E-commerce Supply Chain Management Summary:
E-Commerce Overview
• Growth:
o Global retail e-commerce reached $5.8 trillion in 2023, projected to
exceed $8 trillion by 2027.
o Rapid growth fueled by increasing online retail adoption.
• Definitions:
o B2C: Direct sales to individual consumers. (focus of this course)
o B2B: Transactions between businesses or organizations.
o C2C: Consumers selling to other consumers (e.g., eBay).
o C2B: Individuals providing goods/services to businesses.
• Trends:
o Dominance of Wal-Mart and Amazon, with Amazon rising from rank 157 in
2001 to rank 2 in 2021.
o Rapid expansion of Chinese e-tailers like JD.com and Alibaba.
Supply Chain Management (SCM)
• Definition: The coordination of processes to manage supply and demand,
sourcing, manufacturing, inventory, and delivery at optimal cost.
Other definition: the design and management of seamless, value-added
processes across organizational boundaries to meet the real needs of the end
customer.
• Components:
o Drivers: Transportation, storage, and facilities.
o Integration: Information sharing, sourcing, and pricing strategies.
o Goals: High service levels with minimal cost.
Supply chain is all processes involved with the flow of products and services from/to:
• Raw material producers
• Intermediate product manufacturers
• End product manufacturers
• Wholesalers and distributors
• Retailers
→ it can be:
product flow (materials, components, services, finished products)
reverse product flow (returns for repair, replacements, recycling, disposals)
Information flow (Invoices, Orders, Rules & Regulations, Forecasts)
Cash flow (payments of products)
What is the difference between Aliexpress & Amazon?
• Both are e-commerce firms
• Both are leaders in their respective markets
• Both are technology firms
• But they have different supply chain structures. What is this difference?
,E-Commerce Supply Chains
1. Types:
o Direct Manufacturer-Customer: Ship directly from producers.
o E-tailers: Maintain warehouses for direct sales.
o Marketplaces: Platforms like Amazon or AliExpress where sellers and
buyers interact.
o Third-Party Logistics (3PL): Outsourcing logistics.
2. Strategic Decisions:
o Network Design: (where to position facilities?)
▪ Spreadsheet modelling, labour cost, labour availability, and
industrial relations laws.
How to fulfill demand?
• Integrated fulfilment: building e-fulfilment capability into existing distribution centers
that also deliver to conventional stores
• Dedicated fulfilment: via purpose-built facilities
• Store fulfillment: picking online orders from regular retail shelves for separate,
dedicated delivery
• Dropshipping: delivering customer orders directly from their suppliers’ inventories
When to go for store pickup vs dedicated facilities?
• Volume & lead-time targets drive decision
• Pick from store: 100 - 3000 orders per week
• Pick from dark store: 10000 - 20000 orders per week
• Pick from dedicated warehouse: ≥ 20000 orders per weekTactical Decisions:
Which products to stock? How much to stock? When to replenish?
• Inventory service level to target per product
• Ordering & holding costs
• Substitutes of products
• Perishability
• Obsoloscence
• Return flows
• Sustainability
How to organize last mile deliveries? when to deliver?
• Customer pickup at supplier/warehouse
• Lockers
• Store pickup
• Third-party collection points
• Home delivery
• Attended
• Unattended
• Lead-time targets
,• Cutoff times (transaction is official)
• Time window/time slot flexibility
Operational Decisions:
o Returns Management: Addressing customer returns efficiently.
o Technological and Legal Developments:
▪ Legal compliance with emissions rules city delivery
▪ → NL: transport license required >500 kg
▪ Ever later cut-off times
▪ More flexible delivery options:
• Location flexibility
• Time window/time slot flexibility
▪ Automation
• Automated picking
• Automated delivery
• Drone deliveries
▪ Sustainability: Reducing carbon footprints and embracing green
logistics.
, Summary of the Amazon Supply Chain Management Case
Overview: The case details Amazon's rapid evolution from an online bookstore founded
in 1994 to one of the world's most valuable companies by 2018, with a market
capitalization of $702 billion. Its innovative supply chain has been a key driver of growth,
supporting its expansive product range, from books to groceries, and services like
Amazon Web Services (AWS) and Prime Video.
Key Sections:
1. Amazon’s Achievements by 2018:
• Fourth-quarter 2018 revenues reached $60.5 billion, with a 30% year-over-year
increase.
• Amazon Web Services (AWS) generated $17.5 billion in 2017.
• Innovative devices like Echo, powered by Alexa, gained traction.
• Diversified operations included Amazon Go stores, the Whole Foods acquisition,
and expansion into logistics.
2. Retail Industry Context:
• U.S. retail sales were $5.1 trillion in 2017, with e-commerce accounting for $450
billion.
• Amazon led with 43% of the U.S. e-commerce market, competing with Walmart
and Target.
3. Traditional vs. Amazon's Supply Chain:
• Traditional Retail: Relies on large-scale, seasonal inventory management and
partnerships with logistics providers for bulk shipping.
• Amazon’s Approach:
o Full control of its supply chain: from procurement to final delivery.
o Developed Fulfillment by Amazon (FBA) for third-party sellers.
o Built its logistics network (air hubs, truck fleets, and sortation centers) to
reduce dependency on FedEx and UPS.
4. Amazon’s Innovations in Logistics:
• FBA Services: Offered end-to-end logistics for third-party sellers.
• Prime Hubs: Enabled 1- to 2-hour deliveries in urban areas.
• Amazon Flex: A crowd-sourced delivery program similar to Uber.
• Warehouse Automation: Acquired Kiva Systems for robotic solutions.
• Global Ambitions: Launched freight forwarding services for seamless cross-
border shipping.
5. Whole Foods Acquisition:
• Acquired in 2017 to penetrate the $800 billion U.S. grocery market.
• Leveraged Whole Foods stores for distribution and Prime membership benefits.
6. Financial Challenges:
• Shipping costs in 2017 reached $21.7 billion, with a $7.2 billion loss on shipping
fees due to the aggressive Prime program.
E-Commerce Overview
• Growth:
o Global retail e-commerce reached $5.8 trillion in 2023, projected to
exceed $8 trillion by 2027.
o Rapid growth fueled by increasing online retail adoption.
• Definitions:
o B2C: Direct sales to individual consumers. (focus of this course)
o B2B: Transactions between businesses or organizations.
o C2C: Consumers selling to other consumers (e.g., eBay).
o C2B: Individuals providing goods/services to businesses.
• Trends:
o Dominance of Wal-Mart and Amazon, with Amazon rising from rank 157 in
2001 to rank 2 in 2021.
o Rapid expansion of Chinese e-tailers like JD.com and Alibaba.
Supply Chain Management (SCM)
• Definition: The coordination of processes to manage supply and demand,
sourcing, manufacturing, inventory, and delivery at optimal cost.
Other definition: the design and management of seamless, value-added
processes across organizational boundaries to meet the real needs of the end
customer.
• Components:
o Drivers: Transportation, storage, and facilities.
o Integration: Information sharing, sourcing, and pricing strategies.
o Goals: High service levels with minimal cost.
Supply chain is all processes involved with the flow of products and services from/to:
• Raw material producers
• Intermediate product manufacturers
• End product manufacturers
• Wholesalers and distributors
• Retailers
→ it can be:
product flow (materials, components, services, finished products)
reverse product flow (returns for repair, replacements, recycling, disposals)
Information flow (Invoices, Orders, Rules & Regulations, Forecasts)
Cash flow (payments of products)
What is the difference between Aliexpress & Amazon?
• Both are e-commerce firms
• Both are leaders in their respective markets
• Both are technology firms
• But they have different supply chain structures. What is this difference?
,E-Commerce Supply Chains
1. Types:
o Direct Manufacturer-Customer: Ship directly from producers.
o E-tailers: Maintain warehouses for direct sales.
o Marketplaces: Platforms like Amazon or AliExpress where sellers and
buyers interact.
o Third-Party Logistics (3PL): Outsourcing logistics.
2. Strategic Decisions:
o Network Design: (where to position facilities?)
▪ Spreadsheet modelling, labour cost, labour availability, and
industrial relations laws.
How to fulfill demand?
• Integrated fulfilment: building e-fulfilment capability into existing distribution centers
that also deliver to conventional stores
• Dedicated fulfilment: via purpose-built facilities
• Store fulfillment: picking online orders from regular retail shelves for separate,
dedicated delivery
• Dropshipping: delivering customer orders directly from their suppliers’ inventories
When to go for store pickup vs dedicated facilities?
• Volume & lead-time targets drive decision
• Pick from store: 100 - 3000 orders per week
• Pick from dark store: 10000 - 20000 orders per week
• Pick from dedicated warehouse: ≥ 20000 orders per weekTactical Decisions:
Which products to stock? How much to stock? When to replenish?
• Inventory service level to target per product
• Ordering & holding costs
• Substitutes of products
• Perishability
• Obsoloscence
• Return flows
• Sustainability
How to organize last mile deliveries? when to deliver?
• Customer pickup at supplier/warehouse
• Lockers
• Store pickup
• Third-party collection points
• Home delivery
• Attended
• Unattended
• Lead-time targets
,• Cutoff times (transaction is official)
• Time window/time slot flexibility
Operational Decisions:
o Returns Management: Addressing customer returns efficiently.
o Technological and Legal Developments:
▪ Legal compliance with emissions rules city delivery
▪ → NL: transport license required >500 kg
▪ Ever later cut-off times
▪ More flexible delivery options:
• Location flexibility
• Time window/time slot flexibility
▪ Automation
• Automated picking
• Automated delivery
• Drone deliveries
▪ Sustainability: Reducing carbon footprints and embracing green
logistics.
, Summary of the Amazon Supply Chain Management Case
Overview: The case details Amazon's rapid evolution from an online bookstore founded
in 1994 to one of the world's most valuable companies by 2018, with a market
capitalization of $702 billion. Its innovative supply chain has been a key driver of growth,
supporting its expansive product range, from books to groceries, and services like
Amazon Web Services (AWS) and Prime Video.
Key Sections:
1. Amazon’s Achievements by 2018:
• Fourth-quarter 2018 revenues reached $60.5 billion, with a 30% year-over-year
increase.
• Amazon Web Services (AWS) generated $17.5 billion in 2017.
• Innovative devices like Echo, powered by Alexa, gained traction.
• Diversified operations included Amazon Go stores, the Whole Foods acquisition,
and expansion into logistics.
2. Retail Industry Context:
• U.S. retail sales were $5.1 trillion in 2017, with e-commerce accounting for $450
billion.
• Amazon led with 43% of the U.S. e-commerce market, competing with Walmart
and Target.
3. Traditional vs. Amazon's Supply Chain:
• Traditional Retail: Relies on large-scale, seasonal inventory management and
partnerships with logistics providers for bulk shipping.
• Amazon’s Approach:
o Full control of its supply chain: from procurement to final delivery.
o Developed Fulfillment by Amazon (FBA) for third-party sellers.
o Built its logistics network (air hubs, truck fleets, and sortation centers) to
reduce dependency on FedEx and UPS.
4. Amazon’s Innovations in Logistics:
• FBA Services: Offered end-to-end logistics for third-party sellers.
• Prime Hubs: Enabled 1- to 2-hour deliveries in urban areas.
• Amazon Flex: A crowd-sourced delivery program similar to Uber.
• Warehouse Automation: Acquired Kiva Systems for robotic solutions.
• Global Ambitions: Launched freight forwarding services for seamless cross-
border shipping.
5. Whole Foods Acquisition:
• Acquired in 2017 to penetrate the $800 billion U.S. grocery market.
• Leveraged Whole Foods stores for distribution and Prime membership benefits.
6. Financial Challenges:
• Shipping costs in 2017 reached $21.7 billion, with a $7.2 billion loss on shipping
fees due to the aggressive Prime program.
