Question

Amazon started as an e-commerce book site and has now become a giant e-commerce retailer with wide range of product offerings including music/movie, toys, electronics, software, and home improvement equipment among others. Amazon's analytics team develops state-ofthe-art analytical solutions (predictive and prescriptive) to maintain customer relations by recommending books based on customer purchase history, sending reminders at holiday time, and permitting customers to review and comment on books. To ensure market share while keeping inventory cost low, Amazon has done an excellent job in “rationalizing” its lines of product offerings. That is, to determine which item to hold as inventory and how many to hold. For unpopular items, it often resorts to third-party vendors or sellers for fulfilling an order. In June 2017, Amazon spent $13.4 billion to acquire the Whole Foods. As reported in The New York Times: “It is a strategic move for Amazon to enter the food and beverage market”. “It also represents a major escalation in the company’s long-running battle with Walmart, the largest grocery retailer in the United States, which has been struggling to play catch-up in internet shopping.” Please read the full story here:

However, Amazon faces new challenges of managing food inventory and food supply chains, a business domain they have not dealt with before. The newly implemented inventorymanagement system called order-to-shelf (OTS) at the Whole Foods is causing some serious issue of “empty shelf” as reported by Business Insider. While the employees acknowledge the reduction of food spoilage and stocking cost, they also describe OTS as a “militaristic” system that crushes morale and leads to many items being out of stock. Please read the full story here:

1. From the supply chain perspective, what are the advantages and disadvantages of e-commerce comparing with the traditional brick-and-mortar store?

2. Discuss and elaborate the new challenges faced by Amazon for managing the Whole Foods’ store inventory and supply chain.

3. What are the possible causes of “empty shelf” by implementing the current OTS? What can Amazon and Whole Foods do to cope with this issue?

Answer 1

Q1.

Advantages :

1. E-commerce allows companies to sell goods to practically anywhere arounf the world and greatly expand its reach to customers .

2. E-commerce gives easier access to customers to a lot of information for the products they are buying compared to regular stores.

3. Online stores are open all time 24 × 7 and accept and process orders automatically without much need of human labour .

Disadvantages :

1. Many products get damaged in transit which causes loss to the company , and also causes delay in delivery of the product.

2. Product reviews given by customers gives less control on product marketing for companies , negative reviews affect the sales.

3. The act of adding product to cart and proceeding to checkout is lacking human touch which is less appealing to customers.

Q2.

New challenges faced by amazon would be :

1. Revenue dip - Amazon will likely sacrifice some margin by lowering prices which would help to earn back its customers.

2. Customers attraction - amazon could overcome by reminding customers of their high standards for freshness and winning them over by delivering it.

3. Margin - whole foods margin are larger and can better absorb delivery costs . And the option of curb side pickup can make online ordering more effective.

Q.3.

Possible causes of empty shelf would be that the time taken to reproduce the products are high because of which the shelfs get empty failing to meet the demand and causing dissatisfaction.

To cope up with this issue , amazon had come up with the idea that the products now arrive in trucks , then go directly to store shelves.

The change helps slash costs, save precious store space , and reduce waste. .