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Digital Transformation of Supply Chains - Amazon Case Study

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Introduction

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The client that has been selected to do the research is Amazon. Considering the industry segment of Amazon it can be said that the company works in various including cloud, E-commerce and AI. The main product and service that has been selected for this study is Amazon’s Artificial Intelligence.

1. Client Background

1.1 Goals and strategies

Amazon's suggestion motors are currently driving 35% of complete deals. They're applying persistent simulated intelligence to comprehend the unique situation and goal behind client search questions, so they realize the reason why individuals are looking for explicit items. Amazon's essential savvy speaker item, Alexa, runs on a conversational simulated intelligence stage. In 2020, the internet business giant made the Amazon Help Asset, with a USD25 million beginning commitment, zeroed in on supporting its free conveyance administration accomplices and different partners to manage the adverse consequence of Covid improvements on the business

1.2 Products/services

1. Products which Amazon sells to its clients are namely Echo Fire Tablet Fire TV Fire OS Kindle

2. The various services Amazon provides to their customers usually entails Amazon.com Amazon Alexa Amazon AppstoreAmazon Luna Amazon Music Amazon Pay Amazon Prime

3. Delivery Tasks Above given is the diagrammatic representation of the supply chain management of Amazon. Broadly speaking two main elements bring about the success of the supply chain management system of; the Amazon fulfillmentcenters and the Amazon delivery fleet. Both of them together are responsible for the effective supply chain management of the firm.

4. CSR Problem Although Amazon is one of the leading firms in the e-commerce industry, it has been subjected to criticism time and again due to its lack of transparency in the CSR (Corporate Social Responsibility) aspect. Employees have accused the firm of overworking, uncooperative work culture, lack of appreciation, and so on. However, there are some other aspects of CSR that have been brought in questioning as far as Amazon is concerned. Firstly, the environmental aspect of CSR; optimization of delivery;

Presently about 112 million customers of Amazon have Prime Memberships, this means that the firm is obligated to provide them with two days of shipping no matter wherever they are on the face of the world. Hence, to do so, the firm needs to have an efficient and adequate supply of local logistical chains and networks to establish this. Given the present times, 175 operating fulfilmentcentres are affiliated with Amazon, out of which 21 are in California only. About 500 warehouses are present under the affiliation of amazon worldwide. Amidst the pandemic when layoffs were a common sight, Amazon hired about 427,300 employees as their sales saw record growth

Apart from this, the Amazon delivery fleet is always on its toes, this means that the transportation and delivery aspect of the firm plays a crucial role in this case. The firm carries bout about 2000 packaged boxes each day for delivery from the big warehouses and then carries on with the delivery process. The firm relies on selected delivery and transportation partners for the fulfilment of this task. The two days shipments of the firm are carried out by the firm's airplane fleet that carries out from more than 20 airports around the world. Apart from that the firm also has an elaborate fleet of vans, trucks, cars, and buses as their transportation medium. To optimize their delivery, the firm has recently come up with another idea where they are offering $10,000 to start-up companies to work as their delivery partners.

However, according to sources and statistics, one of the most efficient portions of the operational aspect of the firm is the most problematic portion as well. Amazon is accused of being one of the largest producers of carbon footprints in the world, however, the firm has promised that it will reduce this to half by 2030, one of the major contributors to the issue is the delivery aspect of Amazon. As mentioned vividly in the previous paragraphs(Wasim et al., 2020), Amazon does contain an elaborate network of transportation that includes both land and air travel. The increased demand for the firm and shoot up in sales have contributed to more and more delivery and hence increasing the aspect of carbon footprints.

From the above section of the delivery tasks, the last aspect of the supply chain management which is delivery is the one that is causing serious trouble to the environment. Firstly, due to a range of third parties associated with the delivery (delivery partners, transport companies, cargo services, courier companies, etc) the aspect of delivery gets exceptionally tricky and so do returns and refunds, the process is many a times delayed and have shown lack of efficiency such as incorrect delivery, lack in time management and so on(Razzaq 2020). Furthermore, the carbon emission that is caused by the elaborate transportation system is a direct threat to inducing climate change. It is a direct contributor to global warming and the increasing water levels in the Polar Regions due to the melting of ice in the Polar Regions.

The advocacy group Amazon Employees for Climate Justice has repeated raised striking alarms regarding the changes in the climate that has been induced by carbon emissions by the firm, especially during the delivery process. 2019 and 2020 saw the rise of this awareness where about 350 employees signed a petition where the firm raised issues about the changing climatic conditions.

Apart from the natural harm it does to the environment, carbon emissions are also accused of evoking pulmonary and cardiac diseases in humans, this is caused by the sheer increase in the rate of carbon dioxide in the environment. The emission of excess carbon dioxide also contributes to the growth of acid rain that in turn is considered to be the reason for the extinction of many marine species. Acid rain also breaches and erodes coral reefs, that is the natural habitat for marine life, this in turn disrupts their natural well-being leading to an ecological imbalance in the entire circle .

Though Amazon has been claiming that it is working towards the reduction of its carbon emissions, the firm has not been able to show any pieces of evidence that support its claims so far.

3. AI Solution Evaluation

2.1 Overview of the AI solution

Amazon has shown a range of hearty aspect of artificial intelligence that has been carefully crafted within their systems. For example, the voice induced Alexa to promote voice commands. The Amazon Go Stores are recommendation engines that show the configuration of the items that are frequently brought together. The aspect of the delivery of Amazon is presently semi-atomized in its nature of work. The firm claims that a fully automatic system is almost a decade away from the firm and the market, but a fully automated system will not be good for the CSR policy of the firm. This means that a system that is entirely automatic in nature will lead to a decreased employment generation as the dependence on machines will increase substantially(Hejazi 2020).

The dependence on machines seems like a convenient option until the system acts up against its operators. The firm can use micro-services architecture, this feature helps in the differentiation of processes and operations within one wholesome system. Initially, systems were considered to be less than one monolithic structure, however, industry 4.0 found the possible threats of doing this, out of which the primary one was that if one system crashes down it leads to the crashing of all the operations. Each operation is linked to the other, fixing this might require a complete revamp of the software. This is not only highly expensive but extremely incontinent as well as the correction of a singular operation is not possible in this case(Kousiouris et al., 2019). Hence the introduction of micro-services architecture helped the company differentiate all its operations and functions so that micro-management would become possible. Hence, it cannot be disregarded that the incorporation of microservices architecture will be essentially beneficial for Amazon as a whole.

2.2 Requirements for Micro-Services

Interestingly, the choice of micro-services co-incidentally aligns with the CSR policy that Amazon wishes to implement. Although Micro-services architecture is considered to be fully automated in its nature, it does require integrated human supervision. The issue here is that the phenomenon is automated but it is divided into numerous parts, for Amazon, the sheer size of the multinational conglomerate is enough to determine the number of distinguished operations the software has to be customized into. The parallel and simultaneous efficiency of so many operations altogether will require an integrated human touch. This is mainly required to identify the issue of the aspect of the range of operations that might arise in the process.

An efficient micro-service operation requires containers. Containers are units of software that help in packaging services along with their dependencies. Interestingly, microservices and containers do not necessarily need each other to perform efficient functions, however, the deployments of the later help the operations maintain utmost efficiency in their performance.

Service mesh is another important component of an effective micro-service system. This creates a messaging layer to facilitate communication. This component helps in abstracting the communication layer, this means that when the software is customized the developers do not require to code the entire process of inter-communication while creating the application. As it has been mentioned in the previous portions that micro-services allow the application to distinguish itself in numerous applications however, this becomes an issue at times since all the operations need to be interlinked with each other, and any miscommunication between them causes the crashing down of the entire system.

As mentioned, the sales of the firm exploded during the pandemic, Amazon also gives out sales and discount offers very frequently, most of them are regional, however, some are national and international such as Christmas and New Year. This means that the workload of the firm keeps on fluctuating now and then. To sail through this, the application would require service discovery. This will help in navigating the firm fluctuating workloads, updates, and mitigation of failure.

Micro-services distinguish the number of operations working under a singular system this means that the operations are no longer dependent on each other and hence understanding their specific issues, focussing on them, and solving them becomes time efficient and much easier in nature. In a firm as diverse as Amazon it is obvious that the system will require multiple operations. An API gateway helps in the communication process of a distributed application. The API gateway acts like a barrier that enables abstraction in communication between the providers and the customers. This application also helps in guarding the system where it catches spam and cache files.

2.3 Negative Aspect of Micro-services

The micro-services architecture is a highly distributed system and hence though it has its advantages, it cannot be disregarded that it has its own set of limitations as well. The primary threat, in this case, is the inefficiency of the delivery tasks of the firm. As mentioned before, the delivery aspect of the firm is considered to be one of the most complicated ones of the lot. The solution introduced by the report is also to limit the mishappenings that might occur during the delivery process. However, the issue here is that micro-services divide themselves into several operations altogether; the aspect of delivery needs to work in perfect harmony with the other aspect of the supply chain as mentioned in the diagram above. Any form of miscommunication can lead to insane losses. According to an estimate, about 1-4 million boxes of delivery are distributed from the giant warehouses in a day, if the micro-services so wrong anywhere in communication with the other applications representing the other aspects of the supply chain, it will lead to a mighty disaster where deliveries will be rendered completely useless leading the firm to incur massive losses.

3. AI Solution Viability Evaluation

3.1 Alignment of the AI

with Amazon’s goals Amazon, as discussed has been time and again accused of inefficiency. The arenas of inefficiency constitute time management, delivery failures, return or refund inefficiency, and so on. The primary goal of Amazon is customer satisfaction and hence, the implication of micro-services architecture will help in improving the efficiency of these aspects where the company is lagging.

3.2 Potential Issues with Microservices

1. Cost: The micro services architecture is a very advanced form of software application that is quite expensive. The implication of this software needs to be done in all massive warehouses around the globe, and hence the cost will be quite hefty for the same. Though micro-service is generally considered to be a one-time investment the cost of maintaining it can be pressurized for the firm.

2. Expertise: the software that is considered for implementation is quite a high-tech one and requires an extent of expertise from the developers as well as the operators. This new set of skills needs to be acquired by the existing employees of the firm; this either needs to be done with the help of adequate training of the existing employees that will help in understanding the software application. The other way out can be the recruitment of a fresh batch of employees with the required skill set.

3. Coordination: As vividly mentioned, the aspect of coordination is immensely important for the efficient implementation of a micro service application. Since the software helps in distinguishing applications with the system, it becomes immensely important that all the applications align with each other in the most effective manner possible. Any obstacle in the coordination of interconnections of the application can lead to massive mishappenings.

4. Increase in attack surface: the software while distinguishing the applications into various ports allows the stretch of the scale of service to a much wider extent. This increases the space for cyber-attack. In a monolithic structure, the chances of attack of much less since the entire system are under one coordination application. However multiple systems and applications reduce the chances of security.

Conclusion

Overall from the entire discussion it can be suggested to DeakinCo senior consultant that after analysing the overall scenario of the Amazon and the company position of DeakinCoit will be better for them to go for some local companies that will help them with solving their issues. For a big company like Amazon dealing with the mentioned CSR related issues are not very tough but for companies like DeakinCoit will be bit tough for them to deal with the issues.  

References

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.

De Lauretis, L., 2019, October. From monolithic architecture to microservices architecture.In 2019 IEEE International Symposium on Software Reliability Engineering Workshops (ISSREW) (pp. 93-96).IEEE.

HEJAZI, F.C., 2020. Digital Technologies in Supply Chain: The Amazon Case.

Kousiouris, G., Tsarsitalidis, S., Psomakelis, E., Koloniaris, S., Bardaki, C., Tserpes, K., Nikolaidou, M. and Anagnostopoulos, D., 2019. A microservice-based framework for integrating IoT management platforms, semantic and AI services for supply chain management. ICT Express, 5(2), pp.141-145.

Li, S., Zhang, H., Jia, Z., Zhong, C., Zhang, C., Shan, Z., Shen, J. and Babar, M.A., 2021. Understanding and addressing quality attributes of microservices architecture: A Systematic literature review. Information and software technology, 131, p.106449.

López-Pimentel, J.C., Rojas, O. and Monroy, R., 2020, November.Blockchain and off-chain: A solution for audit issues in supply chain systems. In 2020 IEEE International Conference on Blockchain (Blockchain) (pp. 126-133).IEEE.

Pal, K., 2021.A Review of the IoT-Based Pervasive Computing Architecture for Microservices in Manufacturing Supply Chain Management.Advanced Concepts, Methods, and Applications in Semantic Computing, pp.113-126.

Polacco, A. and Backes, K., 2018. The amazon go concept: Implications, applications, and sustainability. Journal of Business and Management, 24(1), pp.79-92.

Razzaq, A., 2020. A systematic review on software architectures for iot systems and future direction to the adoption of microservices architecture.SN Computer Science, 1(6), pp.1-30.

Selvakumar, G., Internet of Things and Microservices Architecture for modern supply chains.

Waseem, M., Liang, P. and Shahin, M., 2020. A systematic mapping study on microservices architecture in devops. Journal of Systems and Software, 170, p.110798.

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