Operations Planning and Control

KJ SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

Operations Planning and Control Report on

Amazon Warehouse

Submitted to
Prof. Pradip Mitra

Piyush Bhanarkar (106)

Shashank Jain (119)
Sravya Jayanti ( )
Sarthak Shukla (157)
Manav rizwani (149)

1|Page
Operations Planning and Control

Table of Contents
1. Amazon choice of locations
1.1. Capacity of the warehouse
2. Acreage
3. Layout
4. Major Machinery and equipment required in a warehouse
4.1. Warehouse management system (WMS)
4.2. Storage racks
4.3. Material handling equipment
4.4. Conveyor system
4.5. Vertical elevator and Lifts
4.6. Vertical loading system for trucks
4.7. Barcode Scanners
4.8. X-ray scanner and Packaging machine
5. Different functional systems in warehouse
6. Evaluating Warehouse performance using Key parameters
7. Benchmarking Warehouse Performance
8. Internet-based Data Envelopment Analysis for Warehousing (iDEAs-W 1.0)
8.1. Amazon warehouse benchmarking using DEA
9. Industry best practices
9.1. Slotting and Storage Strategies
9.2. Enabling Cross-Docking
10. Advanced technologies to be used in the fulfillment center
10.1. Warehouse Management System
10.2. Order Fulfillment Optimization Technology
10.2.1. Pick-by-Light
10.2.2. Put-to-Light Systems
10.3. Machine Vision and Vision sensors
10.4. Warehouse Robotics Technology
11. Organogram For AMAZON

12. How this works?

13. Short-term and Long-term fulfilment

2|Page
Operations Planning and Control

1. Amazon choice of locations

Depending upon the sales of Amazon, four locations were short listed as follows:

Maharashtra, Hyderabad, Uttar Pradesh and Madhya Pradesh

An analysis was run on excel to give a ranking to the four locations suggested above:
Location FC+VC Rank Weights Value Existing Space Rank Weights Value
Maharashtra 250000 4 5 20 Maharashtra 4 4 16
Hyderabad 100000 1 5 5 Hyderabad 1 4 4
Madhya Pradesh 150000 2 5 10 Madhya Pradesh 2 4 8
Uttar Pradesh 200000 3 5 15 Uttar Pradesh 3 4 12

Potential sites Maharashtra Hyderabad Madhya Pradesh Uttar Pradesh Final Ranking Rank
Environment 2 3 1 3 Maharashtra 45 4
Supplier Proximity 3 4 1 2 Hyderabad 12 1
Retail outlet Proximity 2 3 4 3 Madhya Pradesh 24 2
Transportation Costs 3 4 5 2 Uttar Pradesh 36 3
10 14 11 10

Rank 3 1 2 3 Priorities:
1 Cost
Weights 3 3 3 3 2 Availability of existing space
3 Overall conditions
Value 9 3 6 9

It was deduced that Hyderabad is the best location to setup our new warehouse.

1.1. Capacity of the warehouse

Assumptions:

All FC are handling the load equally

Orders/Day:200000 (Amazon.in)

FC catering to regular products:20

Hyderabad Facility Capacity:250000 sq.ft.

Maximum number of orders handled by Hyderabad FC: 20000

Number of orders being handled currently by Hyderabad FC: 10000

3|Page
Operations Planning and Control

Normal Day % Growth in Sales FC needed equivalent to current hyd capacity

2017 12500 25 0.625
2018 15625 25 0.78125
2019 19531.25 25 0.9765625
2020 24414.0625 25 1.220703125
2021 29296.875 20 1.46484375
2022 35156.25 20 1.7578125
2023 40429.6875 15 2.021484375
2024 46494.14063 15 2.324707031
2025 53468.26172 15 2.673413086

It becomes clear that by 2020,we will not be able to accommodate inventory within the
Hyderabad facility and will be requiring an extra warehouse.

Also, by 2025, we would be requiring a total of 3 warehouses at Hyderabad with each facility
being equal to the current facility of 2.5 lakh sq. ft.

2. Acreage

Hence it is recommended to make a warehouse of at least 5 lakh sq.ft. at Hyderabad so that the
total capacity at Hyderabad becomes 7.5 lakh sq.ft.

3. Layout

4|Page
Operations Planning and Control

This is the area where inbound logistics is supported. The trucks reach with the items in
corrugated box reach one end of the warehouse which directly opens up to the warehouse.
Being India, the process after this is labor intensive.

Firstly, items are sampled depending upon the cost of the items. For items beyond a certain
cost, all the items in the box are verified for quality.

Then the items are placed in the racks which are not more than 6 ft. in height so that it is easy
pick up.

Then depending upon the order, items are picked up and processed through the other part of
the warehouse.

4. Major Machinery and equipment required in a warehouse

4.1. Warehouse management system (WMS)

WMS software is the backbone of warehouse operations. They are majorly responsible
for forecasting and planning of operations, management of inward and outward
consignment, product specifications, location etc. They plan total movement of

5|Page
Operations Planning and Control

material, man and equipment. WMS perform the job right from planning, assigning,
monitoring, correcting and concluding the final status of a consignment.
4.2. Storage racks

Storage racks are the one who stores the goods in a warehouse. They are of different types
depending upon the type of goods to be stored, turnaround time, material handling equipment
available, size and share of goods etc. Some of the storage types which would be used in our
warehouse are as below:

• Flow racks : For small goods with high turnaround time

• Record storage racks: High end expensive goods like watches, jewelry, electronic gadgets
etc.
• Pallet Racks: For medium size regular goods which require more visibility
• Bulk storage racks: For heavy and slow moving goods and require stackers to handle goods.

Flow Racks Record Storage Racks

Pallet Racks Bulk storage Rack

6|Page
Operations Planning and Control

4.3. Material handling equipment

• Bin carts: Used for small and light weight goods, generally pushed by picker around
manually. Very handy to capture variety of goods.
• Hand pallet truck: Manual pallet truck to move light weight pallets around. Generally used
at inward and outward stations to unload and load goods from trucks.
• Electric stacker: Used for medium and heavy goods movement, stacking at heights etc.
Generally used for short distance movement
• Electric Forklift: Used for medium and heavy goods movement, stacking at heights etc.
Generally used for long distance movement of goods.

Bin Carts Hand pallet truck

Electric Staker Electric fork lift

7|Page
Operations Planning and Control

4.4. Conveyor system

• Roller conveyor: Roller conveyors are simple conveyors used to move light weight goods
on a single floor across long distances.
• Spiral elevator: These are like spiral slides which are used to move goods between floors
using simple gravity.
• Sorting and Diverter conveyor: These are high tech conveyor system used to sort goods
according to location, logistic provider, size etc. Highly automated and required network of
sensors and actuators.
• Pallet conveyor: Used for movement of heavy duty pallets containing big consignments and
loading / unloading pallets from forklift.

4.5. Vertical elevator and Lifts: These are medium to heavy duty lift used for movement of
goods across floors.

4.6. Vertical loading system for trucks: These are portable conveyor belts designed to upload
packaged goods directly into trucks to be delivered to customers.

General Warehouse flow

8|Page
Operations Planning and Control

4.7. Barcode Scanners

• Handheld: The most used electronic gadget used in the warehouse to scan barcode on
goods as well as storage location. The screen on the scanner shows orders to be picked up
and route to be followed.
• Conveyor based: Conveyor based barcode scanner scan goods while on the move
automatically. Mostly used after the packaging station and before sorting station.

Hand held Conveyor based

4.8. X-ray scanner and Packaging machine

X-Ray scanner are used extensively now a days as a Poka-Yoke measure to check if the
packaged good is not going empty.

Carton packaging machine are also used in some of the warehouses to facilitate fast packaging
of cartons and directly loading packaged goods on the sorting conveyor.

9|Page
Operations Planning and Control

5. Different functional systems in warehouse

A warehouse consists of different functional system responsible for performing specific work
just like departments in a manufacturing firm. Amongst these main functional system, some are
considered for outsourcing mainly to focus on the core business of the firm.

Below are some of the core functions:

1. Forecasting and planning department: Department responsible for forecasting of demand

and planning supply accordingly. Very technology intensive and core to Amazon business.
Therefore they have developed in-house capabilities to be applied across globe to maintain
competitive edge.
2. System operators: Operators taking care of the execution of instruction coming from
planning department. They track and monitor daily activity and take required action for
deviations. Training is provided to these operators so as to attain operational efficiency.
3. Picker, sorter and packer: Ground manual force responsible for picking of goods from
location, sorting and packaging. They simply follow instructions received from system
operators. All manual operators are given training to understand Amazon process well and
hence kept in the company scope.
4. Inbound and Outbound logistics: Logistics is majorly outsourced to established local
supplier as this is a capital intensive work and requires know how of the region.
5. Loading and unloading doc labor: Contract labor is hired for labor intensive job like loading
and unloading of consignments from or to truck. Some of these may also be taken care by
logistic providers depending on the contract terms.
6. Security services: Mostly outsourced as this does not directly contribute to the business
goals of Amazon.
7. Facility Management (Equipment maintenance, Housekeeping, landscape maintenance,
Canteen): All outsourced as this does not directly add value to the main business focus of
customer centric approach.

10 | P a g e
Operations Planning and Control

Here, a computerized system allocates the packaging required, the logistics provider etc.

There are trucks at the outbound area for each of the logistics carrier.

11 | P a g e
Operations Planning and Control

6. Evaluating Warehouse performance using Key parameters

TOP 10 WAREHOUSE OPERATIONAL METRICS

12 | P a g e
Operations Planning and Control

Operational metrics enable DCs to identify latent inefficiencies and take better control of
operations for improved performance when handling the peaks and daily challenges of
distribution and fulfillment. Warehousing Education and Research Council (WERC) DC Measures
Report and combines key metrics with best-practice insight for managing assets in away to
elevate warehouse operations to best-in-class status.

7. Benchmarking Warehouse Performance

Benchmarking seeks to improve any given business process by exploiting "best practices" rather
than merely measuring the best performance. Best practices are the cause of best
performance. Studying best practices provides the greatest opportunity for gaining a strategic,
operational, and financial advantage.”

8. Internet-based Data Envelopment Analysis for Warehousing (iDEAs-W 1.0)

Data envelopment analysis (DEA) is a relatively new approach to evaluating system

performance. DEA enables one warehouse to be compared to a cohort of "peer" warehouses,
not based on averages, but based on "best performance." DEA has been implemented in an
internet-based tool, iDEAs-W. iDEAs-W allows warehouse managers to compare their
warehouse operations to a large set of other warehouses. iDEAs-W requires only a modest data
input effort, and provides a "system efficiency" score. Analysis of the data for these 150
warehouses reveals that, for almost every segment of the warehousing industry, fewer than
20% to 30% of the warehouses are "efficient." For the vast majority of warehouses, it appears
there are significant opportunities for improvement in operational efficiency.

DEA (data envelopment analysis) is a way to assess warehouse performance that overcomes
the limitations of single factor metrics, by considering all the relevant resource inputs and
production outputs simultaneously.

In the context of warehouse performance assessment, DEA would allow a particular warehouse
to be compared to a large set of other warehouses. DEA would construct a hypothetical

13 | P a g e
Operations Planning and Control

composite warehouse from the input and output data for all other warehouses, and this
composite warehouse would be compared to the candidate warehouse. The composite would
be constructed in such a way that it produces at least as much output as the candidate
warehouse, but uses the minimum possible resources. In this sense, it would be a hypothetical
"best practices" warehouse.

The DEA "score" for the candidate warehouse would be reported as a percentage. Suppose the
score was 75%. The interpretation would be that the composite warehouse used no more than
75% of any single resource used by the candidate warehouse. In other words, based on the
"best practices" composite warehouse, it could be argued the candidate warehouse could
reduce its resource usage by 25%.

An important requirement of DEA is that all the warehouses compared should be "similar
enough" so that they are comparable. Also it is recommended that at least three or four times
as many warehouses should be in the database as there are individual inputs and outputs in the
DEA model.

iDEAs-W (Internet-based Data Envelopment Analysis for Warehousing) implements DEA to

permit the self-assessment or benchmarking of individual warehouses using internet
technology. With a standard web browser, a prospective user connects to the iDEAs-W website,
registers and creates a password, then provides a relatively small amount of data. Once the
data have been entered, iDEAs-W computes the DEA score and reports it back to the user. The
entire process of entering data takes from 15 to 45 minutes, depending on the proficiency of
the user. Computing the DEA score requires only a few seconds of server time, and the
response time to the user is usually less than one minute, depending on network traffic. iDEAs-
W provides capability for "what-if" analyses by the user, by modifying the resource and output
values to see the impact on DEA score..

14 | P a g e
Operations Planning and Control

8.1. DEA Model Inputs and Outputs

Resource Inputs

• Total labor hours

• Warehouse area
• Equipment replacement cost

Production Outputs

• Lines shipped
• Accumulation
• Storage

8.2. Amazon warehouse benchmarking using DEA

Using solver function for formulating linear programming model in excel by minimizing
objective function E and taking input data of respective warehouse for forming input and
output constraint we compare E value. If E value for respective warehouse is less than 1 then it
implies that warehouse is inefficient as compared to others and individual weights indicate the
contribution of warehouses to composite performance. The particular inefficient warehouse
needs to adopt best practices from other ware houses. If E value is equal to 1 then the
particular warehouse is efficient
Data for amazon warehouse is as follows

15 | P a g e
Operations Planning and Control

Inputs output
labour capital annual pick up
Warehouse (in 1000 (in million
location hrs) $) (in millions)
Gurgaon 100 1 1
Hyderabad 100 2 2
Banglore 50 0.25 0.5

Warehouse Gurgaon Hyderabad Banglore

inputs
labour 100 100 50
capital 1 2 0.25

Output
annual pick up 1 2 0.5

Benchmarking Banglore Warehouse

Objective is to check if banglore Warehouse is efficient

Using data for banglore

labour 50
capital 0.25
annual pick up 0.5

constraints
sum of weights 1 = 1
labor 50 <= 50
capital 0.25 <= 0.25
annual pick up 0.5 >= 0.5

16 | P a g e
Operations Planning and Control

lines

minimize E 1
weights Wa Wb Wc
0.00 0.00 1.00

Conclusion
As E value is equal to 1 implies Banglore warehouse is efficient

Benchmarking Gurgaon Warehouse

Objective is to check if Gurgaon Warehouse is efficient

Using Gurgaon data

Labour 100
Capital 1
annual pick up 1

17 | P a g e
Operations Planning and Control

constraints
sum of weights 1 = 1
labor 66.6667 <= 83.3333
capital 0.83333 <= 0.83333
annual pick up
lines 1 >= 1

minimize E 0.83333333

weights Wa Wb Wc
0.00 0.33 0.67

Conclusion
As E value is less than 1 implies Gurgaon warehouse is not efficient. It needs to adopt best
practices of Banglore warehouse as its weight obtained is highest

Benchmarking Hyderabad Warehouse

Objective is to check if Hyderabad Warehouse is efficient

using Hyderabad data

labour 100
capital 2
annual pick up 2

constraints
sum of weights 1 = 1
labor 100 <= 100
capital 2 <= 2

18 | P a g e
Operations Planning and Control

annual pick up
lines 2 >= 2

minimize E 1

weights Wa Wb Wc
0.00 1.00 0.00

Conclusion
As E value is equal to 1 implies Hyderabad warehouse is efficient

9. Industry best practices

To ensure the upcoming facility to be best among existing plants and systems to put right in
place right from start to ensure pant maintains its outstanding performance and sets
benchmark for other warehouses in industry it needs to adopt following emerging best
practices that support fleet optimization which includes

• Implementing slotting and storage strategies

• Enabling cross-docking

9.1. Slotting and Storage Strategies

Growing SKU counts and order demand complicate space and efficiency. To support the
increasing complexity, DCs must maintain the following:
• Larger picking footprint
• Multiple pick zones and vehicles
• Split locations and undersized slots
• Reduced inventory in the pick slot

19 | P a g e
Operations Planning and Control

Each has the potential to increase time and cost, while decreasing efficiency and productivity.
Operations must avoid common challenges like congestion in shipping, receiving, aisles and
storage locations to maintain productivity. DCs can optimize equipment, storage and slotting
plans by conducting a slotting analysis to determine storage size and location for each item,
ultimately increasing capacity. Enlisting the right equipment depends on factors such as speed,
dimensions and vertical rise.

9.2. Enabling Cross-Docking

Cross-docking is the practice of redirecting incoming merchandise from receiving directly out to
shipping, without spending time in storage. A warehouse management system (WMS) enables
cross-docking by providing tighter control and greater visibility of inventory to allow goods to
move more quickly through a facility, helping operations:

• Reduce inventory levels

• Anticipate receipts, customer orders and material movements
• Make more efficient use of warehouse storage capacity

Achieving best-in-class performance requires both the commitment and resources for
continuous improvement. Top DCs strive to constantly improve velocity and accuracy, while
fostering a culture of identifying and removing inefficiencies.

10. Advanced technologies to be used in the fulfillment center

When it comes to warehouse management, constant evaluation and adoption of crucial

technologies is critical to improve profitability and stay competitive. Today, warehouse
managers have a wide array of technologies to choose from as they strive to reduce costs,
improve efficiency and streamline operations. They must ensure that goods, materials and
products flow effortlessly by optimizing their warehouse operations through the use of
warehouse technologies. Given below are some of the technologies that can be used in our
Amazon fulfillment center.

20 | P a g e
Operations Planning and Control

10.1. Warehouse Management System

As supplies move through the warehouse/distribution center, managers must track inventory
and ensure that products are picked and put away in a productive and expedient manner.
Warehouse management systems (WMS) help users improve the efficiency of these inventory
control operations

The core functionality of most warehouse management systems help warehouse managers and
workers guide inventory through receiving, putaway, picking, packing and shipping
Another aspect of WMS is its ability to release order requirements in much smaller increments
to achieve a more productive, continuous flow of work.

According to analyst firm Gartner, WMS is in use by more than 80% of the Distribution centers
in the U.S. market, making it a mature system category. What’s more, the typical WMS lifespan
can be 15 years or more

Evaluating WMS Software

Since the whole point of warehouse software is to reduce spending, buyers should focus first
and foremost on the total cost of ownership. Also the type of WMS depends on the type of
business and warehouse.

21 | P a g e
Operations Planning and Control

10.2. Order Fulfillment Optimization Technology

Different warehouse technology solutions are available to help maximize order picking
productivity and boost accuracy. There are two main solutions: Pick-by-Light and Put-by-Light.
These technologies help automate warehouse processes and offer a more efficient and lower
cost solution over manual picking methods.

10.2.1. Pick-by-Light
Light displays direct operators to specific stock locations

Pick-by-Light systems, also called Pick-to-Light systems, use light displays to direct operators to
specific stock locations. Each product location can have an individual numeric or alphanumeric
display with a light, an acknowledgement button, and a digital readout for indicating quantity.

In Pick-by-Light system, the picking sequence starts at the beginning of a zone where the
operator scans a bar coded address label attached to the shipping carton. The display tells the
operator which products to pick and how many of each. The operator confirms picks via
acknowledgement buttons.

Benefits of Pick-to-Light Systems

1. Increased picking productivity
2. Better accountability

22 | P a g e
Operations Planning and Control

3. Real-time product or order sorting

4. Fewer errors
These type of technologies are also being used by retail giants such as Wal-Mart and others.
SVP of information systems, Tandy Brands Acc said that after installation of pick to light systems
in their warehouse, they were able to reduce errors from .32% to .0013% and savings of about
$81000 a year.

10.2.2. Put-to-Light Systems

Light displays guide the operator to put stock in an order

In Put-to-Light systems, sometimes called Put-by-Light systems, light displays instruct the
operator where and how to allocate stock to orders, allowing efficient picking from bulk stock.
The operator scans each product and flashing light displays at each location indicate which
containers require that product and how many items to put. Confirmed put results are updated
to the system in real time for host system updates.

Typical businesses using a put system include retailers of general merchandise, apparel,
grocery, convenience foods, sporting goods, and personal care items.

23 | P a g e
Operations Planning and Control

Benefits of Put-to-Light Systems

1. High-speed order sorting capability
2. Lower cost operation
3. Ideal for smaller but consistent daily orders
4. Requires less floor space

10.3. Machine Vision and Vision sensors

Machine vision systems are not only tracking cartons through the maze of conveyance and
sortation systems, but they automatically determine volume and weight without interrupting
the flow of parcels.. Machine vision can be integrated with robotic systems and high speed
automation for barcode reading, volumetric scanning, package inspection, natural feature
based navigation, and 3D guided robotic palletizing. The speed of the conveyer belt can be as
fast as 4.5mt/sec.

Vitronics is a company which is a vendor for providing and installing machine vision in
warehouses. These machine visions can scan Address, Item and serial number, Quantities,
Reason and returns, Tracking codes. Some advance visions can also do 3D volume
measurements and contour inspection and recognize defects. They can also help in loading
optimization.

DHL and UPS have been extensively using this technology in their warehouse operations.

Machine Vision technology Vision sensors

24 | P a g e
Operations Planning and Control

10.4. Warehouse Robotics Technology

Leading-edge manufacturers are partnering with providers of warehouse management systems

to create smart robots that help manage the movement, storage and sorting of warehouse
inventory

Amazon Kiwa Robots

Amazon bought a robotics company called Kiva Systems in 2012 for $775 million (£632 million).
Kiva's robots automate the picking and packing process at large warehouses in a way that
stands to help Amazon become more efficient. The robots - 16 inches tall and almost 145kg -
can run at 5mph and haul packages weighing up to 317kg.

Amazon has now 45000 robots working with people in their warehouses. Kiva robots have cut
operating expenses by about 20% that would translate to roughly $22 million in cost savings
for each fulfillment center. Amazon uses Kiva robots in only 13 of its fulfillment centers
currently.

Implementation of the right technologies will be the key to the smooth operations of
warehouses and supply chains.

25 | P a g e
Operations Planning and Control

11. Organogram For AMAZON

COO

Production Investment Marketing Technical

Department Department Department Department

Production Research
Promotion Product Design
planning Department

Planning Research and

Technical design PR
Department Development

Engineering
Production Market Analysis Technical Audit
Department

QA Manager Technical Service

Maintenance Customer Service

26 | P a g e
Operations Planning and Control

12. How this works?

The warehouse flow chart:

E-Commerce service based manufacturing techniques must not only aim at high-quality,
minimized costs and productivity oriented services but also react and respond effectively to
market based conditions and consumer requirements. The three major considerations are:

1. Maintaining design
2. Manufacturing agility
3. Working on extended PD (Product Development)

27 | P a g e
Operations Planning and Control

Amazon has recently opened 7 new fulfilment centres in India in a bid, targeting sales of high
priced products like furniture, television and refrigerator.

Amazon now has 34 warehouses across states which crosses its arch-rival-Flipkart. These 7
warehouses along with two old warehouses will function exclusively for large appliances and
furniture. These require online retailers to build on independent logistics based network unlike
the ones they use for the delivery of smaller products like mobiles, books etc.

Also, to boost this segment, Amazon uses no-cost service and product exchange schemes. The
firm is also increasing its product assortment and signing up exclusive tie-ups with brands.
Usually, the large appliances contribute to only 10% sales in the total of online retail in India.
However, Amazon seems to have an increase of nearly 200% in gross sales of large appliances
over the past year.

It recently opened largest warehouse in Hyderabad.

28 | P a g e
Operations Planning and Control

Spread over 280,000 square feet, the facility has come up in Mahabubnagar district, about
60km from Hyderabad.
This has taken to 11 Amazon's FCs in eight states, covering one million square feet of space with
a storage capacity of over 2.5 million cubic metres. This new facility came up with large
investments and is now set to help several SMEs to gain access to and service the customers
across the county under low operating costs.

The logistics in Amazon is considered to be highly efficient in every aspect. It focuses on

streamlining the methods. They have tie-ups i.e., 3PL with Red Prairie and Transplace. The
software used is WMS or TMS software which keeps a continuous track of product conditions,
i.e., temperature, weight, delivery date, availability, location etc. It prioritizes as per the
following:

1. Making everything portable: So the automation can take care of movements and
motion within the layout
2. Keep it simple: no differentiation across any of the warehouses except for the size and
numbers.

In Amazon, all the manufacturing based processes are absolutely customer oriented.

The procedures start with the Customers and work backwards. This process places the
customer at the centre and drives simplicity and clarity throughout the process.

The outline that depicts the above Organisational chart includes the following:

1. Starts with a press release: This press release describes the purpose of the product,
features and benefits. This gives the customer the basic idea on how Amazon perceives
the product as per the discussions internally
2. Prepare a document on FAQs: This includes the basic and general questions that
majority of customers usually have
3. Define customer experience:
a. For products with user interface: mock-ups for different screens the customer
uses
b. For web services: include writing of use cases and include code snippets, which
describe ways of people using the products

29 | P a g e
Operations Planning and Control

This minimizes the front-end time i.e., the cycle time for developing a concept to delivering the
product (concept-to-delivery) is significantly reduced because the team and peripheral
stakeholders agree earlier rather than later-on what the product would look like in the end.
Moreover, because of the bias-for-action core value, people naturally want to produce, rather
than have long, drawn-out discussions: at the end, people want working code, manifested in a
store that is launched and adding value to the top-line.

13. Short-term and Long-term fulfilment

The reason why Amazon is currently observed to have less returns while selling so much is
because it is planning on long term benefits. The main motto is to strengthen the
manufacturing base. It is currently working on opening 17 new fulfilment centres which handle
airport-hangar size storage and shipping facilities this year and cutting on prices aggressively.
The profit margin is likely to be zero for the fourth quarter.

Amazon believes that, even though cutting on prices offer less or no return, it creates a virtuous
cycle that leads over the long term to a much larger dollar amount of free cash flow, and
thereby to a much more valuable Amazon.com.

“If everything you do needs to work on a three-year time horizon, then you’re competing
against a lot of people,” Mr. Bezos told reporter. “But if you’re willing to invest on a seven-
year time horizon, you’re now competing against a fraction of those people, because very few
companies are willing to do that. Just by lengthening the time horizon, you can engage in
endeavors that you could never otherwise pursue. At Amazon we like things to work in five to
seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn.”

The long-term growth holds onto two major benefits for Amazon:

1. The similar type of economies of scale enjoyed by that of Walmart.

2. Eliminating and weakening the effect of competitors

30 | P a g e
Operations Planning and Control

References

1. insights.samsung.com

2. newsroom.cisco.com

3. ackagingrevolution.net

4. www.softwareadvice.com

5. Trans world Entertainment case study

6. www.businessinsider.in

7. www.transport-exhibitions.com

8. dreamorbit.com

9. The Hillman Group case study

10. www.visiononline.org

31 | P a g e