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Modern Inventory Best PracticesResearch Paper

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Operations Management

The author of this report has been asked to select two service or manufacturing organizations and answer a short series of questions about those two companies and their operations management practices. The questions that will be answered to will include their types of inventories and how they manage them, the goods and service design concepts that are integrated into the practices, an evaluation of the role that inventory plays in the company's performance/operational efficiency/customer satisfaction, a compare/contrast of four different inventory layouts that commonly exist with each company, two metrics that can be used to assess and measure supply chain performance and at least several ways that inventory management can be improved even further by both companies. While Apple and Amazon have their stumbles here and there, there overall inventory and other operations management practices are top notch when it comes to countries both in the United States and around the rest of the world.


When it comes to Amazon, the inventory of the company is decidedly mixed. Indeed, there are roughly three levels of inventory when it comes to Amazon and its networks. First, there are the items and services that Amazon sells directly. These items include digital software downloads and many tangible items like televisions and game consoles. The second type would be the vendors that partner directly and very deeply with Amazon to deliver their famous "Prime Delivery" standard even while the items are actually being sold directly from a third party to the buyer via a purchase on the Amazon website. Finally, there are those that sell new or used items that are identical to what Amazon is selling itself. While it may be counterintuitive to some for Amazon to allow this, Amazon comes out nicely as they get a cut of the sale price (much like eBay) so they still get their cut even if they are not directly involved in the transaction other than the website. They really only need to intervene if the seller does not hold up their end of the bargain. Even in that case, Amazon does not pay the price ... the bad seller does. Apple is similar to Amazon but they really only have two main types of inventories and they very much mirror Amazon in this regard. Indeed, Apple has a "digital" inventory in the form of music, movies and other content that they sell on their iTunes portal as well as the applications for iPhones and their other products. Also like Amazon, they sell physical goods, mostly in the form of consumer electronics. These include computers, MP3 players, the iPhone, the iPads and the accessories for all of the above (Apple, 2015; Amazon, 2015).

For both of the companies involved, there is really a two-tier structure for how they serve their clients. Those clients that know what they want and know their way around the Apple or Amazon websites (or stores in the case of Apple ... although Amazon is starting to open their own stores), people can buy what they want with little to no interaction with another human. They pick their item (digital or tangible), pay for it and it's delivered digitally or via shipping methods like UPS, FedEx or the USPS. For situations or people that require or call for human intervention, both sites allow for human contact in person, on the phone or via chat/email. In short, there are people on standby that can assist those that need help for whatever reason but the genius and design of the websites and portals involved are what make everything work. To state the obvious, Amazon and Apple can sell a great amount of their goods without having a human really do anything other than keep up the website and do maintenance and that does not require nearly as many people as customer service people for each customer would be (Apple, 2015; Amazon, 2015).

The above is a nice segue into how the role of inventory plays a role in the operational efficiency, company performance and customer satisfaction for each company. As noted above, the digital and self-service nature of most to all of the details and transactions involved makes things very easy for Apple and Amazon. Indeed, human-to-human interaction on these portals is the exception rather than the rule. For those that want human help, it is there for the taking. However, many people know precisely what they want or at least what they're shopping for and both companies make it quite easy to find what is needed. The other side of that coin, however, requires a lot of human behavior, efficiency and proper management and that is the fulfillment side of each business. To be sure, the portals and websites need to be fine-tuned so that digital goods are delivered instantly upon purchase and physical goods are shipped and delivered in a timely manner. Neither company has their own delivery service organization (although Amazon is inching that way quite heavily in more than one way) so they make heavy use of companies like the delivery vendors mentioned prior. If those shipping vendors mess up, it can reflect on Amazon or Apple even if that is not fair. Indeed, if a package is shipped timely but damaged in transit, that is not the fault of Apple or Amazon. Even so, Amazon and Apple take great pains to keep customers happy and they thus usually run the interference and file the appropriate claims if the delivery vendors muff an order's path to the purchaser or recipient. Amazon in particular is blazing new trails. The idea that one could argue an item at 3 or 4 pm local time on Amazon and have it the very next day would be fairly to very uncommon just a few years ago but Amazon makes it seem normal for those willing to pay for Prime and a nominal extra shipping fee of five to ten dollars. Having these systems work properly is pivotal and vital when it comes to company performance, these systems must operate at peak operational efficiency at any time that business is open and customer satisfaction is the biggest priority even if a third party (e.g. UPS) is causing the problems (Apple, 2015; Amazon, 2015).

The layouts and plans for the delivery of Apple and Amazon goods are very well-planned. When it comes to digital goods, there are obvious e-commerce portals that analyze and process payment and then the good is made available for the person to download, use and enjoy. This is important to both companies because the process basically needs to be instantaneous at the point of purchase. In the modern age, such a company selling a digital product and not having the product available immediately for use is out of the ordinary. The second type would be the items directly fulfilled by the company via shipment. These items are obviously dispersed at warehouses, distribution centers and resellers around the country. When an item is bought online, via phone or requested by a different point of sale, off the package goes. Then there are the situations where the item is in stock and on hand and it is immediately tendered to the buyer upon proof of payment. Finally, there are the faulty items that come back as broken and are then refurbished and resold for a reduced price. Indeed, just discarding those items is a huge waste as those items, while not working, are not worthless. While Apple is more personally involved in doing this sort of thing, Amazon is absolutely in the business of selling used and refurbished items and this is true in more than one way (Apple, 2015; Amazon, 2015).

When it comes to supply chain metrics and how they can and should be measured, the author of this report would point to two things in particular. First, there should be a measurement of how many products make it to the buyers on time (or sooner) as compared to the total number of products measured. To state the obvious, this number should be in the nineties percentage-wise (if not above 95%) if a company like Apple or Amazon wants to be serious. Another thing to focus on is the quality of the packaging. Indeed, some items do not ship well via conventional means such as glasses, dishware and the like. Even other items like electronics and the like need to be shipped with care. Both Amazon and Apple surely put smaller items into bigger boxes at times and they need to be sure that the items do not excessively rattle around and potentially get damaged or broken. Amazon in particular pays a lot of attention to this and gives surveys just about packaging and whether the item got to its destination in one piece. Indeed, the quality of the packing and the fulfillment of the order are two different things and both must be delivered in fine fashion a vast majority of the time. For those situations where this… [END OF PREVIEW]

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