Critical Analysis and Evaluation of Operations - Amazon UK - Case Study Example

Name Course Tutor Date Critical Analysis and Evaluation of Operations Background of the Operations Amazon UK is a division of a multinational retail organization that has achieved extraordinary success. By definition, multinational corporations should have massive impacts wherever they operate. This state of affairs exists in the UK where Amazon has positioned itself as one of the retail industry’s major players. According to Ruddick (2013), the firm began operations in 1995 as an online bookstore based in the United States. The organization then underwent a period of rapid growth leading to its eventual entry to the UK through the purchase of bookpages.co.ke in 1998 (Ruddick 2013). The company extended its operations in the UK to concentrate on a bigger portion of the retail industry. According to Amazon (2014), the organization seeks to be the world’s most customer-centric firm for content creators, consumers, enterprises, and sellers. Amazon UK is considered to be the most influential retailer in the UK. Its online model has forced other retailers like Tesco to alter their business in order to survive. Available data indicates that its website attracts 12% of the visits to retail websites in the UK. However, this figure is expected to rise rapidly. In the period between 2012 and 2013, visits to Amazon UK increased by 80%, a figure that is twice the rate of growth in the wider retail market. E-bay is Amazon UK’s biggest competitor as it has a 19% share of retail site visits (Ruddick 2013). Amazon UK also has to compete with established supermarket chains like Tesco, Morrisons, Asda, and Sainsbury’s. When it comes to recent performances, Amazon is focused on expanding market share and it has not been able to generate short-term profits. However, it is expected that its global business will become the ninth largest retailer by 2018. There are several external factors that affect Amazon UK. The first and most critical factor is technology. Its entire business model relies on the internet, and any failure or downtime can result in massive losses. Moreover, customers expect to get whatever they want in one attempt, and they are unlikely to wait for Amazon’s services to resume. Additionally, Amazon UK has one of the most technology dependent logistics operations that has to deliver a wide variety of products within short deadlines. Failure in these systems can lead to massive backlogs and losses. Nature is another external factor that affects Amazon like most other businesses. Its international operations also mean that Amazon UK is sensitive to deviations in the global economy. Finally, consumer preferences are also factors in the external environment that Amazon has to consider. Transformation Processes and Evaluation of the Operations According to Slack (2010, p. 11), every operation creates a product by using an input-transformation-output process. Therefore, the operations at Amazon UK can be categorized into inputs, transformation processes, and outputs. When it comes to inputs, Amazon UK makes use of several transformed resources that include finished goods, packaging, customers, and key partners. It then uses its enormous transforming processes that include large warehouses, exclusive technology, trained staff, and transporters. These transformation resources allow the firm to order massive amounts of goods from partners at the lowest prices. Amazon then packs them to meet the needs of clients, and transport the needed goods to wherever the client wants (Jackson 2011, p. 10). It is evident that the output is the delivery of goods using an efficient service that ensures that customer get the best deal in terms of price and convenience. Despite the fact that all operations are the same given that they transform inputs to outputs, they differ in several ways. Slack (2010, p. 19) states that four categories can adequately describe these differences. They are the volume of the output, variation in demand for the output, variety in output, and the degree of visibility (Slack 2010, p. 20). The term four v’s of operations management is often used to describe these categories. In the case of Amazon, a complete analysis would include both a description of the transformation process and an analysis of the four ways in which operation processes can differ. Volume defines the quantity of a product that is necessary to satisfy demand in the market. It plays a giant role in shaping the success of a business as volume defines how much time the transformation of the input to an output should take. For example, a firm that lacks the ability to change volumes according to changes in demand will make losses in two ways. Failure to increase volumes will lead to an inability to take advantage of existing demand, thus leading to losses. On the other hand, a firm that fails to reduce volumes will have excess inventory that cannot be sold, thus leading to wastage of resources. Amazon UK works in the retail industry where volume is a key consideration. An analysis of the firm shows that Amazon UK generated £10.1 billion in just three months in 2013 (Ruddick 2013). Additionally, the firm is expanding at such a rate that established high-volume retailers like Tesco have to change their operations strategies. It is evident that Amazon handles very high volumes of commodities like electronics, digital content, furniture, food, jewellery, and others. Variation in demand defines how demand in the market changes with time. This factor is also important in operations as demand directly determines sales and thus profits. In the case of Amazon, it operates in an industry that has extremely large variations in demand. The record level demand for online shopping that was witnessed in December 2013 best illustrates these variations in demand. According to the BBC (2014), growth in internet purchases between 2012 and 2013 was 19.2. Amazon UK has to be prepared to handle such increases in demand by employing additional staff, paying overtime, and increasing its logistical capabilities (Slack 2010, p. 20). When it comes to variety, Amazon’s recent history proves that it offers a high variety of products and services. As stated, Amazon began as an online bookseller. It improved its operational skills to the point where it started experimenting with selling other products (Jackson 2011, p. 9). At present, a customer can order any one of thousands of products and have them delivered to any corner of the country. The implication of the high variety is that the firm has to spend a lot of money on developing flexible processes to meet diverse client needs. Finally, visibility defines how well a customer sees operations processes. In the case of Amazon UK, its web-based model means that clients do not get to see how the firm gets products from suppliers, packages them, and ships them. Customers just visit a web page and wait a given period to have their purchases. The low visibility allows Amazon to minimize costs as it can establish a few enormous warehouses to serve the entire country. This is unlike other retailers who have to locate stores near customers. In addition to operation management’s four V’s, an organization can be analysed in terms of performance objectives. According to Slack (2010, p. 40), there are five simple performance objectives that apply to all types of operations. The first is quality, and it describes the ability to offer customers the right good/service. Quality is a very important objective for the firm since it depends on making a good impression on customers so that they can visit the site and purchase new things in the future. The open nature of the internet also means that any case where Amazon fails to offer a quality products will get much attention. The second basic performance objective is speed. One advantage of Amazon’s model is that it allows customers to get quick delivery. Customers extremely value this objective and without it, they will simply go to nearby retail stores. Dependability is the third performance objective, and it defines the sense that a firm should be predictable in terms of delivering promises. Flexibility is the fourth objective, and it defines a willingness to make changes. When it comes to Amazon UK customers, dependability and flexibility are not highly valued by customers because the firm has already proven that it is flexible and dependable. Costs, the fifth objective, is the most highly valued by the customers. Clients are sometimes willing to wait an extra day or week because of the bargains they expect to get from Amazon. Therefore, the order of what Amazon UK’s clients value will be costs, and then quality, speed, flexibility, and finally dependability. Process Design A key process at Amazon UK that I would be involved with as an operations manager is the inbound and outbound logistics at one of the firm’s large warehouses that are referred to as fulfilment centres. The fulfilment centre has a large section where all incoming products will be received and scanned. These products will then be stored at random locations across the centre that will be recorded. When a customer orders any product, the employee who will be closest to one of them will pick the merchandise and send it to the outbound section of the centre. Location details will be confirmed, and the product is then packaged and placed on the first available truck going to the customer’s area. The main objective of the process design is speed, quality and flexibility. According to Wohlsen (2014), fulfilment centres can cover millions of square feet. The decision to arrange products throughout the centre thus guarantees speed since an employee is less likely to move across the entire warehouse to find one product. The design of the process also ensures quality in terms of minimum wasted effort. In addition, flexibility is achieved through the ability to handle products ranging from perishable goods to electronics. Control and feedback are achieved through the use of technology. The location of all employees, as well as each product, is tracked on a real time basis. This gives a control and feedback mechanism that allows Amazon UK to attain the level of efficiency that it has. . References Jackson, R. J. R. 2011. Analysis of predictive sorting and process standardization at Amazon.com. Massachusetts Institute of Technology. Locations. Amazon UK. Available from http://www.amazon.co.uk/b?ie=UTF8&node=2610312031 [3 November 2014] Record online sales over Christmas, says BRC. 2014. BBC. Available from http://www.bbc.com/news/business-25671561 [3 November 2014] Ruddick, G. 2013. Amazon is Britain's most influential retailer - and it doesn’t even make a profit. The Telegraph. Available from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10245630/Amazon-is-Britains-most-influential-retailer-and-it-doesnt-even-make-a-profit.html [3 November 2014] Slack, N., Chambers, S., & Johnston, R. 2010. Operations management. Pearson Education, Essex. Wohlsen, M. 2014. A Rare Peek inside Amazon’s Massive Wish-Fulfilling Machine. Wired. Available from http://www.wired.com/2014/06/inside-amazon-warehouse/ [3 November 2014] Read More