Operations management is where businesses are won or lost. Behind every smooth operation lies a universal truth: chaos is the enemy, and process is the shield that keeps it at bay.
While there are a plethora of examples in which a wide arena of intriguing details can be dissected in this segment, Amazon remains a global benchmark for operational excellence.
In this context, have you ever considered what goes into managing such a massive operation? How do we ensure everything runs smoothly without chaos? – A simple one-word answer to this question is “WELL-DEFINED PROCESS”.
The larger the audience, the broader the vision of management. Shifting our reading gears to one of the world’s broadest process management marvels – Global supply chains. Global Supply chains are an immaculate example of organizational precision.
Let’s elucidate Bird’s-eye view over part of Amazon’s supply chain “PROCESS” to understand its importance in stabilizing the entire Amazon ecosystem. Before this let’s take a look at what could go wrong if the process is not well-defined.
The role of process deficiencies in Kodaks’s decline
Kodak’s collapse is sometimes blamed on its inability to adapt to the digital revolution, but a closer look reveals a more serious issue: a lack of well-defined procedures for innovation and strategic decision-making. Kodak was a pioneer in digital photography, creating the first digital camera in 1975, but it failed to incorporate this breakthrough into its fundamental business plan. This flaw in the process meant that Kodak lacked a defined framework for assessing market trends, evaluating emerging technology, and making timely choices to pivot its business model. Instead, the corporation focused on its successful film sector, favoring short-term profits above long-term viability.
A well-defined approach would have allowed Kodak to address the problems of the digital transition in a methodical manner.
Now, let’s take a closer look at how a company like Amazon turned the tables with adaptability and operational excellence, where Kodak failed in the process.
The heart of efficiency – “PROCESS”
Over 20 million times in a single day, the order button gets a hit on the Amazon website. What exactly goes behind the scenes to meticulously wove the fabric of creating a process from hitting the purchase order button to getting a product delivered to your doorstep? We will untangle knots for the United States focusing on the delivery part in the supply chain for an Amazon product.
Under the broader umbrella, once the order is placed on Amazon, the delivery process is categorized on the basis of product fulfilment. The fulfilment process for Amazon’s products differs from that of third-party sellers.
Let’s walk over both the dynamics.
For a third-party product listing on Amazon, for each order, the seller has several options to complete fulfilment.
The following are a couple of options provided by Amazon for sellers to be eased on the platform.
- Self-ship: The seller has the freedom to choose his own delivery partner. It can be delivered by consumer delivery companies like FedEx, USPS, UPS, or other consumer delivery companies preferred by the seller.
- Fulfilment by Amazon: FBA or Fulfillment by Amazon is a service that allows sellers to stock their products at a warehouse or a fulfilment centre managed entirely by Amazon. All that a seller has to do is send their products to one of the fulfilment centres and relax. Amazon executives stock it up with care, pack it when an order is received, prepare it for delivery, and deliver the order.
- Amazon Seller Flex: This unique service provided by Amazon is for sellers who have a large amount of inventory and need help managing their warehouse. Amazon executives work out of the seller’s warehouse and perform the same functions as they would for FBA. They stock the products carefully, and upon receipt of an order, pack it, deliver it, and manage returns.
Now, coming to the centrepiece – “Amazon’s own fulfilment process”
For each order on the website for Amazon’s products, the steps followed for fulfilment are broken down into small puzzle pieces creating a picture-perfect process.
Once an order is placed, the products are broadly categorized as small sortable, large sortable, and large non-sortable. Delivery partners like XPO Logistics directly deliver a portion of the large non-sortable items, while others will continue their fulfilment journey in Amazon’s ecosystem.
Considering all other product categories, the next hop for a product is a regional sorting centre where the products are grouped based on zip codes and sorted according to the final delivery location. As the process advances, the product travels to Denver where Amazon has its airplanes carrying and shipping the products via the Amazon Air facility. If the product is delivered to a local address in Denver, the next hop will be to the nearest Amazon Delivery station. Here, the small delivery vans (by independent companies or individual contractors) by Amazon will deliver the product to customers’ doorstep completing the product’s delivery fulfilment cycle.
On the other hand, if the product delivery is not local to Denver, then Amazon uses leased DHL Express Americas Hub’s facility to reach the product’s next stage in the fulfilment journey. This would be an Amazon Delivery station local to the delivery destination, where small delivery vans managed by Amazon will deliver the product to customers’ doorstep. This further completes the arc of Amazon’s product delivery fulfilment cycle.
Simultaneously, when considering deliveries in Urban areas, Amazon joins forces with local post offices where the delivery process is acquired by the United States Postal Service (USPS). The USPS is further responsible for delivering products to customers’ doorstep, while rural areas are covered by United Parcel Service (UPS).
Below is a flow chart that illustrates the complete process flow of Amazon:
Fig. Amazon’s delivery fulfillment process flow
Keeping the future scope in vision, Amazon’s logistics strategy focuses on expanding its own delivery infrastructure, including its Amazon Flex program (using independent contractors), Amazon Delivery Service Partners (DSP), and the Amazon Air fleet. This will help Amazon reduce its dependence on external delivery companies like DHL, UPS, and FedEx, giving it more control over shipping and reducing costs. Given Amazon’s plans to develop its own delivery infrastructure, it’s only natural to assume they’ve thoroughly studied existing delivery processes to create a more efficient and improved version.
Conclusion
A well-defined process provides a clear and structured workflow. Similarly, automation relies on repetitive tasks that follow specific rules. If the process is unclear or inconsistent, automation may not work efficiently, leading to errors and inefficiencies.
In the aforementioned case study, the sorting of products is done into categories to give us ease in automating fulfilment operations using robots, conveyor belts, and other tools. In the past, Amazon pickers would process around 100 items per hour. Today with automation in place, this rate has increased to 300 – 400 items per hour. To achieve such efficiency through automation, a well-defined process is essential for a business.
A great amalgamation of complex algorithms for managing inventory, predicting demands, optimizing delivery routes, and efficient sourcing and procurement creates a structured transformation network for shipping and logistics. Besides, it also manages reverse logistics for customer retention and brand value maintenance.
Now picture all this without a well-defined process in place! Chaotic Right??? – Often, how things are done provides the focus of making them better!
