Operational Management Capacity Management at Amazon

Klosterboer (2011) states that the Capacity Management is the most crucial part of the supply
chain management that further helps them in defining their demands and setting up their
inventory levels at appropriate level, which further allows them to avoid risks and further
makes them for efficient. Gurmmit (2009) explains that effective lean management helps
businesses in ensuring that there is no surplus in the processes and in the previous sections.
Gurmmit (2009) further stated that the main focus of lean is on economic quantities, optimum
efficiency and reduced production cost.
Sabharwal & Wali (2013), states that lean management is effective along with low variability
and high volume, but this is not the case every time because the competition in the consumer
markets is increasing rapidly and the markets are further becoming more unpredictable.
Sabharwal & Wali (2013) further explained that the lean management in the supply chain
works on the basis of setting inventory and forecasting, while looking at the historic patterns,
which further helps in setting up predefined ordering points.
When a customer orders anything from Amazon a sequence of automated processes starts
making the inventory management even more efficient for the company. In this regard
O’Connor (2013) presented an example, when a customer orders a book from Amazon he is
provided an invoice clearly mentioning its title and also has a barcode and the numbers 2-3-4
indicates the location of the book in the store.
At Amazon, with the help of the automated system, signals are sent to the employees on their
wireless receivers through computers, guiding them regarding the location of the product that
needs to be picked and after that the weight of the product is verified.
Furthermore the products are then placed in the green crates by the workers and when the
green crate is filled the crate is further placed on the conveyor belt so that it can be sent to the
central point. O’Connor (2013) further explained that the barcodes on each product help
workers in determining who will receive the product as it contains the address and contact
information of the receiver.

After that the products are packed and parcelled. The orders of
Amazon are shipped through US parcel service or US postal service whichever is near the
warehouse. In 1999 during the holiday season Amazon was determined to fulfil all of the needs and wants of its customers visiting the site of the company for shopping purposes. For
this Jeff Bezos decided to stock each and every item that the customers will likely to buy.
However the strategy was appreciated by the customers, but the company had to face
numerous different problems.
That was the time when Bezos apprehended the importance of managing inventory for the
company, hence, he decided to reduce the overall size of its inventory and the overall task
was performed by managing the warehouses of the company efficiently (Kiran 2015).

Furthermore the company has also decided to purchase the products while forecasting the
demand for the product in the market. For this Amazon has also decided to manage its
distribution channels as at that time the most important decision for the company was to take
careful decisions regarding the purchase of books and other products directly from the
publishers or from distributors. O’Connor (2013) further explained that Amazon has also
upgraded its software and tried to split its shipment as well.
After that the company has also decided to outsource some of its routine activities while
aiming to cut down the overall expenses of the company, this has further helped the company
in concentrating better on its main activities. Hence Amazon contracted other companies for
shipping its inventory. Hence when other companies were focusing on the shipments of
Amazon the company was focusing on improving its electronic commerce even more. This
further helped the company in managing its inventory and by this the company had managed
to save all of its expenses associated with the filling and shipping of the products to its
customers (O’Connor 2013). In his study Kiran (2015) has concluded that the improved
inventory management has helped Amazon in getting the net profit of $5 million in fourth
quarter of year 2001.


Gurmmit, A. (2009). Capacity Management – A Practitioner Guide, Van Harem Publishers.
Kiran, B. (2015). Inventory Management at Amazon, Available online at:
[Accessed on 03/01/2019].
Klosterboer, L. (2011). ITIL Capacity Management, Peason Education.
O’Connor, S. (2013). Amazon unpacked, Available online at:
http://www.ft.com/cms/s/0/ed6a985c-70bd-11e2-85d0-00144feab49a.html#slide0 [Accessed
on 05/01/2019].
Sabharwal, N and Wali, P. (2013). Cloud Capacity Management: Capacity Management, A

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