7 Lessons from Amazon Supply Chain

Do you really know how Amazon manages its supply chain? In this article, we will explain to you some principles and best practices from the Amazon Supply Chain.

Inside Amazon Supply Chain

As a start-up company in the garage, Amazon has made a giant leap that revolutionized many aspects of overall supply chain management. With more than 130 million stocking-keeping units to manage and millions of transactions to control, this article will show you how they make it.
We've previously covered supply chain issues of the world's leading companies including Amazon in the article "Supply Chain Case Study". Anyway, we feel there is something missing.

We dig deeper and find one interesting article on Forbes named "The Best CEOs -  Amazon's Jeff Bezos". The article provides many examples of how Bezos manages various international business issues and many of them are operations management related. As usual, we extract only the goodies and turn them into this simple infographic,

1. Put yourself in the customer's shoes
At Amazon, they care so much about customers and this is not just something fancy to say. In many internal meetings, Bezos leaves one empty chair next to him and tells people that they should also think on behalf of one important customer who can't manage to be there. Then the word "empty chair" becomes a symbol of customer-service-oriented business practices inside Amazon.

Also, many executives have to attend call center training so they can know customers' feedback, good or bad, firsthand.

2. Don't be distracted by the competition
Many companies focus on benchmarking performance against competitors but this is not the case for Amazon. Bezos believes that the pace of industry change is too fast so it's not good to make a knee-jerk reaction after competitors do something new. What Amazon does is acknowledge what happens but keep focusing on its customer's needs.

3. Keep an eye on the ball
The culture of Metrics is the word used to describe the obsession with performance measurement. They're currently tracking about 500 KPIs and 80% of them are customer-related. KPI is also essential in lean manufacturing and six sigma project management.

4. Go extra mile
Bezos once insisted on using the better quality box so the customer can reuse it. And when Amazon's brand is on every box, it's free publicity. He also pushed many executives at DCs to extend order closing time to 6pm or 7pm, even though this means the over-time cost to Amazon. This is a very unique inventory control practice.

5. Plant seeds and watch them grow
An example of this philosophy is that Amazon invests in many hardware technologies that don't make any short-term gain just to make sure that they build Kindle that people love.

6. Learn to improvise
Amazon asks candidates to make action plans, outside their comfort zone, with the assumption that there will be no budget for such a plan, to test how each candidate reacts to unfamiliar business issues. As mentioned earlier, the pace of industry change is fast so they need people who can think outside the box.

7. Build the dream team
Amazon believes a small work team is more efficient. To determine the right size of each team, they've developed a "rule of thumb". If it needs more than 2 pizzas to feed the team, that team is too big (so I name it "2-Pizza Heuristics").

- The Best CEOs - Amazon's Jeff Bezos (article on Forbes)

- Stone, B. (2013). The everything store: Jeff Bezos and the age of Amazon. Random House.

- Hansen, M. T., Ibarra, H., & Peyer, U. (2010). The best-performing CEOs in the world. Harvard Business Review, 88(1).

- Bezos, J., Kirby, J., & Stewart, T. A. (2007). The institutional yes.

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Last review and update: July 5, 2022
About the Author and Editor:
Ben Benjabutr is the author and editor of Supply Chain Opz. He holds an M.Sc. in Logistics Management with 10+ years of experience. You can contact him via e-mail or Twitter.