Jan 29, 2019 in Business

Introduction

Amazon has over the years grown to become one of the best online selling companies. It majorly deals with the selling of electronic appliances though in the recent past it has diversified and started selling jewellery and other goods. With this increase the challenges increases as well. The state of the warehouse, still being that of the initial plan of the company, is indigent. The project aims at developing proper warehousing techniques that can be adopted by the Amazon.com Company in order to improve its storage facilities. This will be done through incorporation of techniques learnt in class such as linear programming, data development analysis and the use of histograms to present information; the recommendation will be sent to the company and the response will be used to analyze the results obtained from the project.

Amazon.com Inc. Description

Amazon.com Inc. is the largest online retailer in the world. It is an American e-commerce company with headquarters in Seattle, Washington, the USA (ITU, 2011). It started as an online retailer of books but has over time evolved and started selling CDs MP3downloads, software, furniture, toys, etc. In fact, today one can find whatever he/she wants on Amazon.com.

Warehouses are located near airports for easy transportation of goods once the purchase has been made. Earlier in the initial plan of the company, goods once purchased were processed and transported by employees who used hand held computers that were controlled by a central computer that had all the records of the goods, buyers and routes. This plan worked well especially due to the fact that the goods being previously sold were books that were less fragile and required less manpower for transportation. The plan did not anticipate the rapid success of the business and had incorporated only small warehouses.

With the rapid growth and the need of the company to diversify, it introduced other goods in its product list but paid little attention to the size and working conditions of its warehouses. Most of these goods introduced were bulky and more fragile thus requiring more space and better storage conditions.

The central computer was used to monitor the movement of goods from the warehouse to a client. However, due to the drastic growth of the company, the warehouses became too small to accommodate all the goods awaiting to be purchased. It is in this respect therefore that the company came up with Kiva Systems, an automated warehouse company, which was aimed at solving all these problems in 2012. The plan, not yet implemented, means that the company is still facing challenges with its warehouse settings and a drastic measure needs to be put in place.

Managing an online good selling company is very tricky. Goods need to be purchased in advance and then advertised online for potential customers to bid and purchase them. Also the process of shipping of the goods, especially to other countries takes some time, meaning that during this period of acquiring permits of sale in a foreign country, the goods need to be safely stored in a warehouse creating congestion of the already existing goods.

Problem Description

A warehouse plan may be very crucial for the success of any business that deals with goods and transportation. The situation with Amazon that has to deal with both is further complicated. The existing warehouses were created for accommodating fewer goods and have now been congested due to the diversification of the company. The aim of the project therefore is to come up with a more modern plan for a warehouse that would offer a lasting solution to the company, taking into consideration all the economical and logistical factors and the impact it will have on the growth and survival of the company.

There are cases of goods being placed on top of other goods due to the lack of space; moreover the movement within the warehouse is limited. This causes a major threat to the quality of the goods in transit and also to their durability. Goods, specifically electronics, require proper handling while being moved from one place to another. Any miscalculation of these steps can lead to a permanent damage of goods and thus loss of profits. The transportation of goods by employees to the respective clients or destination was also indigent. These employees handled the goods manually and deposited them to their respective destinations via hand-lifting, a process that jeopardized the state of the goods. Proper communication system, good handling techniques and reception in and out of the warehouse needs to be put in place.

The fact that these is a service providing company means that it constantly purchases goods from manufacturers and call costumers from all over the world for bids. The blueprint for the proposed warehouse therefore represents that of the headquarters where the goods have to be stored before shipment because this is the warehouse that receives the largest number of goods. The proposed warehouse model should therefore represent some of the major needs of the company that need to be urgently implemented.

Model Development

This model represents the blueprint for the warehouse. It represents the whole process of construction from the initial plan to the final structure. To begin with, it is important to know an approximate amount of goods that the main warehouse of Amazon.com receives and keeps for a period of one month or one year in order to calculate the required size of the warehouse.

The research has shown that the company receives and sells millions of commodities every month, majority of which are mobile phones, books and computers (Draft, 2008). Other gadgets are sold as well. However, due to the congestion in the warehouse, some of the goods either get spoiled, lost or stolen.

After finding out the approximate number of goods kept in the warehouse during a specific period, it is essential to find out the level of flow of these goods in order to create a model. This means that the movement of goods from a manufacture to a consumer needs to be studied in order to know the exact type of a warehouse to be built. Goods that are kept in the warehouse for a shorter time require less space than those that a kept for a longer time. This flowchart can be presented as follows: the goods move from a manufacturer to the company’s warehouse, then some customers can acquire the goods directly from the main warehouse while others who live far wait for shipment. After the shipping process, the goods must be kept in a warehouse again waiting for the future owner to complete all the necessary legal work (Isaac, 2007). This means that the main warehouse is a really busy place. It should therefore comprise of offices and testing stations for the customers who would prefer to pick their goods directly from the warehouse and not wait for the goods to be delivered.

The flow of the goods also shows the state of operation of the warehouse. A warehouse with less flow means that either the records are not properly done or that the warehouse is so congested that limits the location of goods. This has been the case in Amazon, where customers had to wait for a long period of time for the goods they ordered to be shipped to them, and therefore this led to some of the clients seeking for other sites for purchasing things.

These three factors (the number of goods received and sold, flow rate of the goods and various types of goods being sold) are important when creating a warehouse. They would determine the size, shape and model to be used in building the warehouse. Goods that are kept for a longer time in the warehouse are more skewed in terms of quality and fragility than those that are kept for a shorter time. The skewness of these goods is calculated using statistical standard measurement: where y represents the type of good.

This formula when applied shows us the durability of each product given the time they have to stay in the warehouse and also considering the number of movements that each product will have and the impacts on the quality of the product. More delicate goods like CDs and MP3s require minimal movements unlike books, and should therefore be placed in areas with easy access but should be separated from other goods. Computers, though, are very stable and safe when kept in constant positions, also may get spoiled in case they contact with dust and water. This means that the setup of the warehouse ought to be different depending on the type of a product and destination. Books and jewellery are considered to be less skewed and thus less affected by the conditions of the warehouse.

With all these in mind, a blueprint for the warehouse, incorporating all the required facilities within and outside the warehouse, could be therefore sketched as follows:

The model therefore contains the following parts:

  • Office area for the staff and for meeting customers. This will be equipped with computers for storage of the warehouse records and receipts.
  • Different compartments for storage of various goods depending on their skewness.
  • Reception area where the goods will be received from manufacturers.
  • Departure area which will be the exit point of the goods which are going to be sent/shipped to the customers
  • There should be proper ventilation in the room at the same time guaranteeing high quality of the goods..
  • Proper parking lot for both commercial vehicles and clients; it will provide a more organized and fast movement of the vehicles coming in and out of the warehouse.

Model Results

When this model is followed by the company and every aspect of the above mentioned challenges is tackled, the expected results should be as follows:

  1. There should be enough room created for easy movement within the warehouse. Previous study of the warehouse indicated that it was so packed that there was literally no room for movement of persons and goods in and out of the warehouse. With this model in place, more space will be created.
  2. Proper allocation of each product that will ensure that each product is accounted for in the final debit reports. The overcrowding of the goods meant that some could be stolen or got spoiled in the warehouse. The introduction of the receiving room allows time and space for the employees to take proper count of every product placed in the warehouse. Cases of fraud therefore will be minimized and the firm will enjoy maximum profits.
  3. Fragile goods will have a better and proper storage system. Unlike the previous warehouses that kept almost all the goods together, this model will ensure that the goods are classified according to a specific order.
  4. Saving of time. By this I mean that now it will be possible to handle more activities in the shortest period of time, therefore saving the employees from the burden they experienced in the past. The flow of the goods will be in a more organized manner and the fact that there are offices within the warehouse the number of people in the storage room will be reduced. Accountability of the goods is also ensured by incorporating this model.
  5. Saving money. Every business objective is to maximize profit. This therefore means that one of the fundamental needs to create a model for the new warehouse is to ensure that there is a good flow of goods in and out of the warehouse in order to maximize the sale and thus profit. The new warehouse will do just that.

Verification and Validation of the Model

The function of the model also requires to be verified to see whether it fits a large commercial business. By doing so, we use the cost-benefit analysis economic model. This model measures the ratio of the total cost of the project against the total benefit it would bring to the business.

From the calculation of the entire project cost, various variables are placed against it such as time, space; profit and quality of the goods are put to the test. These will all determine whether the project was successful or not. Conclusion can be then drawn from the results of the validation and possible solutions implied.

From this model, the cost benefit analysis was employed and the results were as follows:

  • The cost of renovation of the entire warehouse would be minimized by using some materials from the old warehouse.
  • The benefits obtained in the long run will overweigh the initial cost of construction.

From the above validation, the profits therefore will be increased in the long run after the implementation of the model by the company. However, the company also needs to prepare for a total make-over of the inside of the warehouse and the employees need to be equipped with this knowledge. This causes some additional costs to the company because the blueprint will need to be shown to all employees prior to working in the warehouse.

 

Conclusion

This model has been created in an attempt to solve the storage problems faced by Amazon Company. However, it is an overview of what really should be implemented by the company and it only provides the constructors with the basic assistance. The model, however being simple, when implemented can help in solving some of the challenges frequently faced by the company and help it in reaching some of its set goals and objectives.

There were various challenges experienced during the formation of the model but finally it represented a proper design that when researched upon could create a working warehouse for any company that deals with purchasing and selling of goods.

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The poster that has been incorporated in the essay compliments the model presented and is also a way to show that the project is valid. Its functions are more or less similar to those stated in the model.

Owing to the fact that this is just a basic model created for academic purposes, more information, especially on the figures and the exact types of products being sold ought to be obtained from the company in order to come up with the final and proper warehouse structure. Taking into account these suggestions, information provided above would be of benefit to the company, however it may be faced with some technicalities during the implementation phase.

It also came to attention that the online services offered by the company are majorly out-dated and need constant upgrading and review. This fact may therefore form a good basis for future researches and models. The company would benefit greatly from this research and with the combination of the warehouse models its services may be improved.

Another interesting feature that could offer a good base for a future research is the connection between the warehouse compartments. In this case, they are mostly computerised and the employees communicate with each other using special computers while in the warehouse. A study to prove the functioning of these computers and ways of improving them to ensure success of the business could also be essential. This study limited the project to the structure of the warehouse in connection with its functions but failed to state other factors of concern that can affect the functioning of a warehouse. Inclusion of the computer system and their operations will therefore be essential in the future projects.

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