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Amazon's Supply Chain Gives It an Edge

Amazon.com owes much of its success to its enhancements to the shopping experience, but its strength in the future will hinge on supply chain and fulfillment capabilities, along with the continuation of popular pricing strategies, according to an article on the Wharton Business School's web site, Knowledge@Wharton.com.

A big advantage for Amazon is that it manages and ships not only its own inventory but that of other retailers such as Eddie Bauer and Target, giving it an economy of scale that dwarfs its rivals. As it stands, Amazon can currently ship some 10 million products, compared with Walmart's 500,000. "As Amazon offers same-day, second-day and other fulfillment options, it competes with bricks-and-mortar companies more and more," says Serguei Netessine, professor of operations and information management at Wharton.

Using drop shipping, Amazon also has real-time links to manufacturers, which ship goods directly to consumers on the internet-company's behalf.  "Amazon keeps the most popular products in inventory, but uses a mix of techniques to deliver goods," Netessine notes. This gives Amazon an advantage that its rivals find hard to replicate.

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