amazon.com european distribution network

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Acess Amazon.com Transportation and Inventory management strategy in Europe

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  • Ashenafi AregawiFrancisco Furtado

    TTOM Logistics Amazon.com European Distribution Strategy

    Amazon.com Leipzig Fulfillment Center

  • Masters Program on Complex Transport Infrastructure Systems (CTIS)1EDN Challenges and OpportunitiesCurrent situation Three independent units working separately in Europe Fastest growing market for Amazon

    Opportunities Operation rationalizing and cost saving by aggregating services and infrastructure Expand product selection; Facilitate global sourcing; inventory planning at the global network level; Reduce risk of relying on a single DC; select the appropriate DC to fulfill a customer order; balance the load across appropriate DCs; expand into other European countries from existing DCs

    Alternative Strategies Single European distribution center (DC)

    Keep the three DCs EDN as a backup Selectively share inventory Full integration

    Two DCs North and South Europe

  • Pros Decrease demand variability across the supply chain due to location pooling in a single DC Decrease total inventory and associated costs Decrease cost of dealing with multi-item orders Mitigate demand-supply mismatch Theoretically decrease inbound transportation cost Mitigate Bullwhip effect (Increase in sharing information, easier to integrate supply chain, easier to predict and manage synchronization and batching of orders) Commercial advantages mentioned in slide 1 Easy to implement

    Cons Pooling effect diminished by positive correlation between demand in countries across Europe and marginal benefits decrease as more regions are pooled Increased distance from supplier to customer, bigger outbound and inbound* transportation cost Increase in lead times to customers (depending on the order) Loose flexibility

    * Many products are produced and consumed at the same placeMasters Program on Complex Transport Infrastructure Systems (CTIS)2EDN Single European DC

  • Pros Decrease demand variability across the supply chain due to virtual pooling (Decrease total inventory and associated costs; mitigate demand-supply mismatch; mitigate Bullwhip effect)

    Masters Program on Complex Transport Infrastructure Systems (CTIS)3EDN Keep the three DCs (full integration) Combined effect of: Consolidated distribution/Shipments via central DCs/Single supply chain Lower inventory and transportation costs (Allows for postal injections, smooth Pan European distribution and in-house transportation) Flexibility Commercial advantages mentioned in slide 1

  • Masters Program on Complex Transport Infrastructure Systems (CTIS)4EDN Keep the three DCs (full integration) Cons Bigger inventory than a single DC High coordination complexity and IT costs Increase in lead times to customersEDN Two DCs North and South Europe Combines the disadvantages of both options and fails to take significant advantages EDN Remarks about the 3 alternatives Keeping the DCs in each of the target countries, with integrated inventory management and as a single supply chain allows us to obtain the advantages of location and lead time pooling without increasing distance between customer and supplier and negligible decrease in customer service (lead times to customers). This way we can at the same time fully exploit the commercial advantages mentioned in the first slide, decrease inventory and transportation costs, and tailoring our distribution network to best fit European specificities.

  • Masters Program on Complex Transport Infrastructure Systems (CTIS)16ConclusionsIs Europe a single region or a sum of different regions ?Its Both!!!Amazon.com Fulfillment Centers in Europe Borders and common market Tailored solution intensive use of IT and optimization (ware house location problem), Integrated information system and supply chain management (story) Use drop shipping , consolidated distribution, cross docking and postal injections (bypass borders) Centralize services keeping in mind specificities (keep a buying department for French media products, websites?) Computing complexity shouldnt be an issue, rent/share excess capacity (warehouses, servers) Expansion to other countries (Imported books are 4.7% of the Internal Market; 93% use Castellan as usual reading language, 4% Catalan and 1,1% English)* Short review of: Newsvendor, pooling, Distribution network, Bullwhip effect

    * Federacin de Gremios de Editores de Espaa

    *****