Supply chain information management - Essay Example

In the initial stage, distinctive procurement strategy of the company relied on three principles such as, maintain optimal amount of inventories such as books, rely on local wholesalers such as Ingram Book Company and also take help of the selected wholesalers to design and source the electronic catalogue of the book. For example, during late 1990s, Amazon maintained only 5% inventory level of its total order in its relatively small warehouses. Rest of the 95% of orders were sourced after receiving orders from customers.

In such situations, Amazon quickly submits the purchase order to wholesaler for the book title which was not included in its own inventory. After receiving the purchase order from Amazon, wholesaler quickly sent the shipments and the shipment had arrived within 2-3days (Hammond 2005). In later years, when the volume of order had increased, Amazon established tie ups with book publisher to get better discount on shipment (48% on selling price) in contrast to discount rate (41% on selling price) by wholesaler (Hammond 2005). . ater to the growing demand for books, e-books in cost and time efficient manner and another important thing was that, Amazon had realized the potential of online selling after witnessing the success of competitor eBay.

After realizing the potential of selling in white space, Amazon transformed its business model in order to change the service-profit equation and offer superior value proposition to customers. The company included all sorts of easily shippable consumer goods along with books in its service portfolio in order to increase choice for customers and revenue margin by selling these items. Then Amazon started offering commission-based brokerage service to participants in online auction and also included third-party sellers in their value proposition list (Johnson 2010).

Amazon has created a virtual market place in its website, where buyers and sellers can meet and bid for a particular while Amazon earns the brokerage from the participants in the online bidding process. Hence it can be said that, Amazon has transformed itself from direct sales company to a company which is able to provide sales and service in simultaneous manner. During late 2007, Amazon has enhanced the potentiality of its web service platform and offered Lab126 which was basically Kindle e-book reader.

At that time, the concept of e-book was relatively new among customers and players in publishing industry but such obstacles never haltered the growth Lab126 platform. Amazon had created a seamlessly integrated iTunes like online platform for readers to subscribe, read and transact e-books which was widely successful. It is evident from the business model transformation of Amazon that the company never hesitated to take risk to launch innovative and high-margin offerings and created market for