Alternative fulfillment operations and vendor analysis

Abstract

This thesis describes the development of quantitative methods to strategically plan the SKU make-up and operational aspects of Amazon's Alternative Fulfillment Sites (AFS). AFSs are smaller Fulfillment Centers (FCs) that have a more focused set of SKUs. By focusing on a smaller subset, complexity and costs are reduced at these sites at the expense of the larger assortment of products seen at traditional FCs. Because of these tradeoffs, choosing what items to provide at each site is very important in the expansion of this program. To determine the appropriate SKUs for AFSs, it was necessary to identify the relevant costs of fulfilling items through three fulfillment methods: Drop Shipping, Traditional Amazon Fulfillment Centers and Alternative Fulfillments sites. Understanding the relationship between the quantity fulfilled and the total costs for each fulfillment option provided guidance on which new products should be introduced to AFSs. As for the operation of sites, analysis of the process takt time at current AFS sites was performed. By separating products into Size Categories, rates could be determined and used to estimate process rates for new products. With a given forecast, this information was used to determine the number of associates required to fulfill the demand at these sites. In addition, product dimensions and forecasts were used to determine the total square footage to hold inventory and provide enough work space for these sites.