Week 6 – Supply Chain Management

Supply chain management (SCM) is the process of coordinating all of the supply activities of an organisation (e.g. planning, implementing and controlling operations) from its suppliers and partners to its customers.

There are two different areas of SCM.  They are upstream and downstream supply chains.  Upstream is concerned with transactions between the organisation (Amazon) and its suppliers.  Downstream is to do with transactions between an organisation (Amazon) and its customers.

Supply Chain Management

A push-pull-system within the business industry describes the movement of a product or information between two subjects.  Essentially the consumers usually “pull” the products or information they demand for their needs, while the supplier which in this case is Amazon “pushes” them toward its consumers.

I feel that Amazon is more of a “push” system.  A push system has emphasis on the distribution of products to passive customers.  Amazon basically “push” the information about their products to their customers. In addition to this, Amazon currently sends emails to do with promotions and special offers along with advertisements to their customers. 

Push & Pull

Amazon is a business which is only available for making purchases online.  They have no physical stores which consumers can buy their products from.  Since Amazon is only an ecommerce organisation this provides them with the opportunity of many of the activities within the supply chain being conducted electronically.  An example would be the reduction of paper documents as order confirmations are sent to consumers via email. 

With Amazon taking orders over the internet this means that it will be fast, inexpensive and accurate and therefore resulting in expediting the payment delivery systems. 

Although there are numerous benefits to Amazon being an ecommerce business there are some drawbacks which are evident.  Supply chains can be very long especially when many internal and external partners are involved.  This is especially true for Amazon as they sell thousands upon thousands of products all from different suppliers. 

Within the supply chain there can be many benefits.  Some are tangible and others are intangible.  Some examples of tangible benefits for Amazon would be personnel reduction i.e. Amazon does not have to employ as many workers as they would if they had physical shops to attend to, Maintenance reduction – once again having no physical shops to attend to allows Amazon to save money.  The only maintenance work they are concerned with is of the computer systems. An example of an intangible benefit is globalization.  This allows Amazon to have customer’s world wide.  They are not restricted to people who just live within a short distance from them.  Therefore this results in their profits being increased. 

Vertical integration vs. disintegration vs. virtual integration

Vertical integration is the strategy of incorporating all aspects of management, production, sales, and distribution within a business in order to become less vulnerable to outside forces. 

Virtual integration is where the majority of supply chain activities are undertaken and controlled outside the organisation by independent third parties.

In my opinion Amazon are concerned with virtual integration.  This is because they have total reliance on linked third parties and a close relationship with their suppliers.  This is because Amazon does not manufacture their own products.  They sell other peoples products therefore they need to be in close contact with their suppliers. 

Value Networks

A value network is a complex set of social and technical resources. Value networks work together via relationships to create social goods or economic value.  There are two types of value networks.  Internal and External. 

Internal value networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, innovation, lead processing, or customer support.  Amazon has a very extensive customer support service.  They are available on the phone or via their website.  Their website is segmented into different sections allowing it easy to find a solution to your query.

External value networks include customers or recipients, intermediaries, stakeholders, complementors, open innovation networks and suppliers.