological innovations have been embraced over the years to streamline supply and demand operations and increase efficiency.
One of Amazon’s core strategies lies in its upscaled customer service. This is in alignment with its mission statement, which states, “Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.” ( Onyusheva & Seenalasataporn, 2018) This aspect has raised the demand for Amazon’s products and created stiff competition for customers' products. Besides, the numerous interviews conducted on employees of the company reveals that they are pushed hard to meet the high demand at the organization. The upside of this approach is that it has helped Amazon grow over the years. For quite some time now, Amazon has been the global leader in the online retail business, with Walmart as its only competitor.
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Another approach that Amazon uses in its supply and demand chain is an investment in technology. As mentioned above, Amazon has fully embraced technology in various aspects of its operations to realize efficiency. These include its inventory, delivery, relay, and dash. For storage of the stock and procedures revolving around picking and packing, Amazon employs automated approaches and robotic solutions. The use of robotics and automation fastens up the operations and hence the capacity to meet the high demand for products. The firm established Amazon Robotics in 2012 and currently has over 100,000 robots in its various facilities across the globe (Laber, Thamma & Kirby, n.d.). Consequently, robotics has increased productivity in the firm. Considering the difficulty of finding warehouse workers, automation is an intelligent move for countering the high demand. Furthermore, research reveals that e-commerce has pushed up Amazon’s products, but few people are willing to take up such jobs (Wang, 2018). Besides, a wage increase is imminent, and therefore automating operations has made Amazon stay ahead of the high demand and the rising costs of operation.
Data and numbers that support Amazon are remarkable. Since its establishment to date, Amazon has been a successful business and has grown tremendously over the years. Statistics reveal that when Amazon began, it had approximately 180,000 customers in books by 1996. In one year, this number had reached almost one1000,000. The dramatic increase in numbers was noticed when Amazon began to sell other merchandise such as electronics and home improvement items. Based on these numbers, research reveals that a non-prime Amazon customer spends an average of $625 annually and a prime user double that amount (Sumner-Rivers, 2015). These numbers imply that the demand for Amazon products is high. To keep up with these high numbers, Amazon has many centers across the country to facilitate the distribution and delivery of goods. Currently, Amazon has approximately 104 centers in the U.S. and 69 others across the world. The numerous facilities help keep up with the rising demand for Amazon products and the high customer base. They combine several approaches for their delivery. First, Amazon uses uber-like methods for delivery services. Secondly, the company has invested in Amazon Prime Air, a drone air service that delivers packages to customers within 30 minutes. The Amazon Prime Air program, however, operates in selected population hubs. Regardless of its limited operations, the drones have facilitated faster delivery of packages to keep up with the high demand.
Amazon’s continue innovative responses to supply and demand have seen significant growth between the years 2004 and 2016, as shown in the graph below:
Figure 1. Amazon Net Sales from 2004 to 2016
Retrieved from Statista
Another strategy that has kept Amazon’s supply and demand in balance is the ability to manufacture its products. Currently, the firm sells its won products and owns many brands. Even though third-party sellers are welcome in Amazon’s marketplace, the firm has been slowly squeezing out many sellers. The ability of the company to manufacture and label the popular products at the market provides cheaper options for their customers while also increasing profits for Amazon (Zhu & Liu, 2018). Manufacturing keeps everything on the house hence completing the lifecycle of the products. Besides cutting on costs of products, the availability of readily manufactured products meets the demand as there are no significant delays in the supply chain cycle.
The ability of Amazon to efficiently analyze its customer base and segment it based on an intelligent price differentiation strategy has also been significant in balancing the supply and demand of the firm. Amazon appeals to various segments by offering varying delivery options for a special price. Also, through the categorization of prime and non-prime members, the company has enough data for agility purposes (Wang, 2018). Furthermore, this data is crucial for Amazon to maintain the dynamic fluctuations in demand and supply. Notably, segmenting helps Amazon balance and narrow down shipping, hence the smooth operations in demand and supply. The ability of Amazon to remain lean in the business has also facilitated a balanced supply and demand. Furthermore, too much inventory will raise the storage costs for the organization and slow down the demand and consequently margin for the firm. Sellers are therefore forced to send just enough inventory to meet the current demand.
In conclusion, a more significant part of Amazon’s success in being the world’s number one retailer store lies in efficiently managing the firm’s supply and demand. Technological innovations have been embraced over the years to streamline supply and demand operations and increase efficiency. As discussed in the paper, Amazon has embraced technologies such as drones and uber for the fast delivery of goods. Also, the company deals with a large customer base that has been increasing over the years. The increasing number of customers has been able to meet the company’s supply needs. Notably, the use of segment pricing and the ability to manufacture some of its goods has also played a crucial role in the demand and supply of the organization.
References
Laber, J., Thamma, R., & Kirby, E. D. The Impact of Warehouse Automation in Amazon’s Success.
Sumner-Rivers, R. (2015). Amazon’s Prime Ambition. Parcelhero Industry Report .
Onyusheva, I., & Seenalasataporn, T. (2018). Strategic Analysis of Global E-Commerce And Diversification Technology: The Case Of Amazon. Com INC. The EUrASEANs: journal on global socio-economic dynamics , (1 (8)), 48-63.
Wang, H. (2018). Pricing used books on Amazon. Com: a spatial approach to price dispersion. Spatial Economic Analysis , 13 (1), 99-117.
Zhu, F., & Liu, Q. (2018). Competing with complementors: An empirical look at Amazon. com. Strategic management journal , 39 (10), 2618-2642.
