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Company Analysis: Team C2X

History

The company was founded in 1994, spurred by what Bezos called his "regret minimization framework", which he described as his effort to fend off regret for not staking a claim in the gold rush.

The company began as an offline bookstore. While the largest brick-and-mortar bookstores and mail-order catalogs might offer 200,000 titles, an online bookstore could sell far more. Bezos wanted a name for his company that began with "A" so that would appear early in alphabetic order. He began looking through the dictionary and settled on "" because it was a place that was "exotic and different" and it was the river he considered the biggest in the world, as he hoped his company would be. Since 2000, Amazon's logotype is an arrow leading from A to Z, representing that they carry every product from A to Z.

Amazon's initial business plan was unusual. The company did not expect a profit for four to five years. Its "slow" growth provoked stockholder complaints that the company was not reaching profitability fast enough. When the dot-com bubble burst, and many e-companies went out of business, Amazon persevered, and finally turned its first profit in the fourth quarter of 2001: $5 million or 1¢ per share, on revenues of more than $1 billion. The profit, although it was modest, served to demonstrate that the business model could be profitable. In 1999, Time magazine named Bezos the Person of the Year, recognizing the company's success in popularizing . Major Acquisitions

 1998: PlanetAll, a reminder service based in Cambridge, Massachusetts; Junglee, an XML-based startup based in Sunnyvale; Bookpages.co.uk, a UK online retailer, which became Amazon UK on October 15, 1998.  1999: Internet Movie Database (IMDb); , Accept.com, and Exchange.com  2003: Online retailer CD . By 2011, the web site .com was defunct and in use by a different company.  2004: Joyo.com, a Chinese e-commerce .  2005: BookSurge, a company, and .com, an company. CreateSpace.com (formerly CustomFlix), a distributor of on- demand DVDs, based in Scotts Valley, California. CreateSpace has since expanded to include on-demand , CDs, and .  2006: , a retailer of designer clothing and accessories for women, based in Madison, Wisconsin.  2007: dpreview.com, a digital photography review website based in ; Brilliance Audio, the largest independent publisher of audiobooks in the .  2008: .com; Fabric.com; Office Mojo; AbeBooks; ; (including a 40% stake in LibraryThing and whole ownership of BookFinder.com, Gojaba.com, and FillZ); , a casual video game development company.  2009: , an online and apparel retailer , SnapTell, an image matching startup.[  2010: Touchco., , Quidsi, BuyVIP, .  2011: Lovefilm, The , Pushbutton  2012: Kiva Systems

Investment

 2008: , a Ruby-on-Rails platform-as-a-service (PaaS) company.  2010: LivingSocial, a local deal site.

Subsidiaries

 2004: A9.com, a company focused on researching and building innovative technology.]  2004: Lab126, developers of integrated consumer electronics such as the Kindle.  2007: Endless.com, an e-commerce brand focusing on .  2007: Brilliance Audio, the largest independent audio book producer in the U.S.

Merchant partnerships

Until June 30, 2006, typing ToysRUs.com into a browser would bring up Amazon.com's "Toys & Games" tab; however, this relationship was terminated due to a lawsuit. Amazon also hosted and managed the website for Borders bookstores but this ceased in 2008. From 2001 until August 2011, Amazon hosted the retail website for Target. Benefit Cosmetics, another merchant partner of Amazon, has also launched a major E-Commerce platform of their own based on Hybris and arvato systems NA, in the US, EU and China.

Amazon.com operates retail web sites for Sears , bebe Stores, Timex, Marks & Spencer, Mothercare, and Lacoste. For a growing number of enterprise clients, currently including the UK merchants Marks & Spencer, Benefit Cosmetics' UK entity, edeals.com, and Mothercare, Amazon provides a unified multichannel platform where a customer can seamlessly interact with some people that they call the retail website, standalone in-store terminals, or phone-based customer service agents. also powers AOL's Shop@AOL.

On October 18, 2011, Amazon.com announced a partnership with DC Comics for the exclusive digital rights to many popular comics, including Superman, Batman, Green Lantern, The Sandman, and Watchmen. The partnership has caused well-known bookstores like Barnes & Noble to remove these titles from their shelves. These titles will be available for purchase exclusively through Amazon's new Kindle Fire tablet. Recent News

Many Booksellers Shunning Amazon

Amazon inspires anxiety just about everywhere, but its publishing arm is getting pushback from all sorts of booksellers, who are scorning the imprint’s most prominent title, Timothy Ferriss’s “The 4-Hour Chef.” The book is coming out just before Thanksgiving 2012 into a fragmented book-selling landscape that Amazon has done much to create but that eludes its control.

Barnes & Noble, struggling to remain relevant in Amazon’s shadow, has been emphatic that it will not carry its competitor’s books. Other large physical and digital stores seem to be uninterested or even opposed to the book. Many independent stores feel betrayed by Mr. Ferriss, whom they had championed. They will do nothing to help him if it involves helping a company they feel is hellbent on their destruction.

Only a few years ago, culture was delivered in discrete doses. “The 4-Hour Chef” would have been in the chain bookstores by the stacks and in independents by the handful. You wanted a book, you went to the bookstore. Simple.

Now the technology overlords — Amazon, and Apple — are competing among themselves and with other players to control how the culture is consumed. Amazon’s Kindle Fire was introduced last year to carve out some space from Apple’s iPad; since then, Google and have brought out their own tablets.

Amazon Will Collect Sales Tax to Expand Boldly

Amazon is building massive distribution centers near several major cities. This multibillion- dollar building frenzy means Amazon is about to lose perhaps its biggest competitive edge — that it does not charge sales tax on the vast majority of its customers, reports David Streitfeld of .

After negotiations with lawmakers, the company is beginning to collect taxes in California, Texas, Pennsylvania and other states. But Amazon hopes that the warehouses will allow it to provide better service, giving it the ability to upend the retailing industry in an entirely new way.

Amazon will soon be able to cut as much as a day off its two-day shipping times, said , its chief executive, in an interview. This will put the much-rumored same-day delivery — the elusive aspiration of every online merchant — potentially within reach in some metropolitan areas.

“We want fast delivery,” Mr. Bezos said. At a minimum, “we can work on making it the next day.”

Amazon’s delivery of everyday objects needs to be fast enough and cheap enough to wean customers from their local stores. Yet it also must be economically feasible for the retailer, which is investing so heavily in the warehouses that it is barely profitable.

If Amazon can deliver on its ambitions, said Sucharita Mulpuru, an analyst at the research firm Forrester, “it will be the dominant retailer in the decade to come.”

It starts collecting sales tax in California on Saturday. Amazon started collecting taxes in Texas this summer, and in Pennsylvania on Sept. 1. New Jersey’s turn will come next summer, and several other states over the next two years. The company seems to be surrendering on the tax issue mostly in those states where it sees strategic value in new warehouses. Company officials say they hope to see a national sales tax law in place that will supersede state laws.

Wal-Mart Deletes the Kindle

Wal-Mart Stores, the nation’s largest retailer, said Thursday that it was dropping Amazon’s Kindle tablets and e-readers, a sign of how seriously it views Amazon as a competitor in the consumer goods market, report Stephanie Clifford and Julie Bosman on Friday in The New York Times.

Target has already stopped selling Kindles, though other stores, including , Staples and Office Depot, said Thursday that they would continue to carry the devices.

Wal-Mart did not say why it was discontinuing its Kindle sales, but analysts said physical retailers have been worried about customers who browse in stores and then buy from online competitors instead. The newer Kindles are particularly worrisome to retailers because they can be used for e-books, movies, games and potentially anything Amazon sells, thanks to a built-in .

Colin Gillis, a technology analyst for BGC Financial, told The Times that by selling Kindles, Wal-Mart was giving customers a reason to step into the Amazon ecosystem.

At the same time, analysts said, the Kindle line was only marginally profitable for retailers. Brands owned by Amazon.com

What’s common between IMDB, Zappos, Shelfari and Audible.com? Well they aren’t just widely recognized brands but they all have a common owner – Amazon.com. Let’s also add Junglee, Amazon Store in , to this list.

Amazon is more than just an online shopping store now. They offer “infrastructure as as service”, “unlimited storage on demand” () and other web services that power other popular online businesses like Zynga, , Foursquare and . Supply Chain

When Bezos started his venture, he aimed at hassle-free operations. He wanted to offer his customers a wide selection of books, but did not want to spend time and money on opening stores and warehouses and in dealing with the inventory. He however realized that the only way to satisfy customers and at the same timer make sure that Amazon enjoyed the benefits of time and cost efficiency was to maintain its own warehouse. Building warehouses and operating them was a very tough decision for Bezos. Each warehouse cost him around $50 million and in order to get the money, Amazon issued $2 billion as bonds. In 1999, Amazon added six warehouses in Fernley, Nevada; Coffeyville, Kansas; Campbellsville, Kentucky; Lexington, Kentucky; McDonough, Georgia; and Grand Forks, North Dakota. On the whole, Amazon had ten warehouses. Most of these warehouses were set up in states with little or no sales tax

When Bezos started his venture, he aimed at hassle free operations. He wanted to offer his customers a wide selection of books, but did not want to spend time and money on opening stores and warehouses and in dealing with the inventory. He however realized that the only way to satisfy customers and at the same time make sure that Amazon enjoyed the benefits of time and cost efficiency was to maintain its own warehouse. Building warehouses and operating them was a very tough decision for Bezos. Each warehouse cost him around $ 50 million and in order to get the money, Amazon issued $ 2 billion as bonds. In 1999, Amazon added six warehouses in Fernley, Nevada, Coffeyville, Kansas, Campbellsville/ Kentucky, Lexington, Kentucky, McDonough, Georgia and Grand Forks, North Dakota. On the whole Amazon had ten warehouses. In the same year Amazon increased its worldwide warehousing capacity from 300,000 square feet to over five million square feet. Since Amazon ordered books and other products from warehouses only after the customers had agreed to buy them the return rate was only 0.25 percent compared to the return rate of 30 percent in many segments of the online retail industry.

Amazon’s warehouses which was a quarter-mile long yards wide stored millions of books, CDs, toys and hardware. They were very well maintained and completely computerized. In fact the number of lines of code used by Amazon’s warehouses was the same as the number used by its website. Whenever a customer placed an order a series of automated events followed which made inventory management easier.When a customer ordered a book from Amazon his invoice mentioned the title of the book followed by a barcode. This was a code of numbers such as 6-5-4 which indicated the book’s location in the warehouse. Computers sent signals to the workers wireless receivers telling those items had to be picked off the shelves. The workers decided the order in which the items had to be picked and then verified the weight of each product.

These products were kept in a green crate which contained orders of different customers, when this got filled they were placed on conveyor belt and sent to central point. Here the barcodes were matched with the order numbers to find out who would receive each item. Then they were packed and parceled. Most of the orders were shipped either through the United States service or United States parcel service whichever is located nearer. In season of 1999, Amazon was determined not to disappoint any customer who visited its site for his holiday shopping. Accordingly Bezos decided to stock the stores with every possible item that customers were likely to buy. Although this strategy was appreciated’ but Bezos faced a lot of problems.

It was then Bezos realized the importance of Inventory Management and decided to reduce the size of inventories, this was made possible by managing the warehouses efficiently. Amazon made careful decisions about which products to buy from where. Then the company decided to manage distributing channels. An important decision was taken was buying of books, CDs etc. directly from publishers rather than from distributors. They upgraded the software and also tried split shipments. Amazon also tried to cut down its expenses. It decided to outsource some of its routine activities so that it could concentrate better on its core activities. It partnered with other companies for shipping the inventory. So, while the partners shipped the items, Amazon leveraged on its e-commerce expertise. It revamped the layout of its warehouses making it easier for the company to locate and sort customers. By doing this it managed to save all the expenses related to filling and shipping orders. Improved inventory management helped Amazon to get net profit of $ 5 million in the fourth quarter of 2001 after accumulating a deficit of $2.86 billion in seven years since its launch in 1995.

Inventory Outsourcing

Outsourcing is subcontracting a service such as product design or manufacturing, to a third- party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour. Outsourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Drop shipment model

Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in all retail businesses, the retailers make their profit on the difference between the wholesale and retail price.In 2001 Amazon decided to outsource its inventory though it knew that it was a huge risk. When Amazon managed its own inventory it had earned the reputation of providing superior customer service, which was its biggest strength.

Amazon did not stock every offered on its site. It stocked only those items that were popular and frequently purchased. If a book that is not so popular is ordered Amazon requested that item from its distributor who then shipped it to the company. In the company, the items the items were unpacked and then shipped to the respective customers. So basically, Amazon acted as a trans-shipment centre and ensured that the entire process of shipping from the distributor to customer was done very efficiently.

The main distributors of Amazon included Ingram Micro and Cell Star handled cell phone sales while Ingram Micro, a whole sale distributor, handled computers and books. Amazon had external distributors for most of its products except the bestsellers. Further Amazon entered into contract with Ingram Micro Inc. for distribution of desktops, laptops and other computer accessories. Drop shipment model was very successful so Amazon decided to extend this model to all categories too. The major disadvantage of this model was if the customers ordered only a single item at a time the drop shipment model was extremely helpful, but if a single ordered had several items such as a book stocked by Ingram and a game stocked by Amazon, then the procedure was adopted: Ingram sent book to Amazon ,Amazon added the game then forwarded the whole box to the customer. Since almost 35 percent of orders placed at Amazon were of different categories the drop shipment model was not very effective.

In 2001, Bezos came up with the idea of including the products of competing retailers and some used items on their website. Amazon earned almost the same profit selling on commission as it earned on retail. An advantage of this feature was customers could now verify the prices of Amazon’s products vis a vis those of other retailers. So the company did not need to advertise its low price. By 2003Amazon, s warehouse could handle thrice the volume they used to handle in 1999, while the cost of operating them decreased from 20 percent of Amazons revenue to less than 10 percent. In 2003 Amazon decided to slash down its shipping charges. Customers who visited the site were greeted with a pop up window announcing the company’s decision to provide free shipping for those who bought two or more items in any combination from the sites books, music, or video stores. The company also decided to reduce shipping charges.

Though Amazon spent millions of rupees in marketing in order to get new customers it managed to leverage the amount spent because of its lower capital costs. Generally physical bookstores having a wide range of books needed to stock about 160 days worth of inventory. The distributors and publishers had to be paid 45-90 days after the books were bought from them, in this way Amazon used to get a month’s of interest free money

Innovative Inventory Sourcing

In early 2001, Amazon decided to outsource its inventory management though it knew that it was a huge risk. When Amazon managed its own inventory, it had earned the reputation of providing superior customer service, which was its biggest strength. Now, the company wanted to concentrate on its main activities and outsource inventory management in order to earn more profits. However, Amazon was apprehensive that this move would damage the hard-earned reputation of the company. Nevertheless, it decided to go ahead with the decision to outsource its inventory.

Amazon did not stock every item offered on its site. It stocked only those items that were popular and frequently purchased. If a book that was not too popular was ordered, Amazon requested that item from its distributor who then shipped it to the company. In the company, the items were unpacked and then shipped to the respective customers. So, Amazon basically acted as a trans-shipment centre and ensured that the entire process of shipping from the distributor to the customer was done very efficiently

Transportation Hubs - "Injection Points"

Industry expert interviews uncovered that Amazon.com operates a number of transportation hubs that they refer to as injection points. Injection point locations are located in heavily customer concentrated areas. The purpose of these locations is to save on transportation costs. The process begins by consolidating orders in distribution centers and contracting less than truckload (LTL) or truckload (TL) shippers to provide the long-haul transportation from the DC to the transportation hub. Once in the hub, the inbound trailers are unloaded and the packages are then sorted the orders out to smaller carrier partners such as (UPS) or the United States Postal Service (USPS) The idea is that overall transportation costs are lower due to less expensive unit mile costs for LTL and TL carriers when compared to UPS and USPS. LTL or TL transportation is used for the long- haul and parcel carriers are used for "last-mile" delivery.

Amazon’s Multi-Tier Inventory Model

Publishers, manufacturers, vendors, and third-party sellers comprise the third-tier in the Amazon.com multi-tier inventory model. These parties further enable Amazon.com to offer the nearly unlimited selection that they offer. Additionally, products sourced from these entities enable Amazon.com to avoid distributor markups, reduce their dependency on distributors, and improve margins.

Amazon’s Multi-Tier Inventory Model

In this model, Amazon.com IT systems pass information to each tier in the supply chain model. Physical products can then flow from any tier to the customer. Furthermore, partners in second and third tier replenish Amazon.com distribution centers with their inventory.

Distribution & Replenishment Process

Amazon.com replenishes its distribution center inventory through a variety of suppliers. Suppliers for their media product segment are large book distributors such as Ingram Book Distributors, Baker and Taylor, as well as other smaller book distributors. CD and DVD distributors also are utilized as well as other wholesaler partners. Publishers, CD, and DVD manufacturers are also parties that replenish products to Amazon.com distribution centers. To give some perspective regarding the structure of the industry, data from Amazon.com's early stages in 1996-1997 indicate that Amazon.com procured the 200,000 to 400,000 best selling books from wholesalers, and up to 1.5 million additional book titles from 20,000 different publishers (Spector, 2002). Amazon.com utilizes a Sales and Operations (S&OP) planning process to determine forecasts for each product that it stores in its distribution center inventory. Amazon.com keeps track of its inventory position in real-time based on warehouse receipts and shipments. Purchase orders are placed to suppliers based on the forecasted amount needed minus the current inventory on hand in the warehouse (Zeppieri, 2004). A graphical representation of the Amazon.com DC replenishment process is shown below.

The distribution process is initiated by a customer ordering from the Amazon.com website or an affiliate website. Amazon.com's IT systems determine which Amazon.com distribution center to ship the item from or whether to ship the item from a drop shipper. The order sourcing decision is determined by product availability and the desire to minimize transportation costs in fulfillment costs. Drop shippers package items in Amazon.com packaging and deliver it directly to customers. Amazon.com distribution centers can ship items directly to customers or through transportation hubs. Orders are delivered to transportation hubs by Amazon.com contracted LTL or TL carriers. Upon arrival in the hub, packages are sorted and routed to small parcel carriers such as UPS or the US Postal Service for "last-mile" delivery. A graphical depiction of Amazon.com's distribution process is shown in the figure below.

DC Inbound Processes - Receiving, Putaway, and Storage

Amazon.com receives products from its distributors, partners, manufacturers, and publishers. Receiving is typically at the pallet or case level. In some cases, Amazon.com receives mixed cases that include many SKUs. Product is received and routed for putaway to a location type based on its SKU activity profile (see Item Activity and Order Profiling). Items are received and routed directly to prime storage locations or sent to reserve storage. Item types are also taken into account at receiving. If an item is "sortable", it comes in a mixed case with other items and needs to be sorted into unique SKUs before putaway. "Full Case" items arrive as a case of homogeneous products and can be putaway as such. "Non- conveyable" products are too large or awkward to flow smoothly on automated conveyors and thus are routed to unique locations. The diagram below illustrates the inbound distribution processes for Amazon.comn including the inputs to the storage type decision and the different putaway processes. Note that prime storage locations are scaled to indicate their relative size when compared to reserve storage locations.

DC Outbound Processes. Picking, Sorting, Packing, and Shipping

Amazon.com's DC outbound processes support the fulfillment of customer orders placed through Amazon.com or affiliate . Picking, sorting, packing, and shipping constitute the outbound processes of customer fulfillment in Amazon.com distribution center operations. In Amazon.com operations, pickers select products from forward pick locations (prime locations) to start the order fulfillment process. Depending on the item and the volume requested, an item may be picked from library shelving, case flow racks, or pallet racks. Picking accounts for 50% of operating costs in typical warehousing environments. Therefore, picking productivity is generally the highest priority initiative when companies assess warehouse productivity improvements. Picking productivity is defined as the number of units picked divided by the number of labor hours involved in picking. Among the costs associated with picking, traveling to and from picking locations accounts for 55% of labor. For this reason, initiatives to minimize picker travel and improve picking productivity are essential to reducing Amazon.com's fulfillment costs.

Amazon.com uses both full-path picking and zone picking to determine the scope of picker travel. Full-path picking is when a picker can travel to all locations within the pick area to pick items for orders. Zone picking confines the potential travel to a subset of locations within the picking area known as zones. Amazon.com uses single-order, batch, and cluster picking in their operations in an effort to reduce fulfillment costs. Single order, batch, and cluster picking are ways to pick orders. Full-path and zone picking are methods to define the scope of the pick area.

Transportation

Due to its order profile, Amazon.com has relied heavily on small parcel carrier partners to deliver orders to customers. In traditional retail environments, large retailers such as Wal- Mart take advantage of scale through large replenishment orders to stores through their private fleet of trucks. Gaining transportation efficiencies in the internet retail model is difficult due to a large customer base that is highly distributed and the small number of units per order by each customer. However, Amazon.com has determined an innovative way to save on transportation costs through leveraging their scale and service windows. Amazon.com has several transportation hubs located throughout the US that they call "injection points". Amazon.com does not disclose the exact location of these hubs, but it is understood that they exist in heavily customer concentrated areas. These hubs serve as crossdocking facilities to transfer packages from lower cost long-haul carriers to their last- mile delivery partners to save on overall transportation costs.

The process begins in the distribution center where orders are sourced based on their proximity to the customer location to save on transportation costs. Orders are aggregated and released in batches so that there are efficiencies in internal outbound distribution center processes. As mentioned earlier, Amazon.com does not have the opportunity to achieve the scale to justify LTL or TL carriers on a per order basis. However, by aggregating their orders going to a specific customer region, Amazon.com can contract LTL or TL carriers to provide long-haul transportation from the distribution center to the transportation hub. Once the longhaul carrier arrives at the transportation hub, the packages are routed to the appropriate parcel carrier for last mile delivery. In the past, 1000 orders going to the San Francisco Bay area may have had 1000 long-haul deliveries by the US Postal Service, UPS, or other parcel carriers. Now, there is I long-haul delivery, and 1000 last-mile deliveries. One area in which this system provides savings is in zone skipping. UPS segments the country into delivery zones. Rates are incremental based on the number of zones that a package must pass through. Transportation hubs enable Amazon.com to zone skip by using long-haul transportation to inject the packages into the UPS system once they have arrived in the zone of delivery, thus avoiding incremental zone charges.

In order to succeed with this strategy, Amazon.com needs a sufficient scale of customers in an area and a service window that allows for order aggregation. The service window is the amount of days within which Amazon.com promises delivery. Amazon.com offers customers different shipping options for different prices on its website as well as free shipping for most orders over $25. In this way, they provide customers with an incentive to increase the service window. Order aggregation at the DC and longer lead time long-haul transportation both are dependent upon a certain service window to achieve the scale necessary for transportation hubs to succeed.

The transportation hub process is depicted below. The numbered squares represent packages that are pre-routed to customer locations. They are transferred from LTL/TL trucks to parcel carriers in the transportation hub for last-mile delivery.

Recent Happenings in Supply Chain Amazon to Add 18 New Distribution Centers Worldwide in 2012. as It Keeps Investing in Logistics

Amazon.com continues to make major investments in its supply chain, as well as other moves that are changing the face of logistics and retailing in the US and across the world. Retailers, consumer goods manufacturers, and 3PLs need to pay attention.

A key development: Amazon continues to be willing to forgo short-term profits for long-term advantage - and the stock market continues to let CEO Jeff Bezos and the company get away with it. That is making Amazon an increasing formidable competitor, as it builds out a distribution network that will provide it huge advantages down the road.

Revenues grew a healthy 29% in Q2 to just under $13 billion. That will make Amazon something like a $60+ billion retailer in 2012. It had $48 billion in sales in 2012.

That growth rate is actually down a bit from recent years, when Amazon regularly more than 40% growth in each quarter, but as it gets ever bigger that pace is too difficult to maintain.

Growth in was 36% year over year. International growth was up 22%, but that was after accounting for currency fluctuations, which hurt revenue recently as the US dollar continues to strengthen. Without currency swings, international growth was up 28%. Amazon runs web stores in the U.K., , , , China, and .

But what may be most impressive for supply chain professionals is what Amazon is doing with tis distribution network.

According to CFO , Amazon has opened six new "fulfillment centers" in 2012, and will christen at least 12 more before the end of the year, for a total of 18.

"We are looking at potentially opening even more than that," Szkutak said on Amazon's Q2 earnings call.

The sheer numbers of DCs that Amazon will have - more than 40 in the US alone - is going to change market dynamics in the US. This is especially true as the profile of where Amazon places these DCs begins to change.

The vast e-commerce fulfillment network will simply continue to reduce Amazon's shipping costs versus others with much less network density. In fact, in Q2, shipping costs as a percent of sales were down for the first time in three years, which Szkutak said was the result of a "number of factors, but certainly one of them is we are getting closer to customers" though DC expansion.

Second, Amazon's third party e-fulfillment business continues to grow, to the point of almost domination. The advantages the company gains from its incredible DC roll out will also accrue to companies that use Amazon for fulfillment, giving it a huge advantage over other 3PLs. To understand the scope of Amazon's outsourcing business, it said that about 40% of its units shipped so far this year were under third-party arrangements.

Third, Amazon is not only building out an incredible network, it is changing where it places them. In the past, most Amazon DCs were in regions that offered good transportation opportunities for a given area, but were generally outside of major metro markets.

More recently, Amazon has been placing more DC in or near urban areas, such as two fulfillment centers it has recently agreed to build in New Jersey.

Does that presage a potential game-changing same day delivery service in select major metro markets, as has been rumored for some time?

Szkutak downplayed the idea on the conference call, saying "In terms of same day, we don't really see a way to do same day delivery on a broad scale economically." But, he added that "We will continue to work on behalf of customers to try to figure out a way to serve them even better by getting product [to them] faster."

Amazon Supply Fuels Disruptive Force To Industrial Supply Chain

Amazon has launched a new online e-commerce offering — AmazonSupply.com — which is aimed at business, scientific and commercial customers and offers products like abrasives & finishing, cutting tools, fasteners, fleet & vehicle maintenance, hydraulics, pneumatics & plumbing, janitorial & sanitation, lab & scientific, materials, occupational health & safety, office, power & hand tools for sale.

It offers more than 500,000 items and the same shipping terms as its regular customers – free two-day shipping for purchases above $50 and members. It also offers a free 365-day return policy, a dedicated customer service center and lines of credit for businesses.

Amazon Supply originated from Amazon’s acquisition of Small Parts in 2005. Small Parts initially targeted just the medical supply and research industries, but Amazon is clearly aiming much higher now. After disrupting the consumer retail space, it is now targeting the business, industrial, scientific and commercial customers — essentially the supply chain.

Online giant Amazon’s supply chain is second only to Apple’s, according to Gartner’s Supply Chain Top 25 for 2012

Apple, which has taken the top ranking for the past five years, was described as having “a zealous focus on starting with the consumer experience and working back through the design of its supply network”. Amazon was praised for adapting quickly to offer new and unproven revenue streams, such as . It also received high scores for its success in establishing a physical supply chain to produce its electronic tablet range, the Kindle and Kindle Fire.

The report said: “Amazon is a great example of an “orchestrator” that goes beyond simply borrowing and adapting others’ best practices and consistently defies conventional wisdom. “Moving into the media tablet business with the Kindle Fire, Amazon has shifted its model so that nine of its top 10 offerings are now digital content, augmenting its vast physical supply chain.” CSR Activities

Over the past few years Amazon has been roundly criticized for a lack of corporate giving. That criticism has echoed partly because its board of directors includes Patricia Stonesifer, former CEO of the world’s largest charity, the Bill & Melinda Gates Foundation. Regardless, Amazon has been a strong supporter of select causes and become more public about disclosing its charity. Over the past decade, Amazon’s online appeals to its customers have raised more than $35 million in disaster relief funds. The company offers a suite of tools for nonprofits to use to raise donations, generate online-based income and appeal for in-kind contributions. Amazon has also made grants to dozens of writing- and reading-based charities in Washington and around the country. Company employees have performed a wide variety of volunteer services for charities in seven states, according to the company’s website.

Amazon Green & Amazon’s Sustainability Efforts

Amazon Green provides online shoppers a wide selection sustainable options for items commonly bought online. Before buying online, check and see if a greener option exists.

In addition to Amazon Green, Amazon has implemented a series of steps in order to improve overall sustainability in its operations. These include frustration-free packaging, reduced packaging waste, environmentally friendly packaging, and their Earth Kaizens program.

Frustration-Free Packaging

Amazon Frustration-Free Packaging is a multi-year initiative designed to make it easier for customers to liberate products from their packages. Amazon Frustration-Free Packaging eliminates hard plastic “clamshell” cases and those annoying plastic-coated wire ties, commonly used in toy packaging.

Through the Amazon Frustration-Free Packaging Certification initiative, manufacturers can send their packaged products to our labs for free analysis and feedback on how their packaging can become Certified Frustration-Free. The program today offers over 350 best- selling items from leading brands including Mattel, Logitech, Fisher-Price, Garmin and Seventh Generation, as well as Amazon brands like Kindle and AmazonBasics.

In addition to making products easier to open, Frustration-Free Packaging uses 100% recyclable cardboard. The product itself is exactly the same-Amazon has just streamlined the packaging.

Reducing Packaging Waste

Since 2007, Amazon has made significant progress to reduce excess packaging in its shipments to customers and has introduced additional types of recyclable packing materials to protect items while in transit.

Amazon has developed a software program that determines the “right-sized” box for any given item to be shipped to a customer, based on that item’s dimensions and weight. As a result, the number of packages shipped in a wrong-sized box has decreased dramatically, significantly reducing packaging waste and transportation costs. In 2008, Amazon also sent 35% of its larger-sized packages to customers without any additional packaging, further reducing packaging waste and transportation costs.

In 2009, Amazon launched its Packaging Feedback program, which allows customers to provide direct feedback on the packaging of their Amazon.com order and to upload images of their Amazon.com packages. Their feedback will be used to improve product and Amazon packaging. This new feature is available at www.amazon.com/packaging.

Environmentally Friendly Packaging

Most Amazon.com orders are shipped in corrugated containers which on average contain 43% recovered fiber content. Once used, these containers are 100% recyclable for use in the manufacture of other paper products.

In Amazon’s U.S. fulfillment centers that primarily ship larger products such as televisions, kitchen appliances, and other household items, we’ve introduced paper packing materials that are 100% recyclable and are made from 50% recycled content.

The air-filled pillows that are sometimes used to protect items in Amazon shipments are 100% recyclable and non-toxic. If a customer cannot reuse or recycle these cushions, they can be deflated and disposed of. Deflated air cushions take up less than 1% of their inflated volume.

Earth Kaizens

Environmentally conscious Amazonians work together to implement environmental and energy initiatives across all parts of the company. Composed of hundreds of Amazonians, this group is known as “Earth Kaizens,” from the Japanese term meaning “change for the better.” Amazon employees at all levels dive deep into every nook and cranny of a process to identify waste and design alternative solutions that are more energy efficient.

The power of the Earth Kaizens comes from the cumulative impact of many people participating in a large number of focused projects, each delivering reductions in energy consumption and waste. The energy savings from a single Kaizen project may not seem significant, but shared across our global network, they can produce meaningful results. Here is an example:

Lexington, Kentucky Amazonians in our Lexington, Kentucky, fulfillment center analyzed the type of work performed in the bulk-storage area of the facility and learned that although a large portion of this area was not used during the weekend, the power remained on. Additionally, the team took light-level readings and determined that the area had too many lights installed for the type of work that associates were doing. As a result, over 120 lights were permanently shut off, and an additional 34 lights are turned off during the weekend. Their efforts resulted in an annual reduction of over 450,000 kilowatt-hours of power usage for this one facility; that’s enough electricity to power 33 homes in Kentucky for an entire year. Major Competitors