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Amazon.com Warehousing and Delivery systems

May 14, 2010

In 1995, Amazon.com sold its first book, which shipped from Jeff Bezos’ garage in Seattle. In 2006, Amazon.com sells a lot more than books and has sites serving seven countries, with 21 fulfillment centers around the globe totaling more than 9 million square feet of warehouse space.

Amazon.com sells lots and lots of stuff. The direct Amazon-to-buyer sales approach is really no different from what happens at most other large, online retailers except for its range of products. You can find beauty supplies, clothing, jewelry, gourmet food, sporting goods, pet supplies, books, CDs, DVDs, computers, furniture, toys, garden supplies, bedding and almost anything else you might want to buy. What makes Amazon a giant is in the details. Besides its tremendous product range, Amazon makes every possible attempt to customize the buyer experience.

Actually, Amazon employs more than 23,400 around the world. Headquartered in Seattle, Washington, USA, and they also have offices, fulfillment centers, customer service centers and software development centers across North America, Latin America, Europe and Asia.

Fulfillment and warehousing

Fulfillment by Amazon (FBA) enables merchants to store inventory and fulfill orders from an Amazon.com fulfillment center.

Amazon offers warehousing and order-fulfillment for third-party sellers including large companies such as Target Corporation. With this innovative program, a third-party seller can send inventory to an Amazon fulfillment center; when customers place orders, Amazon takes care of packing and shipping the products to their buyers. The customers can combine the third-party seller products with Amazon items and receive Super Saving Shipping and other benefits, such as customer service and returns support directly from Amazon.

Fulfillment by Amazon is designed to help the third-party seller operation succeed in fulfillment while they focus on their own business.

It works as you can see here:

Warehousing and Fulfillment centers are located in the following cities, often near airports:

North America:

  • Arizona, USA: Phoenix, Goodyear
  • Delaware, USA: New Castle
  • Indiana, USA: Whitestown and Plainfield
  • Kansas, USA: Coffeyville
  • Kentucky, USA: Campbellsville, Hebron (near Cincinnati International Airport), Lexington, and Louisville
  • Nevada, USA: Fernley and North Las Vegas
  • New Hampshire, USA: Nashua
  • Pennsylvania, USA: Carlisle, Chambersburg, Hazleton, Allentown, and Lewisberry
  • Texas, USA: Dallas/Fort Worth
  • Virginia, USA: Sterling
  • Ontario, Canada: Mississauga (a Canada Post facility)

In March 2009, Amazon announced plans to close three U.S. distribution centers: Red Rock, Nevada; Chambersburg, Pennsylvania; and Munster, Indiana.

Europe:

  • Bedfordshire, England: Marston Gate, near Brogborough
  • Inverclyde, Scotland: Gourock
  • Fife, Scotland: Glenrothes
  • Swansea, Wales: Crymlyn Burrows near Jersey Marine
  • Loiret, France: Orléans-Boigny (2000)
  • Loiret, France: Orléans-Saran (2007)
  • Hesse, Germany: Bad Hersfeld
  • Saxony, Germany: Leipzig

Asia:

  • Ichikawa, Chiba, Japan
  • Yachiyo, Chiba, Japan
  • Sakai, Osaka, Japan
  • Guangzhou, China
  • Suzhou, China
  • Beijing, China

Amazon Warehouse equipment and processing

As you can see in this video, Amazon.com combines different warehousing equipment depending on the type of products they have to storage: books, computers, cd’s furniture.

For example: floor storage for a first storage and conventional racking in a second storage, to have the items ready for deliver orders passing first throw the packaging area for being shipping in a last step.

Another example about the Amazon.com uk fulfillment centre.

Distribution Network Design

Shipping & Delivery 

Amazon.com gladly accepts orders from all around the globe. Available product lines, shipping rates and fees may vary depending on the delivery address for the order. To see the shipping rate information specific to an order’s destination, the customer can check the shipping rates and times specifically of his order and time to delivery.

Amazon works with UPS International post service.

Here is a funny example with a very special delivery directly from amazon to customer:

Sources: www.amazon.con; wikipedia; jpgarcia class notes

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Advantages and Disadvantages of Just-in-Time (JIT) Manufacturing and Inventory Control System

April 12, 2010

Traditionally manufacturers have forecasted demand for their products into the future and then have attempted to smooth out production to meet that forecasted demand. At the same time, they have also attempted to keep everyone as busy as possible producing output so as to maximize “efficiency” and (hopefully) reduce costs. Unfortunately, this approach has a number of major drawbacks including large inventories, long production times, high defect rates, production obsolescence, inability to meet delivery schedules, and (ironically) high costs. Non of this is obvious -if it were, companies would long ago have abandoned this approach.

JIT is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand. In just in time manufacturing system inventories are reduced to the minimum and in some cases they are zero.

JIT works in the three types of inventories:

a) Raw materials: inventories provide insurance in case suppliers are late with deliveries.

b) Work in process: inventories are maintained in case a work station is unable to operate due to a breakdown or other reason.

c) Finished goods: inventories are maintained to accommodate unanticipated fluctuations in demand.

 The main BENEFITS of JIT are the following:

  1. Funds that were tied up in inventories can be used elsewhere.
  2. Areas previously used to store inventories can be used for other more productive uses.
  3. Throughput time is reduced, resulting in greater potential output and quicker response to customers.
  4. Defect rates are reduced, resulting in less waste and greater customer satisfaction.

Most companies find, however, that simply reducing inventories is not enough. To remain competitive in an ever changing and ever competitive business environment, must strive for continuous improvement.

 A real business example: Dell Computer Corporation

In this company an order for a customized personal computer that comes in over the internet at 9 am, can be on a delivery truck to the customer by 9 p.m. In addition, Dell’s low cost production system allows it to under price its rivals by 10% to 15%. How does the company’s just in time system deliver lower costs? While machines from Compaq and IBM can languish on dealer shelves for two months Dell does not start ordering components and assembling computers until an order is booked. By ordering right before assembly, Dell figures it s parts, on average, are 60 days newer than those in an IBM or Compaq machine. That can translate into a 6% profit advantage in components alone.

Source: Gray McWilliams, “Whirlwind on the web, “Business Week, April 7, 1997.

 PCs Just In Time Management.

DISADVANTAGES of JIT:

Implementing thorough JIT procedures can involve a major overhaul of business systems -it may be difficult and expensive to introduce.

JIT manufacturing also opens businesses to a number of risks, notably those associated with the supply chain. With no stocks to fall back on, a minor disruption in supplies to the business from just one supplier could force production to cease at very short notice. 

A real business example: Toyota

Just-in-time manufacturing system is vulnerable to unexpected disruptions in supply chain. A production line can quickly come to a halt if essential parts are unavailable. Toyota, the developer of JIT, found this out the hard way. One Saturday, a fire at Aisin Seiki Company’s plant stopped the delivery of all break parts to Toyota. By Tuesday, Toyota had to close down all of its Japanese assembly line. By the time the supply of break parts had been restored, Toyota had lost an estimated $15 billion in sales.

Source: “Toyota to Recalibrate ,'” International Herald Tribune, February 8, 1997.

More info: http://www.accountingformanagement.com/just_in_time.htm

GET FREE BOOKS IN PDF ABOUT JIT: http://www.librospdf.net/just-in-time/1/

GET FREE POWERPOINTS ABOUT JIT: http://www.powerpointsgratis.net/JUST-IN-TIME/1/

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Just-in-Time Inventory Control (JIT)

April 12, 2010

The Dictionary of Business Terms defines Just-in-Time (JIT) as a method of close coordination with suppliers maximizing the relationship between production and sales levels with inventory, reducing carrying costs. Often JIT is linked with a computerized Point-Of-Sale System and inventory levels are maintained through an automated reordering system connected to suppliers, so that stock-outs are minimized.

On the other hand, the Dictionary of Marketing Terms defines JIT as a strategy of retailers who maintain almost no excess on-hand inventory, relying upon suppliers to deliver inventory as needed. JIT delivery is most beneficial to retailers with high inventory, financing, storage, and insurance costs. The retailer may transfer sales data directly to suppliers via point-of-sale terminals.

For both disciplines –Business and Marketing– the main point is focused in make benefits higher thanks to the same inventory management strategy: Just in time that allows minimize the costs associated with inventory control and maintenance.

The Just-in-Time is a Japanese industrial management method developed in 1950. It was first adopted by Toyota manufacturing plants by Kiichiro who can be regarded as the father of JIT.

Something that led the Just-in-Time was developed with other production techniques, was that after the Second World War, Japan was completely destroyed. In a small nation like Japan, the most valuable asset is the physical space (Japan has an area =369,883 km2 and a population = 123,000,000). The Japanese people could not sow, and they had no capital to start manufacturing, so the only thing that remained them was to maximize the few resources they had.

THE HISTORY OF TOYOTA

Part I:

If in the 50s the technological and industrial development were owned almost exclusively of the United States, largely due to his victory in the Second World War, in the 80s this trend was reversed towards Japan.

The first company to introduce this method of production, Toyota, quickly became a world leader in its sector. The effectiveness of the JIT rushed them to improve and refine their philosophy, which came to affect all areas of the company, not only Production but also Human Resources, Management… 

Part II:

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VIDEOS about Transportation and Logistics

April 11, 2010

In this video you can see the connection between the economy of a country and its transportation systems. Investing in infrastructures is directly connected with competitiveness in the global economy.

Investing in transportation is investing in the future.

The USA example:

 The Hong-Hong example:

The UPS way working example:

Video that shows some jobs involved with Transportation, Distribution and Logistics. They are essential to make our lives easier:

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Transportation: An American company example

April 11, 2010

The web page of this company (www.accessamericatransport.com) is interesting because it’s a good example of how a logistic company specialized in international transportation can give a good service in logistics area to other firms.

Access America is the premier transportation provider in North America. They are a third-party logistics company handling all modes of transportation including van, flatbed, refrigerated/frozen, and intermodal service. They have access to over 400,000 trucks (Truckload & LTL Carriers) in addition to supply chain management services, specialized transportation, and shipping by rail services

Access America Transport is a full service transportation company based in Chattanooga, TN. AAT handles all modes of transportation including less-than-truckload, van, flatbed, and refrigerated / frozen freight. Access America was founded in 2002 by Ted Alling and Barry Large as the Logistics Division of Key-James Brick. Soon after the initial concept, AAT diversified into other commodities and grew quickly.

In 2003 Access opened a transload facility and location in Birmingham which allowed Access America to expand its services and diversify shipping capabilities.

In 2005 Access America started the Government Services division. The division began hauling freight for the Department of Defense, but quickly diversified into other government agencies.

In 2006 the firm opening additional locations in Alabama and Minnesotan and also expanded into less-than-truckload (LTL) and heavy haul. An online LTL system was created to allow customers to go online, compare pricing, and book freight instantly. The software was integrated to work seamlessly with AAT’s load management system.

In 2007 Access America continued to expand by upgrading and adding additional technology and supply chain management systems.

2008 and 2009 were the years of the public recognitions. It starts in 2008 with the certified by Signature Management as ISO 9001:2000 for its quality management systems. The company was also named to the Hot 100 list of the fastest growing companies in the state of Tennessee. The company also received last year the Top 100 3PL recognition from Inbound Logistics, while SupplyChainBrain named Access America to its list of 100 Great Supply Chain Partners.

http://www.accessamericatransport.com/shipping-center/  It’s a link to the blog of Access America Transport about 2010 freight outlook. It’s interesting to know the main thoughts of different experts about transportation in the Truckload Carriers Association annual meeting.

Finally, as a journalist, I recommend the website of the Inbound Logistics, a free online magazine which is an interesting educational resource for business professionals looking to use logistics for competitive advantage: http://www.inboundlogistics.com/magazine/index.shtml

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Price-Value-Cost

March 9, 2010

COST-PRICE-VALUE

Does it exist any relationship?

If you were to ask a room full of 500 salespeople, what do you think is the number one thing consumers want today; what do you think their answer would be? And second? And third?

Probably, the first answer was “lower price”, the second “quality” and third “service”.

But if we switch scenes and we have 500 consumers in front of us and ask them the same question. What do you think the answers would be? Perhaps the order would change: 1- service, 2- quality and 3- lower price.

 So, it seems to have a perceptual difference in what consumers want and what salespeople think they want. But, what’s the reason? It would be a matter of definition.

Price: what we pay for something. Is the financial reward for providing one product or service. It’s a tangible, objective thing. It is the statement, by the owner of a thing, of how much it would cost to purchase that thing (from them).

Cost: for a company is the amount they spend to produce a product or a service. For a consumer is what he pays for what he has bought over time. For example, if you buy a cheap car, it’s probably you will have bigger service bills and inconvenience. You have a higher cost over time than the lower price you paid.

It is a tangible, objective (but different to calculate) thing. It is the accumulation of what had to be spent to create or acquire a thing. In a value chain, the cost of an item will vary as it passes through the chain

Consumers always want lower price and low cost and companies have to define for them what they really want in terms of the difference of our product or service. And this is the value to the customer. And value is always ‘perceived’ value. Every prospect interprets value in his own terms. The job in selling is not to always lower the price, but try to better understand what the perceived value is for each prospect.

So value is an intangible, subjective thing. It is the judgement, by an individual, of what something is worth to them. Market value is an accumulation of individual judgements of value.

 The only way to accomplish this is positioning the product or service appropriately in the mind of the consumers. People not always want cheap but they always want value. People don’t really want things that rust, break, are inconvenient or difficult to understand. They want life to be easier, less complicated, less stressful, happier and more fun.

 To maximise the profitability a company should find out:

▪ What benefits the customers gain from using a product or service

▪ The criteria the customers use for buying decisions – for example, speed of delivery, convenience or reliability

▪ What value the customers place on receiving the benefits the company provide. Wherever possible, set prices that reflect the value the company provide – not just the cost.

Stan Shih “Smile curve”

The Acer’s founder Stan Shih, proposed the concept of the “Smile Curve”. According to this concept, firms which specialize in the beginning part of the value chain (such as in the R&D of core hardware or software, or operation system), and the firms which focus their business on the final part of the value chain (such as in marketing with brand names or in providing customer services), normally enjoy much higher profit margins than those who operate at the middle part of the value chain (such as in the manufacturing and assembling of PCs).

 

With value-added on the Y-axis and the value chain on the X-axis, the resulting curve resembles a smile. This concept has been widely used to describe the distribution of value-adding potential in various industries and justify business strategies aimed at higher value-adding.

Companies that are focused on the extremes of value-added on the Y-axis and/or on the production chain X-axis usually are companies that not merely watch their home market. Usually they are firms that keep innovating to win the global market.

Branding is a very important point to take care if a firm wants to jump from the domestic market to an international market and it is not temporary. It requires a long-term commitment.

Fifteen years ago, Stan Shih proposed the ‘Smile Curve’ to predict the threats that Taiwanese IT (Information Technology Companies) would face if they continued to solely rely on their manufacturing advantages. These problems are now emerging and many of Taiwanese firms have successfully established competitive advantages in R&D, the left side of the ‘Smile Curve’. As for the right side, they have also done well in global logistics, but still need to improve brand marketing, which is the side closest to customers. Because a company that wishes to succeed internationally must strive to build its infrastructure by putting efforts into its R&D, channels, services, and international markets. R&D, production, and marketing are the three most important aspects of an enterprise, and these three departments are closely connected with the enterprise’s sales revenue.

To succeed at international market, the first step is to develop a brand name, and the next step is to achieve localization. Establishing good links with channels is also important: Having recognition, but no sales channels, can make it impossible to reap any benefit from one’s effort.

According to Acer’s founder Stan Shih, the Acer brand is centered on R&D; innovation and superior quality can ensure good products, and can also win consumers’ trust.