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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Martin Muldoon who wrote (105248)	6/23/2000 8:55:00 AM
From: Glenn D. Rudolph	Respond to of 164684

Glenn, why is Amazon needing to carry so much inventory? I don't know much about the supply chain. Is just in time inventory possible with books for example? If not why? Martin, I need to focus on my businss now but will address this a bit later. Glenn

To: Martin Muldoon who wrote (105248)	6/23/2000 10:18:00 AM
From: Alomex	Respond to of 164684

I don't know much about the supply chain. Is just in time inventory possible with books for example? If not why? We went over this a long time ago. For JIT to produce savings you need to have the ability to produce the product as it is being purchased (as Dell does). However books are printed in large batches and then sit in warehouses. That cost is ultimately borne by the consumer, who exactly along the supply chain holds the books is immaterial. Now, if Amazon installed fast printers/binding machines and printed books as they are purchased that would create savings. That is, while Barnes and Noble or Ingram or Vantam press would be sitting on large inventory and passing the costs along to the consumer, Amazon would have no such cost and could split the difference with the consumer.

To: Martin Muldoon who wrote (105248)	6/24/2000 3:09:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Glenn, why is Amazon needing to carry so much inventory? I don't know much about the supply chain. Is just in time inventory possible with books for example? If not why? Martin, I saw at one point GST or someone had mentioned the books being ordered as needed and that this costs more to the retailer than say the retailer buying in large quantities and holding the inventory. This is accurate but the amount of difference in cost there is not significant enough in my opinion to matter. The real problem involves products that are very seasonal and have a form of fashion relationship. In particular, they are toys and electronics that Amazon sells at the moment. I looked up the toy industry a little and found that 90% of a toy retailers business in the US comes during the Christmas/holiday season. The toy manufactueres are not willing nor able to provide just in time inventory. They produce what is expected to be the hot toy for almost the entire year prior to the season. The last thing the manufacturer wants is unsold merchandise after the season and typically they have difficulty manufacturing enough of what turns out to be the hot item. The toy that is hot one year may never sell the next. It is up to the retailer to buy in advance of the season the amount of product they believe they need and it cannot be returned. If one buys too little, they do not have product for the balance of the season. Too much, and one sells and a huge mark-down after the season. This is also as true with electronics. Many electronic items become obsolete quickly. There are new versions and this product line sells best during the holidays. Amazon way over inventoried this product line last fall and took I believe a $40 million write down for the extra merchandise. Amazon has to take that risk again this fall. No company is going to inventory this item for them and ship to Amazon as needed. It appears it is more difficult to sell closeout merchandise for a pure play e-commerce site. They are lacking the ability to place the marked down items at the checkout counter as done in a brick and mortar store and hoping for a impulse purchase. You will see toy stores, electronic stores, etc. after the holidays with a stack of a toy or some electronic item with a big sign at let's say 50% off or something to get rid of the merchandise that did not move. This process even may occur during the last few weeks of the season to elminate product that unexpectedly did not have the demand. Just in time works fine for manufacturing since it is only components but not for retailing. I know this as a fact. Glenn