At the foundation of Amazon.com's supply chain-based business model is a demand management platform that including real-time forecasting and distributed order management integration tot the supplier level. This provides Amazon.com with the ability to interpret, analyze and aggregate demand for a given product, invoke its supply chain processes, place orders, manage inventory, or procure the item based on customer demand. These are the foundational elements of supply chain best practices as defined by supply chain theorists who underscore the need for creating a demand-driven forecasting and replenishment process that manages inventory effectively while fulfilling customer orders (Lee, Whang, 2004). Demand management and forecasting is a key performance driver within Amazon.com's supply chain system, as it is integrated to their analytics platform, which is used for global reporting of supply chain performance. Amazon.com was prescient in creating a distributed order management system that today runs as a Web Service (Lapide, 2013). All of these elements taken together are orchestrated to create state-of-the-art dashboards that include key performance driver assessment, metrics and analytics that in real-time show supply chain performance.
The key performance drivers, metrics, and analytics that Amazon.com uses are segmented to align with operational, tactical and strategic information needs throughout the organization. The reliance on operational metrics is at the warehouse level and includes cost detail analysis, purchasing cost analysis, inventory turns by item, inventory carrying costs and advanced metrics of Vendor Managed Inventory (VMI) of resold products that have a higher average unit price including flat screen televisions and other high velocity, high volume items (Amazon Investor Relations, 2013). These metrics are also tracked from a cost-to-compete an order basis, indirect transaction costs, and replenishment costs (Lapide, 2013). Metrics are also included to track warehouse management performance including optimization of warehouse space, and the effectiveness of material handling technologies including bar coding relative to the recently adopted Radio Frequency Identification (RFID) technologies (Lapide, 2013). Inventory velocity, carrying costs, the Return on Invested Capital and profitability by warehouse location are also reported on monthly (Amazon Investor Relations, 2013).
Amazon's corporate culture is analytically-driven and often defines their strategies from supply chain metrics of performance standpoint first. For many distribution-centric businesses, this is the case, as many seek to create differentiation of their business models at the supply chain process level (Lee, Whang, 2004). This is consistent with high velocity business models that seek to create a unified series of analytics (Hugos, 2003), key performance
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