Amazon Supply Chain Strategies!

Amazon Supply Chain Strategies

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Amazon Supply Chain strategies article and permission to publish here provided by Jae Jun.

Amazon offers sellers fulfillment options. One is FBA and the other is FBM.

As a growing seller, you may already know what fulfillment options work best for you. With newer technologies being founded, Amazon continually offers new services and breaks the rules of supply chain management to improve their service, margins, and for sellers.

Amazon Supply Chain Strategies

Fulfillment by Amazon (FBA) is a service Amazon offers sellers to store products in their fulfillment centers. Amazon then directly packs, ships, and provides customer service for these products. If you are an Amazon seller, it’s vital to make sure your products and margins are able to absorb the costs associated with FBA. Using an Amazon profit calculator will help you check whether your business can make use of Amazon’s supply chain system and services.

Fulfillment By Merchant (FBM) is when the seller is in control of his entire handling and shipping process. No service fee and shipping products to Amazon. The seller is on his own when it comes to sending products directly to buyers.

FBA is where Amazon supply chain management shines and the growth engine to where Amazon is today. Amazon has the best technologies to keep up with demands as it continues to grow. One area that is continuing to expand is their automation.

Robots are the future of automation and Amazon is on top of it with their purchase of Kiva. The technology is built on automated pick and pack tasks in warehouses with some human intervention.

They’ve built Amazon Robotics from this purchase and have since grown their robots in 2020 to 45,000 and counting.

Aside from that, Amazon has also continued to work on its delivery drones. They call it Amazon Prime Air. The drone will deliver products 5 pounds or less, to locations within ten miles of an Amazon fulfillment center, in about 30 minutes or less.

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It’s a great start but not smooth sailing as of yet since they do have some regulatory hurdles to deal with in every state.

Fast Delivery

Automation is just one of the many Amazon Supply Chain strategies.

Even before that, Amazon is known for fast delivery due to its vast warehouse and distribution network. Amazon has 175 fulfillment centers all over the world, 75 fulfillment centers, and 25 sortation centers in North America.

This is unique to Amazon since they’ve been building this up throughout their 20 years of operation, the fact that they have the finances and visionary leadership.

FBA is the heart of this fast turnaround. Since 50% of Amazon sales are from third-party sellers Amazon offers FBA so sellers don’t have to worry about fulfillment.

Amazon requires sellers to send their products to Amazon warehouses where it now becomes Amazon’s responsibility to store and deliver these products to customers. Since Amazon’s distribution network is leveraged, products now arrive faster compared to products delivered by the sellers themselves.

FBA Onsite program

Amazon warehouses and fulfillment centers are close to metropolitan areas. But Amazon is also known to help third-party seller’s own warehouses.

Amazon has an FBA and Seller-Fulfilled Prime (SFP) in which Amazon provides FBA onsite help.

Amazon will optimize the seller’s warehouse using Amazon’s own warehouse management software. In this case, the seller still keeps their products in their warehouse.

The seller controls the inventory in the warehouse and Amazon will provide the means for delivery using the most effective fulfillment method.

This way, Amazon can ensure same-day delivery because they control the logistics, even in this instance.

Amazon Manufacturing

Amazon can’t sell everything to everybody, that’s why they need third-party sellers. But that statement may not be true in the future since Amazon started its own manufacturing arm which is also fulfilled by Amazon.

Amazon now manufactures certain products like notepads, batteries, backpacks, chargers, and every Amazon basics branded product. They do this at a fraction of the cost so they can sell this at a cheaper price and of course fulfilled by Amazon.

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The only problem with this is that Amazon sometimes steps on Amazon sellers. Naturally, because Amazon can undercut their products when Amazon is selling basically the same item but at a cheaper price.

Diversity in Delivery Fleets

Amazon can optimize delivery through its fleet of trucks to bring the packages to the most optimal location. Not only does Amazon have partnerships with USPS and UPS, but they have also last-mile delivery fulfilled by vans, bikes, or robots in some cases.

Their airplane fleets can also take flight in 20 airports. It carries more than 30 containers that can be filled with hundreds of boxes.

They also employ Delivery Service Partners. These are basically privately-owned fleets of 40 or more vans. They receive training from Amazon so they can deliver Amazon products in the most efficient way possible.

Warehouses with Specific Uses

There are popular products and there are products that are not as popular. Amazon knows this data so they have warehouses that contain the least ordered products.

That’s not all, Amazon has specific warehouses for specific products that depend on whether or not they’re under Prime delivery, one-day delivery, first-class delivery, and free super-saver delivery.

Amazon also has the Amazon Retail Analytics (ARA) that will provide Probability Level Demand Forecast. This is how Amazon communicates inventory demand to the sellers.

It means that it’s now the vendor’s decision on how much inventory they are willing to carry versus the demand of the buyers on the platform.

Amazon Growth

Automation is just starting and it’s a certainty that Amazon will try to use this technology to make a robot-operated warehouse with minimal human intervention. With that in mind, Amazon’s growth is guaranteed for years to come.

This article has been contributed on behalf of Gorilla ROI, an Amazon software that connects Amazon Seller Central to Google Sheets.

Originally written for Supply Chain Game Changer and published on July 7, 2021.
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