Inventory Management Lessons to Take Away from Amazon

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As a leading eCommerce giant, Amazon continues to hold a dominant position as one of the biggest online retailers in the market. Their quick delivery services and a wide variety of products at competitive prices keeps them ahead in the eCommerce game. Due to their sheer scale, they are able to meet the high demands from customers around the globe. Amazon’s strategic approach to inventory management can teach online retailers, both big and small, a multitude of lessons to improve their performance.

Anyone in the warehouse industry knows that there are a variety of factors affecting inventory management and each approach to organising a warehouse can be drastically different. In America, Amazon Prime Now is now providing the market with an ultra-fast, one-hour delivery service on thousands of their products. It is setting a new standard and may very well spread to countries near and far to shape delivery services around the globe. However, in order for Amazon to achieve rapid delivery, they need to address warehouse logistics and numerous factors affecting inventory management strategy.

The importance of a warehouse

Firstly, a big factor is storage. Where do they put all of these products in order to deliver it so fast? Amazon needs an extensive warehouse system that is placed in specific locations to reach its broad spanning market; their warehouses are some of the biggest in the world.

Tracking inventory in the warehouse

With large storage space, there needs to be an extensive organisation method to keep track of it. So how does Amazon handle it? Interestingly, their approach is much different from the textbook idea of a warehouse with precisely lined shelves and neatly organised rows in alphabetical order. Rather, Amazon used a chaotic storage system.

Chaotic storage operates in a very different way. Since there are barcodes and barcode scanners available, they can use this technology and tracking system to place items anywhere in a warehouse and still be able to track it down. Amazon couldn’t use the traditional warehouse system with spreadsheets and manual tracking systems. Simply, it would just slow them down and hold them back. With effective inventory management software, Amazon can track the exact location of everything in their warehouse. So even if it is haphazardly stacked in different places around the warehouse, it can be located swiftly and packaged for delivery.

This type of warehouse organisation suits Amazon’s business model and allows them to deliver quickly and accurately. It keeps them dynamic by using empty storage space effectively and it also increases accuracy. Since products are placed in such an ad hoc manner, it is more difficult for a warehouse employee to pick the wrong one off the shelves. Most likely, it won’t be next to one of a similar item so the chances of a mix up are decreased.

Although it may seem disorganised on the surface, it can actually simplify processes. As long as employees know where the rows are in the warehouse, they don’t have to learn where each item is stocked. This simplifies the training process for new employees and can make the warehouse run smoothly.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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