12 Order Fulfillment Along the Supply Chain

THE RESULTS

In the beginning, Amazon.com’s warehouses were only able to deliver 1 million pieces a day, creating delays during peak periods. Today, the average warehouse can deliver hundreds of thou- sands of pieces a day. During the peak holiday season, their warehouses must handle millions of pieces per day. The current system gives Amazon. com the ability to offer lower prices and stay competitive, especially because the company is becoming a huge online marketplace that sells thousands of items.

To increase efficiency, Amazon.com combines several items into one shipment if they are small enough. Shipping warehouses do not handle returns of unwanted merchandise – the Altrec.com warehouse in Auburn, Washington, handles returns. More recently, Amazon.com created “Pantry,”
a pilot program providing same day delivery of a number of the non-perishable items found in a gro- cery store (e.g., detergent). The program is aimed at Amazon’s Prime members and is designed to compete with Costco and Walmart’s Sam’s Club. The program is described in Barr (2013).
Sources: Barr (2013), Del Rey (2013), Harkness (2013), Manjoo (2012), and services.amazon. com/fulfillment-by-amazon/how-it-works.htm (access April 2014).





LESSONS LEARNED FROM THE CASE
The Amazon.com case illustrates the com- plexity and benefits of the overall order ful- fillment process used by a large e-tailer. This chapter provides a detailed overview of the fulfillment process in EC, focusing on the major problems associated with this EC support service, as well as the solutions used to overcome those problems.

1. ORDER FULFILLMENT AND LOGISTICS:

AN OVERVIEW

Comparatively speaking, taking orders over the Internet may be the easy part of B2C. Fulfilling orders and delivering the ordered items to the cus- tomers’ doors can be the tricky part. For example, as the open case showed, Amazon.com initially started out as a totally virtual company accepting orders and payments but relying on third parties to fulfill and deliver the orders. Eventually, they came to realize that they needed physical warehouses with thousands of employees in order to expedite deliveries and substantially reduce order fulfill- ment costs. In order to understand the importance of order fulfillment and delivery in EC, as well as the complexities and problems associated with each, you first have to have a general understand- ing of these concepts.