supply chain management case study amazon

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Amazon.com: Supply Chain Management

By: P. Fraser Johnson, Ken Mark

By early 2018, Seattle-based Amazon.com Inc. (Amazon), one of the world's most valuable companies and the largest online retailer in the world, had grown dramatically since its beginnings in 1994.…

Length: 19 page(s)
Publication Date: Jul 26, 2018
Discipline: Operations Management
Product #: W18451-PDF-ENG

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By early 2018, Seattle-based Amazon.com Inc. (Amazon), one of the world's most valuable companies and the largest online retailer in the world, had grown dramatically since its beginnings in 1994. The company that had started as an online bookseller now sold merchandise and digital content in more than 30 categories, including electronics, clothing, books, furniture, and streaming music and video. It sold its own products and listed products for sale by over two million third-party sellers. It provided on-demand cloud-computing services and offered fulfillment and shipping services to businesses, and it had recently entered grocery retailing through its purchase of Whole Foods Market. With 2017 shipping costs that exceeded $21 billion, the company was working to establish greater control over its supply chain network and capabilities. Amazon was selling a huge variety of products in many formats, and the chief executive officer needed to determine how to structure the company's supply chain in order to support its strategy and growth objectives. What supply chain capabilities would Amazon need as its business model continued to evolve?

Learning Objectives

This case can be used in an undergraduate or graduate course on operations management, supply chain management, logistics, business strategy, or marketing. After completing the case, students will be able to assess Amazon's supply chain, and identify its key competitive advantages; quantify Amazon's ability to generate value from its supply chain; identify potential opportunities and challenges for Amazon in improving its supply chain; and analyze the effects of the opportunities and challenges facing Amazon on its growth and evolution.

Jul 26, 2018 (Revised: Nov 11, 2021)

Discipline:

Operations Management

Geographies:

United States

Industries:

E-commerce industry, Telecom

Ivey Publishing

W18451-PDF-ENG

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reMARS revisited: Amazon’s supply chain optimization

How the scot team implemented a system that leverages operations research and machine learning to decide what products to buy, how much to buy, where to place them, and more..

[Editor's note: INFORMS, the world's largest operations research and analytics conference, is occurring this week, so we're sharing this interview and presentation on how Amazon's Supply Chain Optimization Technologies team deployed one of the largest algorithmic decision-making machines in the world for supply chain optimization.]

In June 2022, Amazon re:MARS, the company’s in-person event that explores advancements and practical applications within machine learning, automation, robotics, and space (MARS), took place in Las Vegas. The event brought together thought leaders and technical experts building the future of artificial intelligence and machine learning, and included keynote talks, innovation spotlights, and a series of breakout-session talks.

Now, in our re:MARS revisited series, Amazon Science is taking a look back at some of the keynotes, and breakout session talks from the conference. We've asked presenters three questions about their talks, and provide the full video of their presentation.

On June 27, Deepak Bhatia, vice president of Supply Chain Optimization Technologies (SCOT), and Salal Humair, SCOT vice president and Amazon distinguished scientist, presented their talk, "Hands-off-the-wheel automation: Amazon’s supply chain optimization". Their session focused on a large-scale, hands-off-the-wheel automated system that leverages advanced mathematical optimization and machine learning to decide what products to buy, how much to buy, where to place them, and more.

What was the central theme of your presentation?

We shared the story of how Amazon continuously innovates to deliver better results to our customers, highlighted by the evolution of the SCOT team. We discussed how SCOT deployed one of the largest algorithmic decision-making machines in the world for supply chain optimization, how it helped Amazon scale worldwide, and how — while running the business — we went back to the drawing board to develop new technologies to both meet increasingly higher customer expectations, and to navigate an increasingly complex network.

This innovation is instrumental to giving customers access to the best selection while also delivering products to customers within two to 24 hours in a network that has more than doubled in size in the past five years.

In what applications do you expect this work to have the biggest impact?

SCOT systems influence customers’ experiences with the Amazon Store every day. We build our systems to directly impact these experiences — e.g., promise speed, delivery accuracy, in-stock rates, new selection — and seller experiences, and we relentlessly monitor that impact. We continuously seek to build new capabilities that increase satisfaction and drive the Amazon flywheel.

What are the key points you hope audiences take away from your talk?

Amazon and SCOT are pushing the frontier of science, tech, and product management for e-commerce supply chains. It is possible to run a business at our scale through technology and still innovate as if you are a startup — SCOT’s history is a prime example of this. While a lot has been accomplished, the field for innovation, and for impact, in teams like SCOT is still wide open.

Supply Chain Optimization Technologies (SCOT)
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About This Product

Learning objectives.

assess Amazon’s supply chain, and identify its key competitive advantages;
quantify Amazon’s ability to generate value from its supply chain;
identify potential opportunities and challenges for Amazon in improving its supply chain; and
analyze the effects of the opportunities and challenges facing Amazon on its growth and evolution.
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August 2015 (Revised June 2021)
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Amazon.com, 2021

Format: Print
| Language: English
| Pages: 48

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Understanding Amazon’s Supply Chain Strategy

supply chain management case study amazon

As one of the world’s largest and most successful retailers, Amazon’s supply chain strategy plays a crucial role in its overall success. The company’s ability to efficiently source, produce, and deliver a wide variety of products to customers around the globe has helped it become the preeminent e-commerce leader.

A closer look at the Amazon supply chain strategy reveals the reasons for the company’s dominance. Key elements drive the effectiveness and innovation that has outperformed the competition and attracted the world’s biggest brands to the Amazon marketplace.

The fulfillment process

Inventory and storage.

The first step in getting products to the customers who placed the order is making sure the items are available to be shipped out. For some sellers, this means having a supply of the inventory in stock at a business, warehouse space, storage facility or third-party warehouse. In the case of Fulfillment by Amazon (FBA), it requires sellers to ship products to Amazon’s distribution centers in a manner that meets the company’s strict compliance requirements.

Success for an Amazon seller via FBA or other means requires careful inventory management. It’s imperative that the sellers are capable of meeting customer demand and planning for seasonal surges and events such as Cyber Monday or Prime Day.

Understanding Amazon’s FBA shipping criteria allows sellers to keep their products in stock for customers and ensures a fast and efficient shipping process. The rules include using boxes that match Amazon’s size requirements and avoiding loose packing materials such as packing peanuts or shredded paper. In addition, the shipping label should not be placed over box seams, and each unit should have a scannable barcode with no extraneous barcodes on case-packed units or shipping containers that might create confusion at Amazon’s warehouse. Finally, of course, the packaging should also be sufficient to protect the products while in transit to the Amazon distribution centers.

Order placement

With the inventory ready for distribution, the next step in the process occurs when a customer orders the item. A brand’s marketing, optimization and reputation all play an integral role in driving these conversions.

Once a transaction is completed, the seller can begin processing the order and moving on to the final phase of delivering the chosen item to its intended recipient.

Pick, pack and ship

The pick, pack, and ship stage includes the steps required to ship a product to a customer. The process typically involves the following steps:

Picking – This is the selection of the specific items that are included in the customer’s order. In a warehouse setting, this might involve using a handheld device to scan the items and add them to the order.

Packing – Once the items have been picked, they need to be appropriately packaged for shipping. This usually requires placing the items in a box or other packaging, along with any necessary packing materials to protect the items during shipping.

Shipping – The final step is to ship the order to the customer. The shipper must print a shipping label, attach it to the package, and hand it off to the appropriate shipping carrier, such as USPS, UPS or FedEx.

Seller fulfillment options

Fulfillment by merchant.

Fulfillment by Merchant (FBM) is when a brand uses its own warehouse or fulfillment provider to ship a product to the end customer. For example, a customer would order a product on Amazon. That order is transmitted to the brand’s warehouse, which then picks, packs, and ships it to the end customer. On the surface, this seems like a suitable fulfillment method since inventory can be stored in one location and used to fulfill orders on Amazon, on a brand’s website, and on other marketplaces like Walmart.com . In addition, the merchant avoids having to comply with any Amazon-specific packaging, labeling or shipping requirements and may enjoy more flexibility when bundling products for sale to customers.

However, companies relying on this model will be unlikely to gain Prime eligibility for their products and will have to manage the return process in-house. In most cases, shipping costs will also be higher than the FBA alternative, and shipping times will be longer by several days.

Fulfillment by Amazon

One of the ways that Amazon sellers try to reach their full potential and land the coveted Buy Box is by opting to use Fulfillment by Amazon (FBA) rather than managing the process alone. The service outsources order fulfillment to the online retailer and puts your products inside an Amazon FBA warehouse where they can be picked, packed and shipped by an Amazon employee. Unlike a Vendor Central 1P relationship, the seller retains complete control over pricing and inventory management while relying on Amazon logistics for the rest.

Obviously, the decision to use Amazon’s FBA service comes with added costs. In addition to paying standard seller fees on orders, Amazon will also charge a fulfillment fee based on the type and size of the product. Storage fees for the space that inventory takes up in Amazon’s fulfillment centers are yet another cost that results from using an FBA model for sales.

However, some of these costs would simply originate elsewhere, such as from in-house employees or a different logistics provider. By partnering with Amazon on fulfillment, sellers enjoy an easier path to Amazon Prime status for their products, reduced customer interactions and more streamlined processes for returns.

Multi-channel fulfillment

Many Amazon businesses already take advantage of the platform’s Fulfillment by Amazon (FBA) program to support their efforts to get products ordered on Amazon to the buyer. However, fewer companies may realize that Amazon also offers similar fulfillment services for products that are ordered from other websites. With this option, Amazon Multi-Channel Fulfillment (MCF) can simplify the logistics of order fulfillment by providing the same features and services of Amazon FBA to fulfill orders that originate from most online merchants, including a brand’s direct-to-consumer (DTC) website.

Much like any other third-party logistics (3PL) company, Amazon allows sellers to store their inventory in their vast fulfillment network. Once products are in one or more of the company’s warehouses, order fulfillment can be automated by integrating Amazon’s services with other e-commerce platforms. Amazon will then handle the picking, packing and shipping of products even when they are ordered via a sales channel other than Amazon. These orders remain fully trackable, and Amazon Multi-Channel Fulfillment can also manage customer returns according to the seller’s preferences.

While brands can use Amazon’s MCF and FBA programs simultaneously, it’s worth noting that the company will always prioritize Amazon orders over those from other sources. However, the Multi-Channel Fulfillment program is not restricted to sellers who use Amazon as one of their sales channels. Even brands that use only their own DTC site or alternative e-commerce solutions can still choose to have Amazon handle their order fulfillment.

Amazon’s fulfillment advantages

Warehousing.

Amazon’s growth over the past two decades is largely due to its approach to order fulfillment. The marketplace’s emphasis on quickly delivering items, including its popular two-day Prime shipping, has set the standard for the industry. But, clearly, their fulfillment strength begins with their warehousing strategy.

The company’s largest warehouses are located in near population hubs, with the Amazon inventory split among them to minimize delays. Each distribution center is optimized to make picking, packing and shipping as efficient as possible. In addition, inventory storage is divided into separate areas according to demand and shipping requirements, such as one for magazines and books, another for Prime items and others for oversized or irregularly-shaped products.

In addition, Amazon utilizes various types of warehouses and fulfillment centers dedicated to particular tasks. According to the company, these include:

Sortable fulfillment center – Around 800,000 square feet, sortable fulfillment centers can employ more than 1,500 full-time associates. In these buildings, Amazon employees pick, pack, and ship customer orders such as books, toys, and housewares. Thanks to the innovations of Amazon Robotics, associates often work alongside robots, allowing them to learn new skills and help create a more efficient process to meet customer demand.

Non-sortable fulfillment centers – Between 600,000 to 1 million square feet, non-sortable fulfillment centers employ more than 1,000 full-time associates. In these centers, associates pick, pack, and ship bulky or larger-sized customer items such as patio furniture, outdoor equipment, or rugs.

Sortation centers – At sortation centers, Amazon associates sort customer orders by final destination and consolidate them onto trucks for faster delivery. Amazon’s sort center network powers the ability to provide customers with everyday delivery, including Sunday delivery.

Receive centers – Amazon’s receive centers support customer fulfillment by taking in large orders of the types of inventory that are expected to sell quickly and then allocating those items to fulfillment centers within the network.

Specialty – Amazon’s fulfillment network is also supported by additional types of buildings that handle specific categories of items or are pressed into service at peak times of the year, such as the holiday season.

Similar to its approach to warehousing, Amazon is revolutionizing the delivery options that customers can utilize when shopping on the platform. In recent years, Amazon has accelerated the time needed to get orders from storage to the purchaser and launched new methods that increase efficiency.

Free, two-day Prime deliveries are likely one of the most familiar. While the company and its sellers still use third-party carriers like UPS, FedEx and the U.S. Postal Service for some deliveries, Amazon has also added its own proprietary shipping options. Drones that land in your backyard or on your roof can deliver products in a matter of hours. Amazon-branded trucks and delivery vans are now offered via a franchise-like structure to entrepreneurs and small businesses interested in expanding the company’s delivery footprint.

The company also focuses on making the delivery process more convenient via its Hub & Locker and Hub Counter locations. At the same time, Amazon Key gives delivery drivers the ability to place packages inside a home or garage. As a result of these innovations, delivery times are reduced and convenience for shoppers and Amazon is increased.

Customer service and returns

Amazon has built a reputation for having a strong customer service team and for making it easy for customers to return products. This is likely because Amazon has invested heavily in developing a comprehensive and user-friendly returns policy and process and training its customer service staff to be knowledgeable, helpful, and efficient.

Amazon also offers a wide range of options for returning products, including the ability to return items by mail, at a local drop-off location, or select retail stores, and provides clear instructions for how to do so. Additionally, Amazon provides convenient tracking and updates throughout the returns process and often offers refunds or replacements quickly and without hassle. All of these factors contribute to making the customer service and returns experience with Amazon generally positive and stress-free.

When third-party sellers opt for an FBA agreement, Amazon handles the customer service and return processing for those brands. While this sometimes leads to concerns about the condition of returns and fraud, it does minimize the costs and time-consuming burden of handling those responsibilities in-house.

Technology

Amazon’s supply chain management relies heavily on technology and is often among the first to integrate new technologies. The company uses robots, automated conveyor belts, and other technology in its fulfillment centers to streamline the process of sorting, storing, and shipping orders. Advanced software optimizes routes and schedules for its delivery trucks, planes, and other transportation assets, to reduce costs and increase efficiency. Sophisticated algorithms and data analytics help track and manage inventory levels and predict product demand. Technology such as barcodes and RFID tags can track products throughout the supply chain and ensure that goods are shipped and delivered accurately and on time. And as mentioned, drones are now being used to make some Amazon Prime Air deliveries in larger markets.

Overall, Amazon’s use of technology in its supply chain helps the company to operate more efficiently, reduce costs, and improve the speed and accuracy of its fulfillment and delivery operations. But the advantages also extend to the companies it works with. For example, the Seller Central and Vendor Central dashboards provide sellers with a central hub to manage their relationship with Amazon, and each offers a wealth of data to help with forecasting and optimization.

Manufacturing

As Amazon has grown, so has its focus on private-label brands. Inspired by the success of house brands in brick-and-mortar stores, Amazon hoped to capitalize on its ability to market low-priced products backed by the company itself. Since committing to the tactic, they have offered private label products, some bearing the Amazon name, in categories ranging from food to clothing to electronics.

However, new reporting indicates a shift may be on the horizon. While sellers and brands utilizing Amazon have previously focused on competing with Amazon’s private label brands, the new priority may be on learning how to adjust to a marketplace with fewer Amazon-branded products available, but new challenges that would accompany such a transition.

Both Vox and the Wall Street Journal addressed the potential change in Amazon’s strategy in recent weeks. Their reports centered on the possibility that Amazon’s efforts to drive market share in-house may lead to more harm than profit.

Among the motivations for a decision to minimize these offerings is the scrutiny Amazon has faced from government regulators due to their private label products. There are well-documented questions about how Amazon’s role as a marketplace and data-collection company may conflict with its aspirations to sell more of its in-house brands. Regardless of what happens in the future, current sellers should be aware of the industry climate and have a plan to respond in ways that will grow their businesses.

Amify can deliver for your brand

Find the right Amazon warehousing strategy for your business with help from the experts at Amify . They understand the impact that a delivery option can have on your bottom line and how growing sellers can make Amazon’s supply chain strategy and operations an important advantage. Contact us today to learn more.

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Amazon Supply Chain: Understanding how Amazon’s supply chain works

Whether you are a small or medium-sized business looking to scale your eCommerce operations, Amazon is one of the best examples to learn from to improve productivity, expand the reach, and maximize profits. Though several factors make Amazon the eCommerce leader it is today, one of the most critical elements to its success has been Amazon’s state-of-the-art supply chain.

Amazon has one of the biggest and most efficient supply chain operations globally. While the basic model has remained the same since its inception, it has adopted newer technologies over the years to streamline its operations and improve its efficiency.

Below, we explain how Amazon’s supply chain works and look at the key elements contributing to the company’s success.

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What is the Amazon Supply Chain?

Amazon fba and fbm, how does the amazon supply chain work, what happens when you buy a product on amazon, components of amazon supply chain strategy.

The supply chain of Amazon refers to the entire process on the platform, right from product warehousing and inventory management to pricing and delivery. Over the years, Jeff Bezos and his team have devised new ways to optimize every part of the supply chain process, ensuring everything works efficiently and smoothly to guarantee customer satisfaction.

As third-party sellers contribute up to 55 per cent of the total sales Amazon makes, the company makes sure these sellers using the platform have multiple fulfilment options available.

when it comes to selling on the platform, Amazon sellers have two options:

Fulfilment By Amazon (FBA) – Amazon takes care of logistics and customer support in this model. Sellers send products in bulk to the fulfilment centres from where the company picks, packs, and ships to customers. This fulfilment option is ideal for sellers who handle small and lightweight products or cannot arrange for logistics.

Fulfilment By Merchant (FBM) – With this option, third-party sellers are responsible for listing their products and taking care of storage and fulfilment on their own.

There is also an FBA Onsite option where Amazon uses its warehouse management program to help sellers optimize their operations. Third-party sellers take care of the inventory of the products, but Amazon is responsible for picking the products from the inventory and selecting the best fulfilment method.

Amazon covers all the bases for different seller types by offering these two programs. Sellers who want to store, pack, and ship products on their own can use FBM, while others can go with the FBA.

Related: How to start an Amazon FBA business

Amazon has been known to reduce delivery times and even offer same-day delivery. This is because it recognized the need for super-fast delivery among customers. There are two main components crucial to the success of Amazon’s supply chain – Amazon Fulfilment Centers & Amazon Delivery Fleet.

Amazon Fulfilment Centres

Amazon puts a robust fulfilment and logistics network to complete orders and meet the ultra-fast delivery expectations of over 110 million Prime membership subscribers. At present, it has more than 175 fulfilment centres across the world. Amazon also has approximately 500 warehouses near metropolitan cities globally.

Related: Crucial Tips for Selling on Amazon that every Seller must know

As the eCommerce sector experienced a boom in the past few months, Amazon has shown considerable growth. In ten months, it has hired about 427,000 employees to keep up with the increasing demand.

Third-party sellers have seen up to 60 per cent growth in sales, and the trend is expected to continue in the coming months. To respond to the growing demand, it will also open about 50 new warehouses and fulfilment centres in the United States.

Amazon Supply Chain - Amazon's global supply chain

Amazon Delivery Fleet

Amazon uses many logistics and delivery partners to deliver orders to customers on time. Trucks are used to carry boxes from fulfilment centres to sort centres. Then packages are sorted depending on the delivery speed and location. After this, the most efficient transportation mode is chosen to transport the packages.

Amazon uses an airplane fleet to meet the one-and-two-day delivery window offered to Prime members. The company uses vans, trucks, bikes, and even robots to facilitate timely delivery on the land. Amazon is presently working on drones to deliver products to locations near fulfilment centres.

Let us understand how Amazon’s fulfilment centre works to complete an order.

Receiving Products

Products are either stored into pallets manually or handled by machines at these centres. Freight is separated based on where it comes from, whether third-party vendors or Amazon facilities. Over half of the products sold on the platform come from small businesses and solopreneurs.

Product Storage

Amazon does not categorize its storage by type but instead stores everything randomly. There are yellow bins containing random items tracked by computers. The containers are then transported to associates depending on the size.

Picking Orders

When a customer buys a product, a robot brings pods of items to Amazon associates at the pick stations. The pickers read the screen, retrieve the product and place the product in a tote box.

Quality Assurance

A lot of quality assurance is required for the proper working of robots with humans. An item’s physical location should match the computer entries so that robots can function well.

Finally, products are organized and sent to the pack station, where box sizes are chosen, and the amount of tape required to pack them is measured. Items coming from third-party vendors ship out in their original packaging, but Amazon works with them to reduce these costs.

While the process of buying from Amazon seems straightforward, it involves a few crucial elements that come together to ensure a smooth shopping experience.

Warehousing

A big factor behind Amazon’s success, the warehousing strategy the company adopts is smart enough to make sure products are accessible from anywhere in the world. It hosts many warehouses and distribution centres near big metropolitan cities. Currently, there are 175 warehouses globally, the majority of which are located in Europe and North America.

Amazon stores its product inventory across these centres to quickly meet the demand. Such an extensive network of warehouses allows it to deliver orders to customers quickly and cost-efficiently. It also has mini-warehouses in smaller areas to ensure enough supply. All the warehouses are optimized from within, with five storage areas. Employees and robots can quickly find products and get them ready for dispatch.

Amazon’s delivery options are one of the most significant factors differentiating the supply chain from other eCommerce operators. The company offers two-day Prime deliveries, free delivery, and even the Prime Now option that delivers the products within two hours. Amazon uses a host of methods ranging from traditional to high-tech to deliver orders with lightning speeds worldwide.

Amazon has delivery trucks, vans, and even bikes operating in specific areas; it also leverages traditional routes like UPS and FedEx. Such a wide range of delivery strategies enables it to deliver faster, more efficiently, and easily to any location globally, even in rural and remote areas that traditional options don’t cover.

Related: 10 Dropshipping Tips that will drive sales growth

Technology adoption is at the core of the Amazon supply chain strategy, helping it work efficiently and cut costs. The company relies on several automation and robotic solutions to pick, pack and ship orders. Such tools and techniques improve the delivery speeds and cut down the costs associated with warehousing and staffing, saving funds for other processes.

One of the biggest advancements in technology anticipated by Amazon is its Prime Air Drone Delivery. Though still in its development phase, the program will ensure 30-minute deliveries in some areas once operational. Customers with an Amazon-branded landing mat living within 15 miles of the nearest fulfilment centre can qualify for a delivery option.

Manufacturing

Amazon has discovered that it can benefit from manufacturing more popular products to increase its profits and provide cheaper options.

Currently, the company has started white-labelling products from sellers and offering options across categories that include everything from household goods and pet supplies to a lot more. This strategy allows Amazon to keep the entire lifecycle of products, from production to delivery, in-house.

Related: What are the risks of dropshipping, and how do you avoid them?

Cost-effectiveness is one of the most crucial parts of the Amazon supply chain. One of the most innovative strategies is to segment the customers into Prime and Standard, offering varying service options at different prices. By creating additional shipping and delivery windows, Amazon keeps the flow of orders smooth, allowing it to respond to changes in demand without affecting the supply chain as a whole.

Amazon also uses such a pricing strategy for its FBA program. It understands that the large inventory can raise costs and slow down fulfilment. It, therefore, charges high storage fees for long-term usage from FBA sellers. This ensures that sellers only send sufficient inventory to meet the demand, and Amazon’s costs don’t rise.

Amazon Supply Chain - Amazon's global popularity

Global Reach

Amazon operates 11 online marketplaces globally to let sellers grow their business worldwide, regardless of where they are physically based.

Businesses can introduce their products to millions of potential customers with these marketplaces located across Asia, Europe, and North America. When sellers register with one of these marketplaces, they get instant access to loyal customers who trust Amazon’s experience.

Related: Which is the Best Online Marketplace: Selling on Etsy vs eBay vs Amazon

Final Thoughts

The Amazon supply chain works efficiently with its latest innovations to beat the biggest competitors. This retail giant has set an example for eCommerce businesses with its consumer-centric approach and use of technology.

Regardless of the industry it enters next, Amazon’s unique supply chain strategy combined with innovations suggests that it will continue to rule the landscape.

Pia has consulted for a number of digital startups and small businesses in Asia before coming to the UK. Pia writes about a wide range of SaaS and B2B products, including trends and issues on e-commerce, accounting and customer service software. She’s also covered a wide range of topics in business, science, and technology for websites in the U.S., Australia and Singapore.

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Ring and Amazon Multi-Channel Fulfillment

ring video doorbell mounted on door frame outside door

Ring specializes in effective and affordable whole-home security solutions, with products like the first Smart Video Doorbell and the award-winning Ring Alarm. The company was founded in Southern California by Jamie Siminoff, who set out to create a product that would allow him to answer the door while he was busy working and inventing in his garage. Since then, the Video Doorbell has evolved into an entire line of home security devices and services helping to make home and neighborhood safety accessible to everyone.

Ring joined Amazon in 2018 and has continued its rapid pace of innovation, with products, integrations and features spanning cameras, doorbells, alarms, lighting and accessories. Ring products are available in both brick and mortar stores and on ecommerce sites such as Amazon.com and Ring.com .

Since day one, Ring has been driven by its mission to help make neighborhoods safer. Ring continues to invent in support of this mission and build products that provide real value to customers, remaining committed to delivering more choice, affordability, and convenience to customers every day.

“Looking ahead, we’re more committed than ever to providing the best possible experience for our customers,” said Jamie Siminoff, Founder and Chief Inventor of Ring. “This means doubling down on offering whole home security in a truly seamless way, and providing customers with devices and features that work smarter together.”

Woman in orange sweater holding daughter's hand by front door with ring video doorbell mounted on the wall

Ring initially managed order fulfillment from a primary warehouse in Southern California. As the company’s customer base and product portfolio expanded, it became clear that efficiencies and expansion would help accelerate delivery times, particularly for customers across the country. By working together, Ring and Amazon have found numerous ways to advance a shared commitment to keep delighting customers. And using Amazon Multi-Channel Fulfillment (MCF) for order fulfillment solutions was a natural fit for Ring, officially kicking off in July 2020.

One of the most important benefits of using MCF, according to Carlo Maerna, a Senior Manager at Ring, is the ability to offer customers an enhanced shipping experience to receive their orders as soon as possible.

“We knew a collaboration with Amazon’s fulfillment network would advance the shipping and delivery experience, and thereby the entire Ring experience, for our customers,” said Carlo when asked about the expansion of the fulfillment network to MCF.

Ring capitalized on leveraging Amazon’s network of about 150 fulfillment centers all throughout the United States. This change enabled Ring to stock inventory closer to their end customer and offer free two-day shipping to many customers at more competitive rates.

“MCF has enabled Ring to offer many customers free two-day shipping in an efficient and effective manner,” added Carlo.

Ring is constantly working to raise the bar when it comes to innovating for customers.

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Amazon Supply Chain Management-Case Study

In the current era of technology and the internet, the business has become very complicated and complex. With the advent of globalization, the sector of business and management has been completely revolutionized and transformed as compared to the traditional methods of conducting business operations. It has lead to more and more competition between a big and well-known business organization that operates its business activities all over the world. In this context, the factor of supply chain management remains at the center of the topic. It occupies the central position of the overall regulation of business management because it has a major role in accelerating the quality and sales rate of the companies. However, poor management of supply chains has drastic implications on the business organization in terms of customer dissatisfaction, loss of trust, poor quality of product and services, loss of reputation, and increased market competition (Sahu, 2017). Therefore, supply chain management has a central role in achieving a high productivity rate in the competitive market, globally (Yu et al, 2017).

The purpose of this essay is to understand the real meaning of supply chain management in the context of one of the most well-known and prominent e-commerce business organizations- Amazon.com. The paper aims to establish the internal strategic decisions of this big online business organization in relation to supply chain management and how it is successfully fulfilling the demands of every customer all around the world.

Therefore, firstly, this essay will explore the background of Amazon.com, and then it will analyze how this big e-commerce business organization is managing its supply chain in such a dynamic environment of contemporary business. Towards the end, it will discuss critical success factors of supply chain management strategies adopted by Amazon.com. And finally, in the last section, the final takeaways will be discussed about the overall analysis of Amazon supply chain management.

In order to explore the strategies of Amazon.com for supply chain management, it is important to understand its importance in the context of the contemporary business environment. The contemporary business environment can be characterized as excessively competitive and dynamic. Case study assignment help experts suggested an Increased market opportunities, competitors, outsourcing of production, the satisfaction of the customer, and others have become prime importance for the current business organization. In all these scenarios, managing supply chains has become a crucial task. The supply chain can be defined as a network of business organizations and processes to select raw materials and transform them into a finished product. It also involves its distribution to the customers (dos Reis et al, 2014). Supply chain management helps the business organization to decide when and what to produce, enhance communication system to place an order, and tracks the current status of the placed order. Along with this, it also helps the business firms to check inventory and the availability of stock products. Moreover, it also reduces the cost of inventory, transpiration, and warehousing. Besides this, it helps the firm’s manager to fulfill the actual demand of the customers by placing the right order at right time (Snyder, 2013).

It is a known fact that supply chain management and logistics have greatly influenced the business activities on an online platform. The advancement in the internet and technologies has provided immense opportunities to entrepreneurs to develop new business strategies for conducting business activities on an online platform. Online business is commonly known as E-commerce pr electronic-commerce. E-commerce business can be defined as the purchase and sale of products and services with the help of the internet. It is a virtual business platform. E-commerce business relies on technologies and the internet only, it has very minimum involvement of human physically, unlike in the traditional business model (Kwilinski et al, 2019). One of the classic examples of e-commerce business is Amazon.com. One of the fundamental approaches of Amazon that took the company at zenith is its strategic supply chain management processes.

Background Of Amazon Company

Amazon is one of the dominant retail companies in the world which is conducting its extensive business operation by adopting an E-commerce business model. It is an American company, which was started by Jeff Bezos in the year 1995. The company is based in Seattle, Washington. In the initial phase of the company, it was a bookstore. Eventually, it started to diversify its products and become one of the biggest e-commerce retail companies in the world. In terms of objectives and mission, Amazon has given primary importance to its brand name. Along with this, it aims to provide marvelous value and a superior shopping experience to the customers and clients (Majed et al, 2018). Thus, it is a customer-centric business organization that gives values and quality products to the customers.

As per the analysis of the research study of Lai et al (2018), Amazon has hundreds of millions of merchandise, and half of them are sold by a third-party seller. In terms of net profits, the graph is increasing every year. The year 2016 and 2017 saw the highest profitability of Amazon. In the year 2018 also, the levels of profits of Amazon has reached new heights, hence, it has made the company the second-most valuable company in the world, after Apple.

In the above three figures, the representations of the graph depict that the Amazon E-commerce company has a remarkable growth and profits in recent years. Moreover, it is a known fact that supply chain management plays an important role for E-commerce companies. Since e-commerce companies totally rely on their logistic system, therefore, effective management of the supply chain can significantly boost the sales and profit rates of the company. Therefore, it can be easily understood that Amazon must have developed some effective and powerful strategies to manage supply chains that is ultimately resulting in tremendous profitability and success of this E-commerce company. However, Wal-Mart is one of the fierce competitors of Amazon (Collis et al, 2018). But overall, Amazon has managed to overcome the competition of Wal-Mart by establishing efficient inventory networks and distribution centers. To know more about Wal-Mart supply chain management, contact my assignment help experts of SourceEssay.

Analysis Of Supply Chain Management Of Amazon.Inc

The supply chain process of Amazon includes warehousing of products, management of inventory, pricing, and logistic. This E-commerce business organization has optimized all these elements efficiently to ensure a smooth supply chain. In order to maximize the supply of products, Amazon has provided two fulfillment options to the consumers (Dunne, 2020). These two fulfillment options are categorized as fulfillment by Amazon and fulfillment by the merchant. The first option, that is fulfillment by Amazon, provides services of storage, packing, and shipping orders to those who prefer a hands-off approach.

On the other hand, in the second approach, consumers can themselves do storing, packing, and shipping of the products. In addition to this, to increase supply efficiency, Amazon has adopted high-tech equipment for picking and packing the products. For this, the company has acquired the Kiva system (a kind of robot). By the end of the year 2017, the company has installed approximately forty-five thousand Kiva robots to achieve fast and effective packing of products. The study of Collis et al (2018) reflects that Kiva robots have successfully able to reduce the timing from sixty-five minutes to fifteen minutes from receiving the order to shipping the order. Moreover, it uses FedEx and UPS to ship the products globally via plane or van for local delivery.

Since Amazon has an independent sales website, which operates its virtual business in several countries around the world. These countries are the U.S.A, the U.K, France, Germany, Italy, India, Brazil, and many more. One of the most strategic for saving a lot of storage cost is to integrate the inventories in DCs and partner’s warehouses. Amazon has adopted this strategy that helps the company to save a lot of storage costs. As opined by case study writing help professional it reduces the cost of inventory physical retail stores. Hence, there is no need for Amazon to spend its cost on physical retail stores for the purpose of inventories (Yu et al, 2017). All the warehouses of Amazon are situated near large population hubs. All the warehouses of Amazon have a well-developed communication system and logistic networks that help them to transport the product from one place to another without making any mistakes or errors. As per the study of Hook and Wright (2015), the support of technologies inside the warehouses of Amazon has been a key advantage and helped the company to develop more than one hundred and twenty giant warehouses around the world. to strengthen its delivery services, Amazon has built more than two dozen Prime Now Delivery hubs across the cities. Along with this, the company has also incorporated a drone system to deliver the products within a limited range of areas in the city. Under the proposal of Amazon Prime Air, the company promises the customers to deliver the products within thirty minutes by using drones (Singireddy and Daim, 2018). It helps the company to reduce delivery costs and makes the delivery faster and smoother. Along with this, it also enables the company to manage its corporate social responsibility effectively. In addition to this, this giant e-commerce company has also developed a new network of midsized distribution centers. This is also known as a sortation center that acts as a link between the giant warehouses and local post offices.

Another strategic move adopted by Amazon to improve its supply chain management process is efficient transportation. As per the analysis of the research study of Allen (2017), efficient transportation management plays a vital role in achieving efficient supply chains. End-to-end visibility in the transportation of products helps the company to tackle challenges related to shorter lead times, absence of drivers, increased freight costs, and many more. In this scenario, Amazon’s powerful step to strengthen its logistics is very crucial. The company decides to remain independent in terms of logistics. Amazon understands that depending on a third party for delivery will only delay the delivery timing of the products. This will only lead to customer dissatisfaction and loss of trust. Now, Amazon’s own logistics has made it possible to deliver the product within twenty-four hours of placing the order. In addition to this, this giant e-commerce business organization has also introduced motorcycle delivery services in some countries of the world, including India. Moreover, the allowance of paying cash after delivery has attracted a large number of customers from all over the world. In other areas of the world such as U.S metro areas, Amazon has successfully launched a new supply chain services in the year 2015. One of these supply chain services is one-day services that have attracted a lot of customers to order products of urgent need (Shranya and Nair, 2018).

Another reason behind Amazon’s success in the field of supply chain management is related to pricing schemes. Cost-effectiveness is one of the crucial parts of the supply chain management of Amazon. As per the analysis of the study of Dunne (2020), Amazon has cleverly differentiated its customer base. This strategy has helped the company to save a lot of delivery charges. In differentiating customers on the basis of the prime customer and standard customers, the company has offered different delivery options to both segments of customers. For example, in such a pricing scheme of product delivery, the prime customer may have to pay more for the product but receives free and super-fast delivery. On the other hand, standard customers of Amazon may pay the normal price of the product but receives slow delivery.

In the context of inventory management, Amazon has developed a three-tier system for the flow of information and products (Bharadwaj, 2019). In the below figure, the three-tier system of inventory segmentation represents the flow of information from Tier 1 to Tier 3 or vice-versa. In the first phase, which is the website of Amazon’s e-commerce and IT system, there is direct contact with the customers. This phase passes the information to the three tiers in the supply chain. Hence, it can be seen that there is a flow of information from Tier 1 to Tier 3. On the other hand, the flow of goods or products is from Tier 3 to Tier 1. To know more get free assistance from cheap assignment help experts of SourceEssay.

With respect to sourcing, Amazon has multiple partners that belong to different countries. For example, Ashford.com is one of the pioneer partners of Amazon which is an online retailing of luxury and premium products. Other partners are Della.com, Gear.com, HomeGrocer.com, and many more. Partnerships also help Amazon to operate its business activities efficiently and effectively all around the world. Another strategy adopted by Amazon company to manage its supply chain is

Thus, it has been acutely analyzed that how Amazon Company has emerged as a giant and powerful retail e-commerce business organization by effectively managing its supply chains. E-commerce is largely reliant on its supply chain management and if the company has implemented its strategic decision in terms of supply chain management, then, it will receive maximum output and profits.

Critical Success Factors Of Amazon In Relation To Supply Chain Management

The above analysis of Amazon’s supply chain management strategies reflects that it is the key to achieving a desirable outcome. Due to its robust and appropriate supply management strategy, Amazon is witnessing immense popularity and growth and enjoys excessive competitive advantages. It is successful in leaving behind the two rivalries, eBay and Wal-Mart by bringing constant innovation in the field of supply chains. As of 2918, Amazon has around two-hundred and eight distribution and fulfillment centers in the USA only. Along with this, it has more than thirty-two Boeing, around eight hundred aircraft, and thousands of trucks to ship the products globally (Yu et al, 2017).

The critical success factors in the field of supply chain management can be categorized as budget reliability, market competence, good logistic system planning, well-designed distribution system, effective communication, fairness, trust, application of technologies, and many more (Ab Talib and Hamid, 2014).

The first critical success factor of Amazon’s supply chain management is its logistic system. It acts as a weapon for Amazon to compete confidently with its rivalry in terms of speed, reliability, and cost. The enhanced logistic function of Amazon has helped the customers of this business organization receive fast and correct delivery of products. The company is using predictive analytics tools to examine customer’s shopping history, choices, patterns, and preferences. This helps the company to predict the shopping behavior of the customers and acts accordingly to maintain and manage supply chains. Well-managed logistics improve the efficiency of supply chain management of Amazon. In ocean freight, a lot of organizations and paper works are involved. In addition to this, a lot of works are done manually, chances of error and mistakes are high. It also results in delayed delivery of products. However, by leveraging blockchain technology, all the updated information and documents can be verified easily within a short span of time. Hence as said by assignment writing service experts this helps Amazon and involving parties to conduct fair and transparent business activities without any delay (Groenfeldt, 2017).

Another critical success factor of Amazon’s supply chain is the technological factor. Implementing robotic technology to manage warehouse for picking and packing the products can be regarded as one of the most influential success factors in adding value to the supply chain management effectiveness. The installation of robots has brought many significant advantages in terms of reducing delays, increasing efficiency, productivity, assisting customers, and reduces labor cost (cost-saving) (Jain and Sharma, 2017). In the context of reduced delays, the study of Daniels (2015) states that the use of robotic technologies in the firm will help it to achieve positive outcomes. In the same way, the installation of robots helps the Amazon Company to avoid huge initial investments. Thus, this will also reduce the operating cost of the company. In addition to this, it deducts labor costs by replacing human workers with robots that ultimately serves as a cost-saving mechanism for Amazon. Free assistance is being rendered by SourceEssay native writers for preparing tuition assignments .

The overall purpose of the present essay seems to be fulfilled by analyzing the supply chain management strategies adopted by one of the biggest and powerful online retail company-Amazon. The current paper has discussed the main advantages of focusing on and improving supply chain management for a firm. Especially, in the context of e-commerce business organization, the essay has analyzed that the supply chain is the only and major source of achieving maximum profits and customer loyalty. The overall business of e-commerce relies on its supply chain management. Next, the essay has provided a deep insight into the background of Amazon Company and how this company has managed to spread its dominancy from a bookstore to the overall empire of the world of business. It has vividly represented the stock price, revenue profits, and operating profits of Amazon and understood that this company has effectively managed its supply chain process to reach heights. Further, the essay tries to dive deep into the main areas of supply chain management in which Amazon has significantly applied its strategic planning. It has been observed that logistics, technologies, transportation, pricing, were the main areas in which this retail company has given primary focus. It has brought several innovations and schemes to make an efficient and smooth supply of products from one location to another location around the world. Be it the decision of remaining independent in logistics, or pricing schemes, the company has shown remarkable progress and growth in every aspect of supply chain management. A further section of the essay has explored critical success factors and concluded that logistics and technological implications are the main critical success factors of Amazon.

Thus, in order to conclude, it can be said the Amazon has evolved greatly as per the external environmental situations of modern business. It will continue to evolve and grow if it maintains the same level of consistency in terms of supply chain management.

Ab Talib, M.S. and Hamid, A.B.A., 2014. Application of critical success factors in supply chain management. International Journal of Supply Chain Management , 3 (1), pp.21-33.

Bharadwaj, S., 2019. The Engineering Behind A Successful Supply Chain Management Strategy: An Insight Into Amazon. Com. International Journal of Scientific and Technology Research , 8 (10), pp.281-286.

Collis, D.A.V.I.D., Wu, A.N.D.Y., Koning, R.E.M.B.R.A.N.D. and Sun, H.C., 2018. Walmart Inc. takes on Amazon. com. Harv. Bus. Sch. Publ , p.30.

Dunne, C., 2020. How the Amazon Supply Chain Works. Retrieved from: https://www.business2community.com/brandviews/xsellco/how-the-amazon-supply-chain-works-02359957

Groenfeldt, T., 2017. IBM and Maersk Apply Blockchain to Container Shipping. Forbes.

Hook, L. & Wright, R., 2015. Amazon aims to go it alone with deliveries, Financial Times

Jain, D. and Sharma, Y., 2017. Adoption of next generation robotics: A case study on Amazon. Perspect. Case Res. J , 3 , pp.9-23.

Johnson, T., 2020. How the Amazon Supply Chain Strategy Works. Retrieved from: https://tinuiti.com/blog/amazon/amazon-supply-chain/

Kwilinski, A., Volynets, R., Berdnik, I., Holovko, M. and Berzin, P., 2019. E-Commerce: Concept and Legal Regulation in Modern Economic Conditions. Journal of Legal, Ethical and Regulatory Issues , 22 , pp.1-6.

Lai, G., Liu, H. and Xiao, W., 2018. ‘Fulfilled by Amazon’: A Strategic Perspective of Competition at the E-commerce Platform. Available at SSRN 3270958 .

Majed, S.Z., Nuraddin, S.H. and Hama, S.V.S., 2018. Analyzing the amazon success strategies. Journal of process management. New Technologies , 6 (4), pp.65-69.

Sahu, M., 2017. Strengthening Supply Chain for Growth of Organized Retail Industry.

Shranya& Nair, S.V., 2018. Supply Chain Management System of Amazon. International Journal of Latest Technology in Engineering, Management & Applied Science, 7 (1).

Singireddy, S.R.R. and Daim, T.U., 2018. Technology Roadmap: Drone Delivery–Amazon Prime Air. In Infrastructure and Technology Management (pp. 387-412). Springer, Cham.

Snyder, R., 2013. E-commerce and supply chain management. ASBBS Proceedings , 20 (1), p.237.

Wells, J.R., Danskin, G. and Ellsworth, G., 2018. Amazon. com, 2018. Harvard Business School Case Study , (716-402).

Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2017. E-commerce logistics in supply chain management. Industrial Management & Data Systems .

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Supply Chain Management: Case Studies of International Supply Chain Organizations

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Supply Chain Management: Case Studies of International Supply Chain Organizations Paperback – June 11, 2017

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Supply Chain Management: Case Studies

This book contains an overview of what a supply chain is and how it is structured before moving on to case studies of some of the largest supply chain organizations in the world.

Many people don’t consider the likes of Coco Cola and Apple to be supply chain organizations but when you look more closely at the companies, when you delve behind the face that the public sees, you start to see just how involved in supply chain each of them really are. In my book, I

have tried to provide some information on how their supply chains work and how they made them better before taking a brief look at some of the biggest supply chain failures in the world.

Read it now!

Print length 50 pages
Language English
Publication date June 11, 2017
Dimensions 6 x 0.13 x 9 inches
ISBN-10 1521483035
ISBN-13 978-1521483039
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Product details

Publisher ‏ : ‎ Independently published (June 11, 2017)
Language ‏ : ‎ English
Paperback ‏ : ‎ 50 pages
ISBN-10 ‏ : ‎ 1521483035
ISBN-13 ‏ : ‎ 978-1521483039
Item Weight ‏ : ‎ 4.5 ounces
Dimensions ‏ : ‎ 6 x 0.13 x 9 inches
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About the author

Khalid zidan.

Khalid has worked in a number of global large, global companies including a well-known Fortune 500 company. These positions took him to various countries across Europe and the Middle East over the last 10 years. He originally studies engineering, and then went on to complete further study in the field of supply chain. He has written several books about supply chain and procurement.

As a side business, he has founded serial websites (most of them are absolute failure:)) from SEO, Freelancers, Market Review, Affiliate Market, Dropshipping and more. He will highlight as much as I can in his books these failures to you and how to overcome them, so you do not have to make my stupid mistakes.

Khalid has decided to help people just like him who are struggling in their lives and really wanna achieve what they have been dreaming of. He believes everyone can be successful and realize their dreams if they only have the right mindset! That’s it; this is the core, the right mindset.

He will do my best here to cover major obstacles that he has personally gone through, and he is sure every entrepreneur out there has.

If you have any questions or you wish to contact me, go ahead: http://successentrepreneur.org/

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Overcoming supply chain challenges with AI and ML

In a recent episode of the HCLTech Trends and Insights podcast, Chirag Modi , the former Corporate Vice President of Global Industry Strategy at Blue Yonder and Sadagopan Singam, the Executive Vice President and Global Head of SaaS and Commercial Applications, Digital Business Services at HCLTech discuss the range of challenges facing global supply chains and how the adoption of technologies like artificial intelligence (AI) and machine learning (ML) can help overcome these hurdles.

Global supply chains are confronting an array of challenges, from increasing customer demands to navigating the complexities of climate change and sustainability mandates. In the throes of evolving market conditions, including the lingering impacts of the COVID-19 pandemic, supply chain resilience is being tested like never before.

The AI and ML revolution

To overcome these challenges, the discussion turned to the adoption of AI and ML as game changers in the realm of supply chain management . The implementation of these technologies can lead to significant enhancements in areas like forecast accuracy, demand forecasting and overall supply chain planning—key aspects that have been historically difficult to manage due to the sheer amount of data and variables involved. With the power of AI and ML, billions of forecasts can be generated to accurately predict and adjust to the fluid demands of a global marketplace.

The HCLTech and Blue Yonder alliance

The conversation offers profound insights into what makes a partnership robust and successful. It's about more than just combining resources—it's about building trust, focusing squarely on client needs and constantly innovating to keep up with an ever-evolving business landscape.

Dive deeper into the transformative potential of AI and ML in the supply chain industry and discover how the collaboration between HCLTech and Blue Yonder is not just shaping the future of supply chains but actively driving businesses towards it.

Watch the full episode to learn more.

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The road to creating a sustainable supply chain

Collaborations with the right partners play an integral role in promoting circular economy practices, reducing waste and increasing resource efficiency

What’s behind the hype with Artificial General Intelligence?

Find out why Artificial General Intelligence stands out from AI and is sparking such significant interest in the tech world and beyond

Unlocking sustainability in supply chains: The critical role of data

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CVE-2024-3094 The targeted backdoor supply chain attack against XZ and liblzma

April 01, 2024 By Ilkka Turunen

11 minute read time

As sure as long weekends arrive in the western world, so too does news of new supply chain attacks. The easter bank holidays were no exception, with the discovery of a targeted attack against the popular XZ compression utility seen in many linux distributions such as fedora, debian to name a few.

The Sonatype team was alerted Friday with the rest of the world as this attack was uncovered by a curious developer who noticed that their ssh login was taking 500ms instead of 100ms!

We think this is one of the more complicated benevolent stranger malware injections to date, and deserves amplification. This post is to discuss all the elements that have been discovered over the weekend and give our stance on this incident.

The practical end result is that the world now has another patching effort in front of them - to discover which systems are affected by the bad packages, and to upgrade to a known good version, which currently is understood to be anything below 5.6.0. The malicious code seems to have only been distributed in the operating system packages, and not present in the java-xz package. This may change as more research is performed.

The situation is still developing, and the malware attacker’s contribution history is being studied. As we find out more we will relay information about the package here.

What is the XZ package and what does it do?

To put it shortly, the XZ utility and it’s associated library are linux utilities, much like bzip or gzip. It handles data compression. It has gained popularity over the years and is commonly used for this purpose. Compression is useful in many use cases, and is often seen in critical procedures performed by the operating system. This is speculated to be the reason why the assailant chose this project specifically as their target.

Who is affected by the backdoor?

The good news is that no Java software dependencies are affected, according to our research and as discussed by the Apache foundation . Although there is a xz distribution in Java under org.tukaani.xz, the last release was 3 years ago, and all subsequent commits have been done by the original maintainer and can be considered safe.

This means operating systems that distribute the xz package and liblzma which is installed with it should be considered affected. The affected versions are 5.6.0 and 5.6.1 - both released in the last few months, now pulled from all the distro package registries. Any system with these two versions still installed should be considered compromised.

When considering what to patch here, operating systems mean not just linux boxes, but also containers and any development machine that may use tools like homebrew. So far at least Fedora, Kali, and some unstable releases of Debian have been confirmed to spread the malware.

What is the malicious code in xz?

The malware targets the sshd process, commonly used to facilitate remote access in Linux servers. It allows the attacker to essentially bypass the entire ssh authentication process - and thus gain access to the server. It needs to run on a system that uses glibc and most likely on something that uses .deb or .rpm packages.

The attack actually uses the IFUNC call provided by glibc to bypass system calls for encryption under these specific circumstances. One of the most published effects is that it bypasses the ssh daemon authentication procedure, allowing unrestricted access. Since the code is encrypted, it performs slowly which is why it was

discovered.

There are good deep dives into the technical details of this issue that can be found:

Github user thesamesam’s FAQ
org.tukaani (original project maintainer’s) writeup

Essentially, any unix machine, including macOS based personal devices, on which any version of xz or liblzma is installed should be considered backdoored and needs to be remediated. You should be prioritizing systems in production with public facing ssh connection ability.

How did the backdoor get merged?

What makes this attack stand out is that the assailant followed the benevolent stranger attack playbook nearly to the letter. This is very similar in motivations and vector to the attacks performed against 3CX or Solarwinds , just played out longer term. Thus, this is definitely a supply chain attack, but probably the most elaborate social engineering project that we have seen.

Firstly, the XZ project has been maintained by a sole developer for almost two decades. It is liked, moderately popular, and underserved at least to the apparent community needs. In 2022, the project maintainer began getting pressure from suspected sock puppet accounts about their lack of speed of applying updates .

This type of behavior is not uncommon in open source projects that get popular - maintainers are inundated with requests for work without the requester actually helping. This type of dynamic has led to some authors to protest within their software - like in the case of the famous colors and faker packages where the author deliberately made their software publish protest messages about their free labour. The older a project gets without volunteers, the more likely it is to be subject to security weaknesses and vulnerabilities.

In the case of xz, the maintainer expressed the project is their hobby, and would welcome another maintainer onboard. One such maintainer appeared, Jia Tan. With an account with a short history, they approached the maintainer with initially innocent patches and began contributing code. With the benefit of hindsight, it is now evident this was social engineering performed to ratchet up the pressure for the maintainer to relent. As is standard in open source, when you pick up the shovel you begin to gain trust. Over time, Jia Tan became more and more trusted .

Once Jia gained the trust of the maintainer, they began suggesting and adding features. Jia Tan also advocated for the xz project's adoption downstream into linux distributions due to its now advanced features - again a very normal and expected activity. With the benefit of hindsight though, the timeline of these activities is extremely accelerated when considering normal open source project contributor journeys. They went from contributor to signing releases in a course of a year.

Over the next 24 months, they would add encrypted code that started working in stages. The malicious code was hidden in two binary test files embedded within the source code . Normally this would be alarming, but this was a compression package after all, meaning binary test files are not beyond the norm, allaying any doubts, so all malware was hidden in plain sight. It was partially this compression that caused the slowdown observed by the developer later on. More on these below.

Though everything seemed above board and would have passed any human sniff test, it is worth mentioning that in our past modeling of what projects are most likely to contain security vulnerabilities, we have found that binary files are one of the largest indicator of a security vulnerability being present .

How was it discovered?

The malware was discovered by a Microsoft developer wondering why their ssh connections over a period of time began slowing down. As they investigated the issue they came to realize the sideloaded nature of the xz utility. This caused them to raise the alarm, which ultimately resulted in the package being pulled out and the current incident being raised.

How do I mitigate the issue?

You should aim to understand every affected system you control and which ones have the affected packages installed. This will include not just virtual machines, but also containers based on any linux distro.

Best practice to help with this effort is to generate a SBOM or a System BOM of all of your containers and virtual machines and monitor them for any new findings. In this regard, Sonatype Container can be of help by auditing your container package indexes for any known bad package.

It's worthwhile to prioritize any infrastructure that has public facing interfaces but not forget about other privileged hardware such as developer machines or internal build infrastructure that may be of high value target potential.

It also is evident that information about this issue will continue to arrive as researchers deep dive into this code. The situation over time may change as the assailant worked on the code for a period of 2 years. It’s prudent to expect further changes in known safe versions.

Why did this happen?

A lot of perspectives have been raised about this attack - the maintainer was a sole unpaid enthusiast. As they began trusting the attacker more they began letting patches through without oversight, even when they didn’t actually fix issues they claimed to. It would be completely wrong to blame the original maintainer for the lack of any such oversight - it is after all their hobby project, something they did on the side out of passion. In fact, they were taking a break from contributing altogether at the time of this incident. They already were the sole torchbearer of a larger community decades ago.

With the benefit of hindsight, it is safe to say the attackers chose their target carefully. It was a critical project, large adoption, under pressure. When put together with the sequence of evidence, it is easy to conclude that this was a deliberate operation from beginning to end.

What could have been done to avoid falling foul of this lure? Not much I’m afraid. Some of the commentary raises a consistent criticism that the industry should do more to support these kinds of critical projects. The grim thought many have had is how many other projects such as xz are susceptible to this type of operation? Much like underinvestment in physical infrastructure in the form of highways or water utilities , there is a significant portion of the digital infrastructure that has seen their old maintainers retire and no new ones emerging to take the mantle. The reasons for this are manyfold and deserve future examination, but needless to say, xz is not a unique project in this regard.

By a coincidence this hobby project became part of critical infrastructure and nearly became universally adopted. This phenomenon is not unique to the xz project or any other open source for that matter. Due to the network effect, any piece of code can transform from a hobby to a universally leveraged piece of critical infrastructure. Adopting code takes little effort and so it is done in the name of efficiency, which is extremely useful for the incentives most of us have - to ship software out as fast as possible with as good of a quality as possible.

This certainly means on one level that to minimize the risk posed by such attacks is to begin contributing back to open source software you depend upon for your business.

From a systems perspective, the reality is that a lot of our IT infrastructure is beholden to a deep supply chain consisting of components just like this - relying upon countless open source projects. Because of this, according to one study, replacing open source altogether would 3x an organization’s software development spend instantly .

This fact of digital nature is not lost on adversaries and attackers - nation states and otherwise. The long game the attacker played suggests deep pockets, pointing the finger to an intelligence operation. The desired outcome of such an operation would certainly have been the complete backdooring of most digital infrastructure, and we were possibly mere months away from this plan completing.

This is not the first such attack - on the application level we have observed many such incidents ranging from manufactured several crypto heists , open source hijacks , to backdoored releases of other popular packages .

The lesson we absolutely should not take from all this is that open source should be considered unsafe or minimize its usage. Far from it, the open nature of the project allowed this attack to be uncovered in the first place.

What should happen instead is that organizations should have a cold hard look at their risk models when it comes to open source. The reality is that when you adopt technology it comes with a commitment to keep it maintained, and the risk of adverse realization rests solely on the shoulders of the organization adopting the code - not the maintainers of it. The only mitigation to such risk is to identify the affected systems quickly, and to jettison the malicious or vulnerable code as fast as possible.

This combined by genuinely effort in replenishing the pool of maintainers for such projects, through dedicating time and energy and resources are the only way to sustain what is already out there. CISA and OpenSSF have initiatives towards this end, but more is needed from everyone if the aim is to succeed.

Practical steps to minimize future incident impacts

There are patching strategies one can follow - such as adopting a best practice we uncovered a few years ago in our research that the most optimal version of any package is 2.7 versions behind the latest release . In this case this would have helped to keep the package in a safe range.

There is tremendous naivete in the industry in assuming all code that is gained from reputable sources is safe forever. For the most part it absolutely is. However, when it is proven to NOT be, it is absolutely imperative that the organization be able to mount a coordinated patching effort in 48 hours or less, with full knowledge of the affected targets. Anything less is not to benefit from the learnings of such incidents in years past, and to ignore the fact that these types of attacks will become more frequent.

All of the risk may come from the open source code, and yes, effort to keep it safe should be made at the open source project level. However true that may be, another truth also exists: the RISK of that open code rests solely with the organization adopting it - directly or indirectly. Any method to minimize this risk should be undertaken, and pretty soon will be required by directives such as the NIS2 directive in the EU . This will require critical organizations to notify regulators of any such incident within 24 hours of discovery and supply them with a mitigation plan.

To achieve such monumental feats might seem daunting, but the solution is simple - to look inward at your process to collect the information necessary and automate the identification process. The fundamental element to be collected is a SBOM of every software, operating system and open source dependency bought, adopted, built or put into production, and to monitor these SBOMS in an automatic matter for ANY new vulnerability, issue and release and evaluate them against predetermined policy automatically. To this extent, Sonatype Container in our platform can help.

Merely blindly upgrading everything is a waste of energy which is why most organizations don’t do it. Applying intelligent rules automatically when new findings are discovered helps organizations stay on top of their issues. It is for this fundamental reason we recently published our Sonatype SBOM Manager product - to help automate this process end to end.

This is not the first attack of its kind nor will it be the last one. It is a wake up call that we as an industry must rise up to the challenge and get better prepared. At the same time, we must support our maintainers. Our digital world depends on it.

Written by Ilkka Turunen

Ilkka serves as Field CTO at Sonatype. He is a software engineer with a knack for rapid web-development and cloud computing and with technical experience on multiple levels of the XaaS cake. Ilkka is interested in anything and everything, always striving to learn any relevant skills that help towards building Sonatype for success.

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