a. Managing Inventory is one of the most important tasks of a retailing company. If there are not enough goods in stock, some of the customers might be disappointed. Stocking too many will reduce the profit margins. Do you think Amazon.com adopted the right strategy while trying to manage its inventory? Was it successful in executing this strategy?
Ans:
Amazon’s was started with a focus on the following four value propositions: * Convenience * Selection * Price and * Customer Service
With these objectives Amazon opted for e-business of retailing. This offered the convenience. Amazon offered more choices than a conventional retailer. Since, it had the volumes it was able to offer products cheaper to the customer. It always met the shipping schedule and therefore had a lot of satisfied customers.
However, as Amazon expanded it kept on changing its strategy and adapted itself. This ensured that though the four value propositions were still maintained the supporting business model kept on evolving. Amazon's decisions in maintaining its inventory have been fruitful over time.
Amazon took deliberate and conscious decisions in managing its Inventory.
1.0 Amazon’s Initial Strategy for Inventory Management
After the initial success of its lean e-tailing model, Amazon realized that in order to grow and maintain customers it would need to create its own warehouses and stack inventory as per customer requirements. Though this made sure that the goods were delivered in time the company faced huge losses and suffered inventory management crisis.
2.0 The Drop Shipment Approach
In order to tide over the problem created by over stocking, Amazon adopted the Drop Shipment Approach. Drop Shipment is an arrangement wherein the retailers usually forward the orders received from the customers to the manufacturers or distributors. Manufacturers then directly