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How to Manage Your Warehouse Like You're Amazon

Amazon is, without a doubt, the industry leader in order fulfillment. They have taken the inventory management process to levels never seen before. Their goal is to make sure every customer has a positive experience and, in order to do that, they have to be in a state of constant improvement.

Clear goals and objectives.

Amazon strives to provide their customers with convenience of shopping online, to provide a vast selection of goods at the best price and provide a high level of customer service.

Warehouse organization.

Their warehouse is set up on an intricate system they affectionately call “the library”. Rows of stack like shelves hold sectioned off bins for products. Like a library, each product has a number and a barcode assigned. Unlike the Dewey decimal system, the barcode doesn’t tell you about the product or it’s location. Its just a simple and efficient way to track the item. Barcodes are scanned all along the way to ensure that they can be found at any point in the process.

Like items are purposely set apart from each other in order to prevent employees from mistakenly picking up a similar but wrong item. And fast moving items are placed in several different spots around the warehouse in order to prevent pickers from tripping over each other to get the most popular items.

Inbounding is just as important as outbounding.

Items are immediately sorted within 12 hours of arrival. Each item is quickly scanned and sent to a receiving area where it is sorted into bins. Quick moving items are moved directly to a shipping area.

Embrace technology

From their warehouse management system to their handheld scanners, technology helps them every step of the way. They don't shy away from trying new technology that could help them make their processes even more efficient.

Inventory tracking is king.

Employees are outfitted with scanners so that products are tracked from when it’s received, to when it's transferred, to when it’s put away. When someone orders the product, the item is scanned before it’s transferred and as it’s put in the shipping container. At any point in the process the product is visible to anyone trying to find it.

Similar items are often kept separate from each other, and popular goods will be stored in multiple parts of the warehouse. Similar items are separated so that an employee does not accidentally grab the wrong item, and popular consumer goods will be located in multiple locations to prevent bottlenecks that can occur when too many people converge on one spot.

Reverse logistics

When items are returned, their system automatically calculates the reverse route it takes back into the warehouse. Employees can then scan it in, inspect it, repackage it and send it back out saving time and money.

Record data on customer behavior and preferences

In their effort to provide a superior customer experience, they track how, why, and when customers shop as well as what they buy. Then they can track trends and preferences in order to customize the experience.

Product diversification

Amazon offers a dizzying array of products for sale. They also offer a drop shipment approach where they broker the exchange between another seller and the customers.

Letting third parties sell on their site help them increase the diversity of items without spending money for inventory

Strong distribution channel

Amazons distribution channel is growing. Warehouses are opening up in other countries according to demand. They have developed relationships with their supply channels, transportation channels, third party channels, etc, in order to knock their customers socks off.

Negative cash cycles

The lower the cash cycle the better it looks for a company’s finances, so a negative cash cycle is very desirable. A negative cash cycle is one in which you don’t pay for your inventory or materials until after you’ve sold the final product associated with them. It means you’re using your working capital as efficiently as possible and have available cash for other things.

Scaleable warehouse

Their warehouse is set up in such a way that if business can be scaled up or down depending on the market demand.

Workforce management

The key to the Amazon workforce is using a combination of full time and seasonal employees. During busy times, like Christmas, temporary employees are hired to help with the immense demand. Promotions are chosen from their ranks and given to top performers.

Supervisors oversee the constant task of improvement. They travel the floor to find small improvements and can even send text messages to employees scanner devices to encourage them.