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Author's profile photo Richard Howells

Christmas In July: Amazon Prime Day Supply Chain Challenges

Since 2015, Amazon Prime Day has become a traditional online shopping event in the Howells home. Prime Day, along with the annual marathon of holiday themed films that also run in July, make Christmas in July a “thing” in my house.

For the very few people who have not heard of it, Amazon Prime Day is a shopping extravaganza exclusively for the estimated 200 million Amazon Prime members, that usually takes place in July, and has expanded to more than 20 countries around the world. In fact, it’s so successful that it now spans 2 days, and in 2022, sales reached an estimated $12 billion!

This is an enormous volume of sales, in a very short space of time, and requires an enormous amount of planning and logistical power across the supply chain.

But how can you plan for this surge in e-commerce sales in a 48-hour period? While Amazon undoubtedly has extensive logistics and distribution networks in place, there can still be challenges during this high-demand period.

Anticipating Customer Demand is a primary focus

Accurately predicting customer demand is vital for Amazon to optimize its supply chain operations during Prime Day(s). However, forecasting during this event can be challenging due to the unique nature of the sales and the potential for spontaneous buying patterns.

Inaccurate forecasting can result in stockouts or excess inventory, impacting customer experience and profitability. Ensuring that the right amount of inventory is available for promoted products can be challenging. Overestimating demand can lead to excess inventory and associated costs, while underestimating demand can result in stockouts and dissatisfied customers.

Logistics processes must be ready for primetime

Amazon operates a vast network of warehouses, fulfillment centers, and increasingly brick and mortar stores to meet the demand of the estimated 300 million items sold (in 2022). During Prime Day, the volume of orders significantly increases, which can strain the capacity of these facilities and the thousands of distinctive Amazon trucks that are already seen multiple times a day on my street alone.

The Prime Day 2022 revenue estimate of $12 billion, is almost 10 times the company’s daily average. So, meeting that 2-day (or even same day in some cases) delivery commitment whilst managing the movement of inventory and coordinating order processing “on steroids” must be a logistical nightmare.

Partner collaboration is a prime commodity

Not even Amazon can do it all alone. The vast Amazon business partner network both sources and distributes good for Prime Day (and every other day). Ensuring smooth coordination and collaboration with these partners, managing their inventory levels, aligning their production schedules, and ensuring visibility into their shipments and deliveries can be a challenge. Effective communication and collaboration are essential to maintain a steady supply of products.

Returns and reverse logistics are a prime concern

Amazons’ standard policy for items purchased through on Prime (or any other) Day is a refund within 30 days of delivery. But with the volume of sales increasing 10-fold, you can only expect ‘buyers remorse” at the same level. Handling returned products, processing refunds or replacements, and managing the associated logistics can be a complex task. The reverse logistics operations will also be put to the test but are critical to ensure that the returned inventory is processed and repurposed, and the customer is satisfied.

Priming technology to meet the challenge

Amazon heavily relies on its technology infrastructure and systems to manage its supply chain efficiently. They saw this first-hand when a technical outage during the Black Friday / Cyber Monday weekend in 2022 resulted in Amazon’s ad dashboard provided inaccurate data about sales and advertising spend.

However, during Prime Day, the increased traffic and order volumes can put a strain on these systems, potentially leading to technical glitches, slower response times, or even outages. Such issues can disrupt order processing and impact customer service.

To learn more about how you can reduce supply chain risk in times of fluctuating supply and demand, download the recent Oxford Economics Research.

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      Author's profile photo Douglas DeLuca
      Douglas DeLuca

      This really brings a lot of the B2B logistics issues home.  Funny how B2C has outpaced B2B on logistics visibility.  Thanks for the insights here on what B2B should be thinking about and learning from B2C logistics.