amazon process innovation

Prime Now SKIPTHETRIP.ONEHOURDILIVERY.

(AnAnalysisofamazon’sevolvingdeliveryprocess)

Professor:CARMENGOYTRECASTRO

Date:5THNOVEMBER2015Name:SHAKTISHIKHAR

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SHAKTISHIKHAR|MIMIB-F1

The Amazon Prime and Prime Now

In 2005, Amazon introduced Amazon Prime, a membership offering its customers free two-

day shipping to its customers, and a discounted one-day shipping rates. Starting with USA

amazon expanded to Germany, Japan, United Kingdom, France, Italy and Canada in the

following years. Members In USA also got free videos and TV Shows through Amazon

Instant videos without paying extra fees. The annual subscription of the Amazon Prime

service is $99.

In December 2014, Amazon announced that as an additional benefit to Amazon Prime

members, in parts of Manhattan, in New York City, people could get products delivered to

themselves within one hour for just $7.99, or within two hours for no additional fee apart

from their Prime membership. This new service is called amazon prime now and is only

available for existing prime members. Over 30,000 daily essential products are available

with this delivery service and whereas over 2,000,000 products through amazon Prime. In

February this year the service was extended to all of Manhattan. It has since been expanded

to various cities in USA, London and Birmingham in the UK.

Traditional Amazon delivery system

In the traditional e-commerce delivery system the customer places the order and then chooses

the delivery choices for each products from the respective sellers. Since the order placed

might have different product sellers apart from amazon each products might be shipped

individually and reaches the customer at different dates. However, the e-commerce websites

like amazon and e-bay do provide a faster shipping for an extra charge but even the faster

shipping’s were made within 3-5 days to reach the customers as compared to the normal

delivery system which has no time guarantee but an estimate date of arrival.

The following steps describe the process once the company receives the order and the

payment is processed.

Step-1- Order downloaded in OMS: After the customers on the amazon web store place the

order it is then downloaded into the order management system (OMS). This system is a back-

end ERP system that receives all the orders from across the country and processes these

orders.

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Step-2-Inventory Allocation: As soon as the order flows into an OMS, the inventory from

the Warehouses nearest to the customers, at the same time a new number of SKU’s remaining

is updated on the web store after deducting the current order. This scenario is only true when

the goods are available and has to be shipped from the warehouse directly but there are other

possibilities like:

1. Back to back order fulfillment: In this case the system downloads the orders and ask its

operator to go to the vendor immediately and get the required SKUs to the fulfillment

center/Warehouse to complete the order.

2. Drop shipment: In this case the orders are downloaded and handed over to the vendor

directly and it’s the job of the vendor now to fulfill the orders and ship it to the customers.

The warehouse doesn't have any control over this shipment and may result in quality or

product differentiation as the customers may not get exactly what they asked for which might

affect the Amazon brand.

3. Made to order: In this case, once the customer places an order a purchase order is

generated and the SKU’s are purchased from the vendors and bought to the warehouse and

then the normal cycle of order fulfillment is carried on.

Amazon usually does the stocking model (keeping SKU’s at the warehouse) and Drop

Shipment model for which it is widely popular.

Step-3-Order Collection: The operations team then starts processing the order in the

warehouse or requests any third party seller to do the same. Now, a pick list is generated by

the system against that order usually in the case of multiple orders at one go and using and is

handed over to a collector in the warehouse who then picks the respective SKU’s from one

particular warehouse and brings it back to the picking stations, a stage location in the

warehouse.

Step-4-Order Packaging and label generation: After the collection of the order is done, the

next stage in the process is packaging. At this time of packing required documents are printed

that needs to be sent along with the shipment package to the customers such as bills, warranty

or any other required document. A unique shipping label with bar code and tracking id is

generated to identify each order, which helps customers and the company to track the order

for the ETA and the whereabouts of the package.

Step-5-Order shipment: After the order is packed and ready to be shipped out to the

customer, the order is assigned to the courier companies that handles the outbound logistics

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of the company like DHL, UPS, FedEx etc., as per their shipping location and a manifest is

generated for them. Then the shipment is handed over to the employee of the courier

company who comes to the warehouse to collect the shipment. Once the shipment is out of

the main warehouse it is sent to the sort facility where the packages are sorted according to

their destination and the time of delivery.

Step-6-Order Received at Destination: Once the order reaches is destination the courier

company sends it to its own facility at the destination and the packages are sorted according

to the time and area of delivery. The company (Amazon) then informs the customer about a

time window in which the delivery can be expected.

Step-7-Shipment Delivery: The shipment is then delivered to the respected customer and the

courier company updates the details of the delivery back to Amazon regarding the

consignment at which points Amazon informs the customer about the completed transaction

and asks for feedback. Sometimes it is also possible that after several attempts to deliver the

product and due to the unavailability of the customer the goods are shipped back to Amazon.

The Amazon Prime Now

The Amazon Prime now is amazons promise to the world that they can get what they want

within minutes of placing the order. Amazon started its prime now service, which is a

membership only service for its Prime Now members. With this service Amazon promises to

deliver the order within two hours of the purchase with no additional cost to the membership

or a fee of 7.99 $ for a one hour delivery. Who would have thought that we could get

everything we need delivered to our doorstep within an hour of purchase. Well, Prime now

most certainly is fulfilling its promise. Amazon started the Prime Now service from the city

of New York in December 2014. A service, which is fairly new in the industry, is growing

exponentially and has increased the number of it’s Prime Members as well as the Amazon

customer base in the following months. However, currently there are over 30,000 products

on the Prime Now store to order and the service is currently available in New York City,

Miami, Baltimore, Dallas, Atlanta, Austin, Chicago, and Indianapolis.

The following steps describe how Amazon Prime Now is different to the traditional e-

commerce delivery system and how it works after the customer places the order.

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Step-1- Order downloaded in OMS: After the customer’s places an order on the Amazon

Prime now App available on Android and the App store the order is then downloaded into the

order management system (OMS). This system is a back-end ERP system that receives all the

orders to the closest warehouse to processes these orders.

Step-2- Order Confirmation: As soon as customers place the order they receive a text

message confirming the order, time of delivery, tracking id which enables them ti track the

order through the app.

Step-3-Inventory Allocation: As soon as the order flows into an OMS, the inventory from

the Warehouses nearest to the customers, at the same time a new number of SKU’s remaining

is updated on the app store after deducting the current order. In case of Prime now customers

can order shipments from amazon as well as third party sellers anywhere within the delivery

area that the service covers.

Step-3-Order Collection: The amazon fulfillment team now collects the SKU’s from the

amazon fulfillment centers and brings it to the packaging station in the warehouse.

Step-4-Order Packaging and label generation: After the collection of the order is done, the

next stage in the process is packaging now in c this case the company also saves 5time, as

there is little or no packaging until the product is highly fragile or a food product. At this time

of packing required documents are printed that needs to be sent along with the shipment

package to the customers such as bills, warranty or any other required document. Since the

orders are delivered within the city all items in a particular order are packed and tagged with

one common label used for tracking the order by the customers.

Step-5-Order Delivery: Since the order has to be delivered within the city and in less than

an hour or two, a dedicated team at the amazon fulfillment centers is responsible to carry out

each individual delivery at the doorsteps and requests the third party seller to do the same,

just like we have been ordering pizza so far.

Conclusion

“At 12:15 p.m., as I put my order together, I could have gotten the delivery for freebetween2and4p.m.Inthenameofjournalism,Isplurgedonthe$7.99togetitwithinan

hour,andtheservicewasprettyimpressive.ItwasrainingoutsideandIstillgotthebagat

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1:19p.m.,fiveminutesbeforethe1:24p.m.deadline.”1ThisiswhatLilyHayapublicistat

slatehastosayabouttheAmazonPrimenow.ItisevidentthatAmazonhasleftnostone

unturnedtomakelivesforitscustomereasierandthefutureofecommercebetter.The

new alternate delivery process of Primehas helped the company get over 1omillion

customers and has solved various problems. This process innovation has helped the

buyers to stay home and orderwhatever theywant from electronics and clothing to

immediatelyrequireditemslikegroceryandmedicines,suchinnovationcancreateonly

loyalandhappycustomers.Tosolvetheproblemthatcouriercompaniestooktimeto

reachthecustomers,Amazonhasestablisheditsownfulfillmentteamtoprocesstimely

andquickdeliveriesandisalsoworkingondronetechnologyalsoknownasPrimeAir.

ThethirdproblemthatamazonPrimenowhassolvedisthatpeoplecangetwhatever

theywanteven if itsnotavailablewithAmazonwith thisamazonno longerneeds to

maintain largewarehouses andmillions of SKU’swithin the company and can collect

anddelivergoodsfrompartnerthirdpartycompanies.Toconclude,theAmazonprime

now service is almost near perfect and improvements can only be made to assure

qualityproducts(Exhibit3)fromthirdpartiesforthisamazonneedstocomeupwitha

planthroughwhichtheycankeepaneyeonthirdpartyassociatesandcustomersdon’t

havetobeunhappyandreturntheproductsclaimingtheydidnotgetwhattheyexactly

asked for creating a situation in which both customers and Amazon stand to loose.

1http://www.slate.com/blogs/moneybox/2014/12/23/amazon_prime_now_same_day_delivery_works_in_central_manhattan.html

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Mainpossiblefailure:F1:TheCompanyrejectstheorderF2:ThecourierboydoesnotcontactsthecustomerfortimelydeliveryF3:Shippingcompanywaitsforbulkordersforoneareai.e.,takestime.F4:thesuppliersdonotsupplyrequiredinventory.ResponsetoSensoryElement:

Legend:

Exhibit1:E-commerce(Amazon)deliveryprocess

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Exhibit2:AmazonPrimeNowdeliveryprocess

Mainpossiblefailure:F1:TheCompanyrejectstheorderF2:ThecourierboydoesnotcontactsthecustomerfortimelydeliveryResponsetoSensoryElement:

Legend:

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Exhibit3:AmazonPrimeNowdeliveryprocess(Recommendation)

Mainpossiblefailure:F1:TheCompanyrejectstheorderResponsetoSensoryElement:

Legend:

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Exhibit4:Amazonfulfillmentcenter

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Exhibit5:InfographicAmazonPrime

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Exhibit6:OrderfulfillmentProcess

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Bibliography

• (Kumar, 2014) https://www.quora.com/How-does-Amazon-Prime-Now-one-

hour-delivery-work

• (newman, 2013)

http://www.slate.com/blogs/moneybox/2014/12/23/amazon_prime_now_same

_day_delivery_works_in_central_manhattan.html

• (Amazon, 2015)

http://www.amazon.com/b/ref=pn_surl_lp/?node=10481056011

• (Honorof, 2015) http://www.tomsguide.com/us/what-is-amazon-prime,news-

18041.html

• (Wikipedia, 2015)https://en.wikipedia.org/wiki/Amazon.com

• (Nikunj, 2014) https://www.quora.com/What-is-the-work-flow-at-Flipkart-after-the-order-is-placed-online

amazon process innovation

Documents

amazon prime service

amazon prime members

usa amazon

amazon web store

prime membership

order fulfillment

amazon instant videos

current order