12 Order Fulfillment Along the Supply Chain

THE SOLUTION

Amazon.com decided to change its business model and handle its own inventory and logistics. Furthermore, for a fee the company provides logistics services to any seller even its competi- tors. The company spent billions of dollars to construct their own warehouses around the coun- try and became a world-class leader in ware- house, warehouse automation, packaging, and inventory management. For description see Harkness (2013).

How is Amazon.com able to efficiently fulfill many millions of orders every month?

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  Step 1. When you place an order at Amazon. com and designate a destination, the com- puter program knows from where it is going to be shipped. It is usually shipped from Amazon’s fulfillment center, or from the sell- ers’ locations. Sellers have an option to ship their merchandise to Amazon.com for stor- age and processing. Amazon lists the prod- ucts in its online catalog and may advertise the product(s). When an order arrives, a com- puter program will route the order to where it will be fulfilled. Amazon.com has dozens of distribution centers. In general a typical Amazon.com distribution center operates in the follow way:
  
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  Step 2. All orders received are routed elec- tronically by the dispatcher to specific pickers for fulfillment.
  
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  Step 3. The items (such as books, games, and CDs) are stocked in the warehouse in bins. Each bin is equipped with a red light. When an item in the bin needs to be picked up, the red light turns on. Pickers then pick up the items from the bins with red lights then turn off the light.
  
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  Step 4. Each picked item is placed in a basket with a barcode designating the order number. The baskets are placed on a 10-mile long winding conveyor belt in the warehouse. Each basket is directed automatically to a specific destination point guided by barcode readers.
  
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  Step 5. Each full basket is checked to assure that the barcodes are matched with a specific order. Then the items are moved to appropri- ate chutes, where they slide into delivery boxes. The system arranges for multiple items to reach this same box if there are several items on one order.
  
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