Inventory Management at Amazon: The Secret to This ECommerce Giant’s Success

By Djordje Tresac

June 19, 2023

Amazon is a behemoth of a company. It dominates the online retail market and shows no signs of slowing down. But what many people don’t know is that Amazon’s success relies heavily on its distribution network. 

This system consists of many parts, all of which work together to ensure speedy and accurate delivery of products to customers.

In this article, we’ll take a look behind the scenes at how inventory management at Amazon works. We’ll examine the segments of this system and how they all work together to make Amazon the giant it is today!

The Importance of Amazon’s Inventory Management 

Amazon has made a fortune by being extremely efficient in its inventory management. It has come a long way since it opened its first warehouses in 1997, both in terms of storage space and supply chain logistics. Although the company now owns storage space of over 300 million square feet in the United States, it has also made steps toward a simpler, just-in-time inventory system.

This means Amazon orders products from suppliers when they are needed to fill customer orders. Owing to this approach, Amazon can avoid the cost of storing excess inventory. Moreover, the products are less likely to become outdated or damaged while sitting on shelves.

Of course, this system requires a high degree of coordination between Amazon and its suppliers. But, by carefully managing its inventory, Amazon has been able to achieve unprecedented levels of efficiency and profitability.

How Does Amazon Manage Its Inventory 

When Jeff Bezos founded Amazon in 1994, he had a simple mission: To be Earth’s most customer-centric company. To achieve this goal, the people at Amazon have always been willing to experiment and take risks, whether it’s developing new technologies like the Kindle or reinventing the way we shop with Prime. 

Behind the Amazon inventory management system lies a simple insight that eCommerce customers want their goods as quickly as possible and to get as close as they can to the experience of shopping at a physical store. To help them achieve that, Amazon uses modern tech throughout the process, from online shopping to the last stages of delivery.

  • The company has a team of data scientists who analyze customer buying patterns and use that information to forecast future demand. The goal is to maintain a good inventory balance, meaning get exactly the right amount of stock. In turn, this would reduce waste and ensure that the products customers want are always available. 
  • Amazon uses technology to keep track of its inventory. It boasts GPS-enabled devices that scan items as they are loaded onto trucks and uses RFID tags to track items as they move through warehouses. This allows the team to know exactly where each item is at all times, so they can quickly find and ship it to the customer who ordered it. 
  • State-of-the-art logistics ensure that products are delivered efficiently to Amazon warehouses. In the delivery of goods to an Amazon fulfillment center, the use of its custom app Relay streamlines the process for both the warehouse and the delivery vehicles.
  • Another big part of Amazon’s warehouse management system is its use of robots and artificial intelligence. With more than 520,000 robots in their fulfillment centers around the world, Amazon teams get considerable help from these robots in moving inventory around and loading it onto trucks for shipping.
  • In addition to physical robots, Amazon relies heavily on artificial intelligence to help manage its inventory. For example, the company uses AI-powered algorithms to predict which items are likely to sell well in the future and stock accordingly. 
  • The company became the third approved provider of drone delivery services in the US. This innovation is meant to give Amazon an advantage over its competitors by lowering the costs of last-mile delivery, which is often critical in terms of the resources it requires. 

Thanks to these efforts, Amazon is able to keep its inventory well-stocked and fulfill customer orders quickly and efficiently. 

Amazon Facilities and Shipment Process

Facilities play a vital role in this system, as there are currently 305 Amazon fulfillment warehouses. These are giant storage spaces that hold inventory and are connected to Amazon’s distribution network.

When customers order items from Amazon, they are sent from the nearest fulfillment center. The company also has over a thousand distribution centers, which are used to store products before they are sent to fulfillment centers or customers. 

Although the fulfillment center is at the heart of Amazon’s operations, there are five facility types that make up the Amazon distribution network. We’ll take a quick look at what they are and what part they play in Amazon’s order management.

Cross-Dock Center

Amazon cross-dock centers are basically large warehouses where inventory is sorted and then shipped out to fulfillment centers. The term “cross-docking” comes from the fact that these facilities typically have loading docks on both sides of the building so that inbound and outbound shipments can be loaded and unloaded.

As the first stop in Amazon’s warehouse system, cross-dock centers have a much smaller staff than traditional warehouses since there is no need for employees to pick and pack orders. Instead, the focus is on rapidly and accurately sorting inventory as it arrives so that it can be quickly reloaded for shipment to its final destination.

Fulfillment Center

The Amazon fulfillment center network is one of the most important pieces of infrastructure in the company’s business model. By stocking inventory in large warehouses and using sophisticated software to track sales and trends, Amazon was able to create one of the best inventory management systems on the market. 

Each Amazon fulfillment warehouse stores merchandise until it is sold. When an order is placed, the appropriate item is picked off the shelf and shipped to the customer. 

As Amazon’s average fulfillment center is 800,000 square feet, the company uses a complex system of barcodes and scanners to keep track of all the items. When an item arrives at a fulfillment center, it is assigned a barcode that is scanned into the system. This allows Amazon to track the location of every single item in its inventory at all times.

Sortation Centers

Amazon sortation centers are distribution facilities where orders are sorted by destination ZIP code and then shipped further. At a sortation center, workers scan and sort customer orders before loading them onto trucks for delivery.

By sorting orders according to their destination ZIP code, Amazon is able to reduce shipping times and costs. 

Delivery Stations

Delivery stations are also an essential part of Amazon’s warehouse management structure, as the last-mile delivery that they serve contributes to cutting delivery costs. 

These delivery stations are small warehouses that package and ship orders to customers. Amazon workers at these facilities pick, pack, and ship customer orders. Some delivery stations also serve as sorting centers, where packages are sorted by destination before being sent out for delivery. 

Amazon Prime Now 

Amazon Prime Now is a service that offers ultra-fast delivery of items from local stores and restaurants. It is currently available in the United States, the UK, and select markets across the world. In each city, Amazon has established so-called “Prime Now hubs,” which are staffed with drivers and personnel who fulfill orders placed through the Prime Now app. 

How Do Fulfillment Centers Work 

A key part of Amazon’s eCommerce inventory management strategy, the fulfillment center network ensures the speedy service Amazon customers have come to expect. However, these centers don’t function the same way you would guess. 

Most businesses designate areas of their storage facilities for certain types of goods, let’s say, apparel or tech. But because of the enormous space that Amazon’s warehouses occupy, this wouldn’t be efficient at all.

Instead, as soon as the commodity arrives at the fulfillment center, it is placed on the first available shelf. Both the item and the shelf barcode are scanned and entered into the system so the item could be located. 

When something needs to be picked up for shipment, it’s usually time for robots to assist. The robot waits for the Amazon employee at the designated shelf, its job being to take the item and drop it off for shipment. This saves time, as workers don’t have to cart from the shelf to the shipment area. 

How Can You Benefit From Amazon’s Warehouse Management?

Anyone who has ever shopped on Amazon knows that the company is an eCommerce powerhouse. But what does this mean for you, the customer?

Well, there are certain benefits to Amazon’s efficient warehouse management. For example, you can often find great deals on items that are in stock and ready to ship. Moreover, Amazon Business is one of the prime wholesale websites where you can find supplies in bulk and pay less, especially if you’re stocking up for your company. 

There are also advantages if you’re using Amazon Marketplace to sell your products. You can benefit from Amazon’s FBA inventory management service. The Fulfillment by Amazon program takes care of the entire process from order to delivery. The only thing left to do is optimize the keyword research for your product and push it up Amazon Marketplace rankings. Then sit back and watch your sales volume go through the roof.

Bottom Line

Amazon has become synonymous with eCommerce for good reason; the company has revolutionized the way we shop. Certainly, a big part of Amazon’s success is the efficient management of its massive inventory.

By leveraging a combination of fulfillment centers, robots, and artificial intelligence, Amazon is able to keep track of every single item in its inventory at all times and ensure that popular items are always in stock.


Why is Amazon a leader in inventory management?

Any company that wants to compete in the eCommerce space must have a proper inventory management strategy. Amazon’s inventory management software uses sophisticated algorithms and predictive analytics.

By constantly monitoring customer buying patterns, the company is able to keep its shelves stocked with the items that are most in demand. This means they can avoid the costly mistakes of overordering or underordering inventory.

In addition, Amazon has invested heavily in automated warehouses and distribution centers. This allows its teams to quickly fulfill orders and get products to customers on time. All of these factors contribute to Amazon’s status as a top player in inventory management.

How much does it cost to sell on Amazon?

There are a few key expenses associated with selling on Amazon, and it’s important to be aware of them before you get started. First, there is a fee for listing each item on Amazon, ranging from $0.99 per item for individual accounts to $39.99 per month for the professional plan. In addition, there is a referral fee, which is a percentage of the total sales price.

If you’re using Amazon fulfillment services, there will also be storage and shipping costs associated with each sale. As these fees can add up, you should take them into account when pricing your items.

What is Amazon inventory management?

Inventory management at Amazon is the process of tracking and managing the inventory of products that are sold on Amazon’s eCommerce website. Different software programs can be used to manage Amazon inventory, and businesses can choose the one that best fits their needs. In general all Amazon inventory management programs will allow businesses to track sales data, set reorder points, and create purchase orders.

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