Question: On November 26, 2012, Amazon.com customers ordered 26.5 million items worldwide, an average of 306 items per second. On its peak order-fulfillment day, Amazon shipped more than 15.6 million units, and the last unit delivered in time for Christmas was ordered on December 24 at 11:44 AM and delivered that same day, 3 hours later.10 Such performance is only possible because of Amazon's innovative use of information systems. Some of its major innovations are listed in Figure 1-5. You may think of Amazon as simply an online retailer, and that is indeed where the company achieved most of its success. To do this, Amazon had to build enormous supporting infrastructure-just imagine the information systems and fulfillment facilities needed to ship 9 million items on a single day. That infrastructure, however, is only needed during the busy holiday season. Most of the year, Amazon is left with excess infrastructure capacity. Starting in 2000, Amazon began to lease some of that capacity to other companies. In the process, it played a key role in the creation of what are termed cloud services, which you will learn about in Chapter 6. For now, just think of cloud services as computer resources somewhere out in the Internet that are leased on flexible terms. Today, Amazon's business lines can be grouped into three major categories:
• Online retailing
• Order fulfillment
• Cloud services, including Kindles and online media Consider each.
Amazon created the business model for online retailing. It began as an online bookstore, but every year since 1998 it has added new product categories. In 2011, the company sold goods in 29 product categories. Undoubtedly, there will be more by the time you read this. Amazon is involved in all aspects of online retailing. It sells its own inventory. It incentivizes you, via the Associates program, to sell its inventory as well. Or it will help you sell your inventory within its product pages or via one of its consignment venues. Online auctions are the major aspect of online sales in which Amazon does not participate. It tried auctions in 1999, but it could never make inroads against eBay.11 Today, it's hard to remember how much of what we take for granted was pioneered by Amazon. "Customers who bought this, also bought that;" online customer reviews; customer ranking
of customer reviews; books lists; Look Inside the Book; automatic free shipping for certain orders or frequent customers; and Kindle books and devices were all novel concepts when Amazon introduced them. Amazon's retailing business operates on very thin margins. Products are usually sold at a discount from the stated retail price, and 2-day shipping is free for Amazon Prime members (who pay an annual fee of $80). How do they do it? For one, Amazon drives its employees incredibly hard. Former employees claim the hours are long, the pressure is severe, and the workload is heavy. But what else? It comes down to Moore's Law and the innovative use of nearly free data processing, storage, and communication. In addition to online retailing, Amazon also sells order fulfillment services. You can ship your inventory to an Amazon warehouse and access Amazon's information systems just as if they were yours. Using technology known as Web services (discussed in Chapter 6), your order processing information systems can directly integrate, over the Web, with Amazon's inventory, fulfillment, and shipping applications. Your customers need not know that Amazon played any role at all. You can also sell that same inventory using Amazon's retail sales applications. Amazon Web Services (AWS) allows organizations to lease time on computer equipment in very flexible ways. Amazon's Elastic Cloud 2 (EC2) enables organizations to expand and contract the computer resources they need within minutes. Amazon has a variety of payment plans, and it is possible to buy computer time for less than a penny an hour. Key to this capability is the ability for the leasing organization's computer programs to interface with Amazon's to automatically scale up and scale down the resources leased. For example, if a news site publishes a story that causes a rapid ramp-up of traffic, that news site can, programmatically, request, configure, and use more computing resources for an hour, a day, a month, whatever. Finally, with the Kindle devices, Amazon has become a vendor of both tablets and, even more importantly in the long term, a vendor of online music and video. And, to induce customers to buy Kindle games, in 2013, Amazon introduced its own currency, Amazon Coins
1. In what ways does Amazon, as a company, evidence the willingness and ability to collaborate?
2. In what ways does Amazon, as a company, evidence the willingness and ability to experiment? Use Amazon coins as an example (https://developer.amazon.com/post/ Tx2EZGRG23VNQ0K/Introducing-Amazon-Coins-A-NewVirtual-Currency-for-Kindle-Fire.html).
3. In what ways do you think the employees at Amazon must be able to perform systems and abstract thinking?
4. Describe, at a high level, the principal roles played by each of the five components of an information system that supports order fulfillment.
5. Choose any five of the innovations in Figure 1-5 and explain how you think Moore's Law facilitated that innovation.
6. Suppose you work for Amazon or a company that takes innovation as seriously as Amazon does. What do you suppose is the likely reaction to an employee who says to his or her boss, "But, I don't know how to do that!"?
7. Using your own words and your own experience, what skills and abilities do you think you need to have to thrive at an organization like Amazon?