Amazon's Inventory Management

Introduction

The idea online book selling and the launch of Amazon.com in 1995 marked the start of a new era. Utilizing the strong power of e-business and e-commerce, Amazon has proved itself as “Earth’s biggest bookstore” (Business Week, 1997) and the fact that the physical good on sale are not necessarily linked to what are actually in stock. Bearing in mind clear and concise value proposition which comes four-fold namely, convenience, selection, price and customer service, Amazon has achieved rather positive customer relationship management and maintained a stable customer base through its outstanding e-business methods including e-mail promotions and collaborative filtering technology (Pillai, 2004) and also invested heaps on IT infrastructures in order to facilitate its well-known inventory management.

Under all circumstances, the case study introducing Amazon’s inventory management is worth further investigation as well as the future challenges facing the company. Following are the author’s analyses on three critical aspects with the form of three Q&As.

1.Analyse Amazon’s inventory management strategy.

Inventory is always playing a critical role for retail companies in terms of anticipation of future demand. Therefore, inventory is inevitably vital in supply chain and should be arranged well in order to ensure supplies meeting demand and consequently smoothes customers’ experience and significantly reduces costs (Chopra & Meindl, 2010). Amazon’s strategy for inventory management evolved during its business development. Starting from its realization of the importance of inventory, its strategy change can be separated into two time sections.

Firstly, during 1999 to 2000, expecting to meet every customer’s demand on its website, Amazon decided to build its network as distributor