How Amazon has used its distribution system in e-business, and general features of e-business distribution networks
by Jimmy Alyea
Distribution systems have been used in e-business to improve customer service in terms of access, customization, and convenience and to lower costs in supply chains. For example, Amazon.com has lower inventory and facility costs due to their use of e-business for sales rather than bricks-and-mortar retail stores, but their transportation costs are high because they must ship books to customers. Shipping costs are a big portion of their book costs. However, inventory costs are low compared to retail stores because Amazon.com is able to aggregate inventory in a few geographical locations. They keep mainly medium- to high-demand books in their own warehouses and purchase low-demand books from a distributor when a customer orders. This reduces inventory costs considerably, but their facility costs are growing since business is increasing and they have had to add warehouses.
In the customer-service area, customer experience is very positive in terms of access, customization, and convenience. Customers, however, must be willing to wait for delivery of books they have ordered unless products can be downloaded. Benefits to customers also include better order visibility and quicker access to new products.
Basic features of an e-business distribution network include low facility and inventory costs but high transportation costs. An e-business can carry a wide variety of products, but response times are longer than those at retail stores, excluding products that can be downloaded. In terms of product availability, e-businesses communicate customer demand information throughout the supply chain faster, so their forecasts are much more accurate. Also, they can launch new products faster by shipping directly to the customer instead of having to first stock retail shelves. Overall, the customer experience is very personal due to access, customization, and convenience of online shopping.
Copyright 2012 James L. Alyea. All Rights Reserved.
About Jimmy Alyea:
Jimmy Alyea lives in Houston, Texas, and holds two Bachelor of Business Administration degrees (Supply Chain Management and Marketing) and a Master of Business Administration degree. Follow Jimmy Alyea (James L. Alyea) on LinkedIn, Twitter, or Blog.