Introduction We are living in an era where technology is advancing consistently and most business operations and transaction are being executed through the internet or computer networks. E- Commerce and E- Retail has become popular among companies and organizations. E- Commerce involves buying and selling of organizational products through the internet, as well as other computer networks.The transaction involves fund transfer through electronic means. Internet marketing that involves posting adverts on the internet. There is also electronic management of the supply chain as well as processing transactions online, electronic data interchange, and online management of the inventory systems (Qin, 2007). On the other hand, E Retail is a term used within the prospect of E- Commerce. It refers to the process by which a customer buys goods or services directly from a seller through online means such us the World Wide Web. In this transaction, intermediariesare not involved. An online shop or an online store evoke the analogy of buying goods and services at a shopping center in a process that is referred to as business to customer online shopping. In the case where a business is buying from another business, the process is referred to as business to business online shopping. One of the corporations that are known for online shopping is the Amazon.com based in the United States (Qin, 2007). Amazon.com is an E- Commerce multinational company that has its headquarters in Seattle, Washington. It started its operations way back in the year 1995. Since its inception, the company has always been ranked among the best retail sites operating on the internet (Pillai, 2004).The company is the largest online retail store in the world. In addition to online selling of products, it also provides cloud computing services and consumer electronics such as the Amazon Kindle e- book reader and Kindle Fire tablet computer. Importance of Management Inventory in a Retailing Company According to Madaan (2009), one of the most important tasks in a retail shop or a retail store is the management of inventory. It is important since it ensures that there is enough stock in store at any one given time. This will aid in reducing the chances of loss of sales and revenue. It the shop is out of stock, customers might not be willing to wait for more stock to be brought. In this case, customers will just walk away and buy elsewhere and hence the business will have lost those sales and the revenue associated.Therefore, it is the duty of inventory manager to ensure enough stock is always in place. Amazon, being one of the best and largest retail stores in the world,echoes the importance and the need to manage an inventory that will ensure that all customers get what they want and that they are fully satisfied whenever they log into its website to make an order. The company s CEO Mr. Bezos is aware of how important it is for his company to have good inventory management (Pillai, 2004). He realizes that holding too much stock on the company s shelves is too expensive and at the same time, holding less stock will lead to loss of customers who will walk away disappointed after not getting what they want. It is for this reason that the company decided to manage its stock in a different way. The company was able to adapt the right strategy to manage its inventory. It decided to operate its own warehouses, whichwere fully computerized making it easy for customers to make their orders. Amazon only made orders from the warehouses after the customer agreed to buy them. It was able to reduce the size of its inventory and at the same time offer a wide range of products to its customers to ensure satisfaction. This was successful in enabling the company reduce the cost of hold too much inventory. At the same time, customers were always satisfied and hence the company got more income from sales. The company further refined its software such that it was able to accommodate inventory depending on the consumers demands. After the improved inventory management, the company recorded its first ever profits in the fourth quarter of year 2001 (Pillai, 2004). Outsourcing inventory management Amazon was able to meet its customer demands when it managed its own inventory. In fact, the company gained a good reputation and was able to increase its level of sales in the year 2001. However, the company decided to outsource the inventory management so that it can be able to concentrate more on its core business. It aimed at cutting down some of the expenses by so doing.Therefore,the company collaborated with other companies that were to be doing the shipping jobs as Amazon concentrated on its E- Commerce business(Pillai, 2004). Ramanathan (2009) has emphasized on the importance of outsourcing for a business organization. According to him, outsourcing is important in a business organization since it gives it an opportunity to specialize in its business. Therefore, the company can be able to offer improved services and give way for more innovations. On the other hand, there are some key areas of business which might be a risk if outsourced due to their implication to the business incase they are not well managed. Therefore, the company has to weigh on the business areas to outsource and those it should not outsource(Pillai, 2004). According to Deepen (2007), outsourcing has become a relevant option for most organizations. However, a company has to answer two important questions before outsourcing its operations. The first question that has to be answered is which area of business is to be outsourced. Then, the other question is on who is going to be providing the services. In answering the first question, the company will have to calculate the risk involved with the outsourcing. It has to outsource those business areas, which will not affect its business adversely. The aim of outsourcing is to reduce the operational costs and improve the company s profitability. Therefore, the company will have to select the best firm that shall be offering the services. By outsourcing inventory management, Amazon outsourced a key area of business. Despite the fact that the strategy (drop- shipment) had a disadvantage in that it reduced the efficiency especially in the case where a customer placed more than one orders, the over all implication is that it improved the profitability of the company. The company was aware of the risk involved in outsourcing the services. However, it went ahead to outsource the services (Pillai, 2004). An Amazon spokesperson said that the strategy helped the company lower the inventory holding cost since it did not have to receive the product in its warehouse and store it in its shelves before sending to its customers. The company was in a position to concentrate more on its marketing business(Pillai, 2004). Therefore, I think Amazon took the right step to outsource inventory management since this increased its total revenues that is the major aim of any business organization. Selling competitors Products on Amazons site In the early 2001, Bezos, the Amazon CEO, came up with a strange idea whereby the company was to market the products of its competitors on its website. The aim was to earn commission from the sale of these products. It is important to note that the company was earning the same profits from selling products on commission as it could earn if it sold them on retail. This strategy had some advantages to the company. On the other hand, the strategy looked to give an advantage to the competitors by since Amazon assisted in marketingtheir products (Pillai, 2004). The advantage that the company had from this is that customers had a chance to compare the prices of Amazon products with those of the competitor retailers. Amazon products were at a relatively low price as compared to those of its competitors. Therefore, by selling competitor products on its website, customers would definitely go for the products thatare being offered at a lower price. Therefore, the company did not have to advertise the low prices for its products since customers would be able to make comparisons as they make their orders on the websites. This helps Amazon lower its advertisement cost while at the same time it earns commission on sale of competitors products. The company also sold used books on its website. According to Bezos, giving customers the opportunity to make their own choice on what they should buy would not do them any harm. In fact, if a customer buys an old book, it has been indicated that the customer will go on to buy a newer book, which he or she has never bought in the past (Pillai, 2004). Therefore, they will eventually buy Amazon books, which were new in the market. The strategy hand a benefit for Amazon in the end. It made the competitors products popular, but at the same time, it increased its own sales since its products were being offered at a price lower than that of the competitors. Therefore, I think the action to market competitor products on its website was a strategy aimed at gaining more customers over competitors and was a right one. Conclusion Inventory management is one of the key business activities that have to be accorded much attention by the management. It will determine the performance of the business organization in the end. Proper inventory management will help the organization improve its performance while poor management will adversely affect the performance if the organization. For an organization to manage its inventoryproperly, it should first establish the consumer demands. This will help the company to determine the mount of stock to hold in its warehouse at any given time. This will ensure that all customers get what they want and that they are satisfied. It is important to note that holding too much stock is expensive, and it will increase the operation costs of the organization and lower its profitability. A company can decide to outsource some of its operations. However, it has to do proper calculations of the risk involved to avoid any future failures that may be involved. Outsourcing willhelp the company concentrate on other areas of business and hence will be able to offer improved services.
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