Amazon Operations Management

Running head: PROJECT MANAGEMENT PLAN 1

PROJECT MANAGEMENT PLAN 2

Final Project: Project Management Plan – Amazon

Student Name

Affiliated College or Institution

I. Operations Management

A) Significant Forces 

Amazon remains the leader in online retail marketing, especially coming from the integration of issues which have been identified in the Porters five forces analysis. The Porters five forces model will help analyze the external model of Amazon, specifically the factors which impact its operations and management (Akzin, et al. 2017). The factors to help define the conditions of the e-commerce environment, with focus on the market. The organization remains the biggest market player, and to maintain this desired market position, Amazon needs to evaluate the factors which affect its operational effectiveness regularly.

i) Market rivalry or competition

Amazon, just like any other established organization, competes against very strong competitors in the market (Akzin, et al. 2017). Analyzing the competition will help show three distinct aspects which end up affecting operations management within the market. Such factors include; high aggressiveness of other firms in the market, the high availability of substitutes and the low switching costs. Retail firms are known to be aggressive and exert significant competitive forces.

For example, Amazon’s chief competitor is Walmart. The physical or the brick & mortar stores are perfect substitutes for the online retail services at Amazon (Akzin, et al. 2017). Management dealing with Amazon’s market presence needs to come up with better ideas to mitigate the competition more proactively. There is a need to make the competition a strategic factor of consideration, and a priority meant to ensure that the organization maintains long-term competence in the market.

ii) Bargaining power of the consumers

The influence of the firm towards the consumers in the market is determined by the bargaining power of the consumers. The operations management of Amazon will need to be aware of the strong intensity of buyers, and the need to always satisfy the demands in the market (Akzin, et al. 2017). Factors affecting operations management based on the bargaining power of consumers at Amazon include; high quality of information, low switching costs and the availability of substitute commodities, in the competitive market.

Consumers access a lot of quality information online, especially regarding services that the retailers offer. In the future, this aspect is bound to affect Amazon, since it will make it easier for consumers to transfer from Amazon to more productive firms and operational friendly entities like Walmart stores. There is a need for the operational managers in the organization to consider the substantial bargaining power of all consumers, including addressing its business challenges in the retail industry (Akzin, et al. 2017)

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iii) Bargaining power of the suppliers

Suppliers can control the materials and the e-commerce operations which Amazon is involved in. In this case, there is a need for Amazon to consider fundamental factors including; the small population of suppliers in the market which is a strong force in operations management. Other moderate forces include forward integration and the size of suppliers. Regarding operational management at Amazon, the small population of suppliers allows the suppliers to impose a powerful force on the organization’s e-commerce business (Akzin, et al. 2017). For example, the degree of control that suppliers have in the market, impacts the retail operations of Amazon as a business.

iv) The threat of substitutes

Amazon just like most organizations competes with the availability of substitute products within the online retail market. The availability of substitutes affects the operations of the organization and the industry environment at large; hence this is a strong force (Christopher, 2016). Important aspects which should be considered strong forces based on the threat of substitution include; low switching costs, the high availability of substitutes as well as the lower costs of substitutes from other companies. The management at Amazon will be affected in the future, primarily if substitutes are not controlled in the market. High availability leads to decreased product costs, which also limits the operational profitability of the organization.

v) Threat of new entrants into the market

The threat can be considered the weakest force affecting the operational management at Amazon. New firms are bound to lead to a reduction in the market share at Amazon, in online retail business. These threats end up affecting the organization, which experiences weaker intensity based on significant factors such as; high economies of scale, and the high cost of brand development, which are both relatively weaker forces (Christopher, 2016). If this force is not handled, consumers at Amazon are likely to transfer to new firms in the industry, which will lead to the empowerment of the new firms to impose a stronger force, against Amazon’s operational success. There is a need to develop strategies to counter operational inefficiency.

B) Key Obstacles 

The evolution of operations management in the modern era, especially in the competitive business platform is alarming. The competitiveness displays just how much change has been experienced and the intense need for organizations such as Amazon to keep adapting to changes as the changes come into the dynamic business and industry platform. Amazon must be detailed to keep up with a lot of business challenges and pressures, during the evolution of operations management, to fit into the modern era in business (Christopher, 2016). Amazon was extremely keen to share its plans regarding making moves and working on the next generation smartphones.

However, the management experienced greater challenges, which does not get as much attention. International growth has been a significant challenge for the organization, especially in operations management. This was evident when the entity reported its annual financial results, recently. The foreign exchange fluctuations played a significant role. The organization cost was approximately $1.3 billion, to international revenues. However, the pattern could not have been sustained in the growing American business and the industry as a whole. The pattern is more worrying especially because the entity is not failing to invest in the business. It is also losing money which greatly affects its profitability.

Losing on profitability and revenue is a nightmare to all profit-making entities. In countering this problem, the management at Amazon handled the issue through embracing the need to invest into a fulfillment center actively and increasing more efficient and diverse infrastructure, in every country in which it operates (Christopher, 2016). The move was aimed at building capacity and increasing the overall demand in the market. The operations management team believes that Amazon’s strategy is aimed at building capacity so that demand in the market can be adequately met without any struggle, and with a seamless experience. This was a relatively proactive approach, which helped Amazon tackle international growth problems on a different level.

C) Changes 

The success of Amazon depends on the high-efficiency levels, which are in the operations management, that determine the productivity of the organization (Cummings & Worley, 2014). The organization has learned to embrace and address key strategic decision areas which are optimized by operations management productivity. Being the leading player in the online retail industry, the organization is the best example of technologically supported productivity. The management in the organization has ended up making ten strategic decisions, considering the increasing complexity of operations.

The organization structure has also been modified, considering that the organization also continues to expand and diversify its operations continuous improvement is bound to help enhance the capabilities of the organization to support global expansion (Cummings & Worley, 2014).

Essential decision areas which have been embraced include the following:

i) Design of goods and services

The organization design output addresses the primary concern of technology. Advanced information and communication technologies help address complexity in the organization.

ii) Quality management

Quality management at Amazon is meant to ensure that continuous improvement is not shunned. The organization uses its organizational culture to provide support to idea creation, among its various personnel (Cummings & Worley, 2014).

iii) Location strategy

Accessibility of resources in the organization makes location an area of priority at Amazon. Amazon needs to maintain its warehouses and at the same time, be close enough to its consumers, of the online retail business to maximize satisfaction (Stadtler, 2015).

iv) Supply chain management.

Operations management prioritizes the need to streamline all the supply chain efforts, to support the objectives of the organization. For example, sellers are required to adjust to all supply levels, based on demand.

v) Inventory management.

The focus of operations management at Amazon is to maintain optimal levels of inventory. This is a strategic decision area, which helps in the optimization of retail inventory size for cost minimization while satisfying demand in the market (Stadtler, 2015).

D) Business Operations

Different organizations embrace different approaches regarding processes, as well as operational management. At Amazon, all operational procedures are aimed at obtaining quality output in the long run. The company uses specific organizational processes, which make it more unique and easy to handle considering the numerous demands.

i) Reviewing all plans and objectives

Objectives include all activities which need to be completed for the sake of achieving goals and objectives in an organization (Stadtler, 2015). At Amazon, all activities needed to reach goals are identified and plans also established for development.

ii) Determining work activities, which are needed to accomplish identified objectives.

Once all objectives have been identified in the organization, the management team at Amazon is responsible for analyzing all tasks and listing those that need to be accomplished. In the long run, all goals must be met.

iii) Classification and grouping of activities into manageable units

Managers are expected to categorize all group activities based on four distinct models at Amazon. These include; departmentalization, geographical, product, customer and functional.

iv) Assigning activities and delegation of duties

The management is responsible for assigning the defined roles to specific persons. This is based on the specialization of specific groups of personnel (Stevenson & Hojati, 2017). Equal authority is provided to allow easier and more favorable work environment.

v) Designing a hierarchy of relationships

Managers at Amazon are keen to determine the vertical decision making, as well as coordination, or horizontal relationships of the organization. Management also needs to diagram all relationships to allow easier determination of hierarchy (Stevenson & Hojati, 2017).

The business operations at Amazon have been designed to support the strategic plan, mission and vision and the values of the organization. The business operations at Amazon complement all operations, which makes everything in the organization run smoothly and effectively. For example, the strategic plan, mission, and vision of the company are encouraged based on the operational activities. The ultimate goal is to achieve overall success, for the benefit of the organization as a whole (Stevenson & Hojati, 2017). A lot of factors affect the profitability and productivity at Amazon. For example, profitability is affected by organizational expenses, corporate social responsibilities, and the overall economic conditions.

E) Key Trends 

Production trends have since evolved, following the dynamic business platform in the global context. Quality, resource, and information management have also changed, which have majorly impacted the business operations of Amazon as an organization. For example, regarding information management and quality, technology has played a significant role and is recognized as a critical trend affecting organization operations at Amazon. Also looking at the production point of view, most businesses are now producing based on market demand, to avoid stock-outs and costs of holding goods, which increases the losses and expenses incurred (Stevenson & Hojati, 2017). Quality is gauged through consumer acceptance and comparison with other organizations in online the retail industry such as Walmart among other entities.

F) Impact 

Business operations of Amazon, just like any other organization, are bound to be affected considering the major developments on business operations products and services in every entity should be maintained, in terms of determining quality effectiveness and control. The trends have led to increased production quality, especially in terms of services (Stevenson & Hojati, 2017). Other trends include; advancement in technology, emerging markets end up gaining power, demographic changes, global warming, and the increased growth of the population. Decisions made at Amazon need to completely conform with the changes, hence the process should strictly rely on global changes in the market.

II. Operationalization 

The technique that our company Amazon is initiating in operationalization is through quality management to align all of its processes. Quality management arises when the firm recognizes any mistakes and shortages that are associated with the products been provided and effective measures are initialized to counteract the limitations (Cummings, & Worley, 2014). Quality control acts as means for success for the company since it is with the provision of the best items that customers wish to purchase what the customer will need from the firm. The paper outlines the concepts of quality management including the total quality management which is the key to maintaining the high-quality of items by Amazon. The business strategy of operationalization will comprise of the work breakdown structure that offers information about the major tasks that should be performed in connection with quality control. Therefore, the business opportunity to be explained in this paper will reference the quality management that is required from the firm to seize offering of high-quality goods with the use of statistical quality control.

A) Potential Costs

It is evident and inevitable to incur some costs with the introduction of quality management concepts and perspectives. In other words, it is not possible to come with measures that will be meant to attain quality management and fail to incur some costs. For instance, technology is one of the aspects that are associated with quality management. Technology requires the adoption of information management measures such as the purchase of computers and creation of other systems that are meant to keep track on the continuous provision of effective goods and products. Therefore, additional funds will be incurred to the firm needs to improve the activities that are currently in place concerning quality management. The other costs are associated with the training programs that must be adopted and introduced to the workers.

The other costs associated will be in the advertisement once the firm seeks to offer awareness to the public concerning the goods. Moreover, creating ads and making them accessible over the internet and social media is costly. Some of the risks that are associated with quality management include lack of adequate skills among the personnel since the employees will be faced with new technologies. The other risk includes the lack of adequate funds that are supposed to accommodate for the new technologies introduced by Amazon. Also, it is possible that there might be a risk if all the employees do not support the new changes adoption resulting in reduced collaboration among the team members.

However, even with the existence of the risks and costs, there are some benefits associated with quality management. For instance, it is known that clients never wish to purchase goods that are of poor quality. In other words, no person ever wishes to purchase an item that is low in its quality. Therefore, with the improvement of quality, there are high chances that Amazon will attract a significant number of clients who will gladly want to buy items from the company. Moreover, high sales correspond to high revenue suggesting the company will manage to earn itself a high proportion of income from all the investments that it will put in place regarding operations and quality control (Cummings, & Worley, 2014). Additionally, there are high chances that Amazon will enjoy an improved market share that will transform into advanced relationships between Amazon and its potential customers. Therefore, it is evident that there are high chances that Amazon will enjoy additional benefits with the sustainment of quality management and operations.

An estimated notional demand of 25,500 units, the average notional demand should be 4,250 per month over the semiannual period (Dey, Cheffi, & Nunes, 2015). To produce these units per month given a standard labor rate of 0.74, the workforce required will be:

4,250*0.74 = 3,145 units.

Units per hour given 160 regular hours available = 3,145/160 = 20 workers.

Opening Inventory: 3,145 units

Current workforce: 22

Regular hours available: 160

Overtime hours available: 20

Standard of Labor: 0.74

123456

Demand

500500040002500100003500

Production

425042504250425042504250

Cumulative

Demand

50055009500120002200025500

Cumulative

Production

4250850012750170002125025500

Excess Units

375030003250500000

Units Short

00007500

Description

Months

Since the workforce that is needed is 20 workers, the company will have to lay off two employees to minimize costs and at the same time maximize in profits.

The table below shows the estimated operation costs:

CostPer Unit ($)Total Cost ($)

Materials 4040*25,500 = 1,020,000

Labor1010*25,500 = 255,000

Laying off10001,000*2 = 2,000

1,277,000

Total Cost

The semiannual production plan above shows that the total cost of production for the six months period is $1,277,000.

B) Work Breakdown Structure

C) Narrative

For quality management to be attained, three tasks are associated with its success. The three tasks are total quality management, business operations, and changes for improvements that should be adopted. The three tasks are associated with other three subtasks that result in their success. For the total quality management, there is the issue to do with institute leadership that refers to the situation by which Amazon should focus on making sure the best leadership team is created. In other words for Amazon to excel, there is no doubt that its management team should be highly experienced and placed in the right conditions to succeed. It includes ensuring that the leadership team is determined to work in hand with all staff members since unity will grant them better results. Additionally, the firm has a responsibility to train its employees in order to possess all the required skill sets for them to conduct the production activities and meet the defined expectations. Additionally, the company should introduce and support a culture of improving its services and goods from time to time. The culture of improving is necessary as technology advances, the company can make sure that it fulfills the desires of its consumers by incorporating all of its items to align with the advancement of new technological development that arise.

The other task associated is business operations which include the reviewing of the plans that have been implemented by the firm. In other words, it is required that the company should always make sure that it assesses all the plans that have been in connection with quality control to make sure that the plans are appropriate (Cummings, & Worley, 2014). The aim of the activity is to make any necessary changes that are related to any mistakes and shortages that might have occurred with the plans that are already in place. The other task is the determination of hierarchy that considers the Amazon Company should ensure all staff members are aware of the leaders in place to receive directives and expectations regarding what the staff member should do. With measure in place, it becomes easier for the leaders to monitor how the workers are performing their duties. The other task is the delegation of the duties that require Amazon to always ensure that the assignment of roles is done by evaluating a worker’s skills and traits. In other words, it is required that the Amazon Company should assess all the abilities of the employees to make sure the staff members can significantly perform the duties well.

The other task is the adoption of changes into ensuring that quality is attained which includes developing the item’s design to make sure that it is what the customers want at that particular time. Since clients tend to lose their taste for a certain design with time, it is indispensable for the company to transform the product’s design that will ensure that the clients never lose their taste for the corporation and will always appreciate their effort in supplying the market with new items. Supply chain management is another task that should be managed requiring the firm to realize better ways and channels that can be adopted to help reach the market. Inventory management should be controlled and aligned with the core business activities since it will ensure that the company does not lack items to offer the clients. In other words, inventory management is a task that requires the firm to research and analyze the market trends that relate to consumer demands to make sure to always have all what the consumer needs. The inventory management also includes offering of the products at the most convenient locations so the clients will not have a hard time to getting to the products.

D) Key Milestones 

Different deliverables, milestones, and resource requirements are necessary for the attainment of the different objectives that have been implemented by Amazon. For instance, with the introduction of total quality management, the company will select key team members that should be given the mandate to overlook all that happens within the firm. In other words, there is the need to assign a team lead to watch the overall business activities that are based on ensuring the quality of production is ongoing throughout the operations of the product. Moreover, the management team has a responsibility of ensuring that other team members are open to come to with questions or concerns if facing significant difficulties. It starts at formulating and sustaining healthy relationships between the management team and staff members. When management ensures to empower and hold personnel responsible for performing tasks; team members will always seek to coordinate and collaborate to help the business in identifying how best it can create more quality than any other company in the same business market.

The other milestone includes the construction of budgets and ensuring that the budgets are met with the operational plan that was estimated in the plan. The budgets are the strategies that will guide the operation on how resources should be allocated. The budget will ensure that all the business departments are granted the best share of the available resources. The monitoring of the budget also ensures every department keeps good visibility of tracking expenditures. With the watch out on the level of expenditure, it becomes easier for the company to make sure that no overspending is noticed and so the departments are using the right proportions of the available resources. Additional deliverables include making sure that the projected profits do not have a big difference in the actual profits. It is paramount and beneficial that the actual profits show a positive sign comparing with the projected performance.

Information management is another aspect that should be controlled and monitored to make sure that it is done in the right way. Therefore, Amazon has a responsibility of ensuring that all the proceedings are recorded appropriately, along with tracking and documenting key information to stay keen on trends being done within operations. The documented information is to be utilized when the firm needs to research and evaluate how it has been progressing and which areas that have proven to be declining with time. It helps in discussing the way forward on the activities that are noted to have declined to bring up the best methodologies that will assist the firm in recognizing a significant change in a positive way.

Additionally, technological change is an aspect that should never be neglected at any time. It is because it has been discovered that the companies that have been noticed to be doing extremely well in the market have never failed to introduce the most recent technology. Clients have portrayed a high desire for improved technology expecting Amazon Company always to seek the best ways and perspectives that it can adopt when requiring maintaining the newest technology (Paul, 2013). Additionally, for Amazon to attain the customers’ demand there is the need to always come up with questionnaires and interviews whose aim is to give the clients an opportunity to choose what the client want from the company. It is a method of involving the clients in its production activities, which yields the corporation improved image in the market that corresponds to improved returns on investments.

E) Potential Obstacles 

The key obstacle in the industry is the competition that arises with the existence of other large firms in the same industry. In other words, the corporation is faced with a high competition that might transform to reduced returns if the firm does not take full responsibility for eradicating competition. Therefore, different companies will always be fighting for a larger market share than the other suggesting that it is the mandate of Amazon to do its best to earn a better portion of the entire market. Additionally, there is the issue to do with technological challenges and pressures that relate to operation management (Stevenson, & Hojati, 2017). In other words, it is challenging to attain operational management with the continuous evolutions that occur concerning technology and various measures of advancement.

Amazon lacks the certainty of which technology will be in place in the market after a certain period since the market has always introduced new technologies. Also, not all the employees are aware of the computer-aided design and JIT technique suggesting that there will be ineffectiveness among the employees. Additionally, most of the tools that need to be purchased by Amazon to introduce improved technologies are very costly which results in difficulties. Moreover, with challenges arising from international growth, it becomes complex for the staff to control all the global operations including difficulties such as the foreign exchange fluctuations. Therefore, with the existence of all these challenges, it becomes necessary to understand which risk mitigation strategies should be utilized.

F) Risk Mitigation 

The risk mitigation strategies related to these obstacles include identifying pain points to realize what Amazon should do differently from the other competitors. With the existence of technological challenges, the firm should utilize a selected team that will be responsible for development and research activities that will help in accessing new technologies at the moment the knowledge is introduced into the market (Stevenson, & Hojati, 2017). In other words, Amazon should never stop to research since that is one method that can help in discovering the most recent technologies. Additionally, it is no doubt that the company should never stop to train its workers since that will advance their chances of being competent in their actions. The initiation of budgets will always help in ensuring that the company has profits that can be utilized to purchase most of the tools that are inevitable if the company needs to use new technologies.

The component of quality management within operationalization comprises of the various strategies and steps that are related to aligning and advancement of business operations. The company has to make use of total quality management, make sure that it adopts the best business operations, and initiate significant changes if it is to succeed. For the corporation to reach the majority if not all of its objectives, the company has to initiate risk mitigation strategies to include research activities and employee training. Additionally, it is paramount that the firm keeps a good track on documenting and recording information from management and the technologies the business utilizes.

III. Life Cycle Management

A. Life Cycle

The toy and games business idea will be subject to five basic cycles since its development and embracement in the organization. These stages include:

i) Seed and development

At this stage, the idea is officially in existence. The owner is now ready to take the plunge, and there is a need to assess the viability of the idea (Stadtler, 2015). Advice and opinion are gathered at this stage, including personal abilities and readiness of the market for the idea to be implemented in business operations.

ii) Startup

After successful testing of the idea, there is a need to launch it in the market. The startup is considered to be the riskiest stage of the business idea life cycle. Adaptability is of the essence at this stage, which will ensure that feedback is obtained from consumers.

iii) Growth and establishment of the idea

At this stage, the idea should now be generating a large source of income and attracting new consumers into the market (Stevenson & Hojati, 2017). This stage of the cycle is also characterized by improvement in revenue, which is enough to cover all ongoing expenses. Profits also begin to improve slowly, but more steadily.

iv) Expansion

The business begins to adopt a specific routine of operations at this stage (Stevenson & Hojati, 2017). Staff is already in place for the management of the idea, and the firm at this point has already established a presence within the market.

v) Maturity

The organization receives stable profits, and the idea generator is left with two options; to exit the business or expand to further opportunities in the market and industry as a whole, for increased profitability (Stevenson & Hojati, 2017).

B. Profit Generation 

Based on the lifecycle as described in the above section, a lot of profit generation and cost saving opportunities are present, and significantly associated with the toy and game business idea. First, the major opportunity which needs to be exploited is the aspect of children in most target markets. Considering the high middle age population especially in locations within which Amazon operates, the population of children that find toys and games fascinating is bound to boost the revenue of the organization for this specific idea.

Another opportunity which needs to be exploited includes the high demand for toys and games in the consumer market. Most organizations are not keen to implement and avail toys and games, which is considered demanding in most commercial and profit-making organizations. With this gap in the market, the idea is obviously going to generate profits for the business, which may as well lead to increased revenues, high recognition, and positive public image in the retail industry as a whole.

C. Phase-Out Plan 

The planning phase should be the first step in the product phase-out process. After a phase-out plan is laid out, there is a need to embrace the phase-out process now. Depending on the product in question, which is toys and games, in this case, the process might take around a year, to completely exhaust all market supplies (Stevenson & Hojati, 2017). This stage should incorporate the sales team, which should, in turn, make sure that there is a clean message on the failure to replace the commodity.

The marketing department should also be involved in the withdrawal of marketing material from all websites, and catalogs related to the commodity. No more effort should be spent on research and development. Regarding manufacturing, handling the commodity should be in a way that components and inventory are eliminated (Stevenson & Hojati, 2017). Controlling department should decide on handling for costs related to obsolesce. With this plan in place, toys and games will be phased out systematically.

References

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Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Cummings, T. G., & Worley, C. G. (2014). Organization development and change. Cengage Learning.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Stevenson, W. J., & Hojati, M. (2017). Operations management (Vol. 8). Boston: McGraw Hill/Irwin.

Paul, L. (2013). Sustainability. Hoboken: Wiley.