How Amazon keeps diseconomies of scale at bay

If you look at the pictures below, it’s hard to see how anyone can keep track of this Amazon ‘fulfilment centre.’ It is the size of eight football pitches with 1000 staff. As soon as I saw this photo I thought this would be a great diseconomies of scale example, along the lines of Heathrow Terminal 5.

Impressively however, despite goods being placed in no particular order, their location governed only by their size and the spare shelving available at the second they arrived, Amazon are able to boast a near perfect fulfillment record. This is done by fully embracing technology, with a ‘gun’ (which acts a bit like sat nav) calculating the quickest route between products and almost all processes being automated. Humans are just required to pick up and sometimes gift-wrap the products.

Today Amazon is likely to be tested as online shopping reaches its peak on the first Monday of December. Last year, ‘Mega Monday’ at Amazon saw a best-ever 1.4million British orders in 24 hours and the computer has calculated that 2009 will beat that record by up to a third. Click read more for some GCSE style questions or here for more photos and an article from the Daily Mail

1. State three types of diseconomies of scale (3 marks)

2. Explain how Amazon could take advantage of economies of scale (8 marks)