Amazon.com Inc. Operations Management: 10 Decisions, Productivity
Amazon Tower II (Rufus Block 19) in February 2016. Amazon.com Inc.’s operations management tackles the 10 strategic decision areas through automation and HR development for optimal e-commerce productivity. (Photo: Public Domain)
Amazon.com Inc.’s e-commerce success depends on the high efficiency achieved in its operations management (OM), which directly determines productivity. The company must address the concerns of the 10 strategic decision areas of operations management to optimize productivity. As the leading player in the e-commerce industry, Amazon is an example of the significance of technologically supported productivity for optimal efficiency of services. These 10 strategic decisions of operations management become increasingly complex, as the organization continues to expand and diversify its business. Continuous improvement can help enhance the capabilities of Amazon in maintaining adequate support for operations despite global expansion and the broadening of the product mix [Read: Amazon’s Product Mix, Marketing Mix]. Through effective operations management, Amazon keeps its lead in online retail and the e-commerce market.
Amazon ensures that its operations management (OM) efforts satisfy the 10 strategic decision areas of its e-commerce business. With expanding operations in addition to online retail business, Amazon.com Inc. must continue adjusting its operations management approach for the corresponding changes in these strategic decision areas.
Amazon’s Operations Management, 10 Decision Areas
1. Design of Goods and Services. The design of organizational output is covered in this strategic decision area of operations management. Amazon addresses this concern primarily through technology. For example, the company uses advanced information and communication technologies to ensure that its online retail services are efficient and convenient for target customers. Such technologies are also used to support maximum efficiency of Amazon’s e-commerce operations.
2. Quality Management. The objective in this strategic decision area is to maximize quality of operational output to satisfy the expectations of customers. Amazon.com Inc.’s operations management approach involves continuous improvement efforts in its e-commerce business. The company uses its organizational culture to support innovative idea creation among employees [Read: Amazon’s Organizational Culture]. For example, Amazon encourages employees to be bold and pioneering in creating new ideas to solve problems and improve the business.
3. Process and Capacity Design. An objective of operations management is to optimize production processes and capacity. In this strategic decision area, Amazon applies extensive automation to streamline its business processes. For example, considering online retail service as its main organizational output, the company automates the ordering process to increase the capacity to accept as many simultaneous orders as possible. This approach to operations management highlights the importance of automation and related technologies in enhancing Amazon’s process and capacity in e-commerce.
4. Location Strategy. The accessibility of resources and markets is considered in this strategic decision area of operations management. In the case of Amazon.com Inc., the emphasis is on the strategic location of warehouses or fulfillment centers. For example, Amazon must maintain warehouses that are optimally near the largest possible number of customers of the online retail business.
5. Layout Design and Strategy. In this strategic decision area, operations managers have the objective of optimizing the movement of human resources, materials, and information. Amazon addresses this objective through efficient layout designs that align with computer-assisted processes. For example, in the company’s warehouses and fulfillment centers, items are organized according to a computerization policy. The corresponding layout involves maximization of shelf space and minimization of aisles to achieve optimal capacity without reducing process efficiency in Amazon’s online retail business.
6. Job Design and Human Resources. Human resource development is the focus in this strategic decision area. Amazon’s operations management uses a combination of in-house employment processes and third-party employment agencies. For example, workers from these agencies fill temporary positions and are evaluated to determine suitability for permanent positions, especially in warehouses and fulfillment centers. Amazon’s recruitment and hiring processes are aligned to organizational growth and human resource needs in corporate offices.
7. Supply Chain Management. The operations management concern in this strategic decision area is to streamline the supply chain to support organizational objectives. Amazon does so through automation and enabling suppliers and buyers to access some of its IT assets. For example, sellers adjust supply levels based on demand data available from the company’s online retail website. Also, buyers can track order and communicate with suppliers through data available from Amazon’s website.
8. Inventory Management. In inventory management, operations management’s focus is on maintaining optimal inventory ordering and holding. Amazon addresses this strategic decision area through a finished goods inventory using just-in-time inventory management in some areas. For example, in just-in-time inventory management, some goods that arrive at the company’s fulfillment centers are immediately shipped to fulfill customers’ orders. Amazon holds other goods as part of its finished goods inventory. In addition, to ensure optimal inventory ordering and holding, warehouse employees are trained to maximize the speed of order fulfillment through mobile computers linked to a central computer and database. In this way, Amazon.com Inc.’s operations management optimizes its online retail inventory size to minimize costs while satisfying market demand.
9. Scheduling. Operations managers consider intermediate and short-term schedules to ensure that resources satisfy market needs. In this strategic decision area, Amazon relies on the involvement of suppliers for its online retail business. For example, suppliers access the company’s website to determine demand levels and implement their shipping and delivery schedules accordingly. Also, Amazon’s operations management automates shipping schedules involving its fulfillment centers, which provide shipping services to sellers for a fee.
10. Maintenance. This strategic decision area emphasizes the reliability and stability of business processes. Amazon.com Inc.’s operations management involves specialized teams for maintaining technological assets. In addition, workers are regularly trained to maintain human resource capacity to satisfy the company’s needs for its e-commerce business. Moreover, Amazon is always on the lookout for advanced technologies to improve its operational efficiency.
Amazon.com Inc.’s Productivity Measures
Amazon’s business productivity mainly refers to the productivity of its personnel and automated systems in fulfilling customers’ orders. In online retail operations, the company’s employees must move fast in packing and shipping items to fulfill customers’ orders. The following are some of the measures or criteria used to determine productivity at Amazon:
- Inventory items processed per hour (inventory productivity)
- Orders fulfilled per hour (Amazon Fulfillment Center productivity)
- Inquiries answered per day (customer service productivity)
References
- Amazon.com, Inc. Form 10-K.
- Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations Management: An Integrated Perspective. INTECH.
- Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic planning in operations management: a framework for executive decisions. International Journal of Management and Decision Making, 9(3), 310-327.
- Verdaasdonk, P., & Wouters, M. (2001). A generic accounting model to support operations management decisions. Production Planning & Control, 12(6), 605-620.