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Amazon Supply Chain Management

There are a lot of working parts that make up a supply chain, so let’s start by looking into supply chain logistics. All sellers, large or small, have many logistical factors to consider. First, you have to determine whether to outsource some or all of your supply chain functions, such as shipping. Will you keep everything in-house or seek outside expertise that can drive higher sales and faster delivery?

Disruptions can hamper supply chain management. Depending on your situation, it might make sense to gain outside expertise to ensure that you can accurately forecast inventory and maintain appropriate stock levels. 

Some products sell consistently and have regular trends you can use to forecast volume. Other products sell seasonally or face more sporadic trends that may change due to popularity or oversaturation. For example, swimwear sells year-round for vacationers but experiences strong spikes in spring and summer as swimmers prepare for the warmer season.

Sometimes, it makes more sense to partner with third-party logistics experts to help identify trends that you can take advantage of. This is more cost-effective than hiring full-time staff that you won’t need all the time.

It’s also worthwhile to evaluate whether your inventory management software accurately predicts demand and tracks available stock versus what’s in demand and waiting to be shipped out of the warehouse.

Amazon supply chain management requires even more sophistication. For example with FBA, due to large volumes, Amazon sometimes experiences disruptions. So, how do you cope with the longer receiving times that can come with the Amazon supply chain process?

To maintain high supply chain standards, it’s important to reach out to suppliers to ensure they maintain sufficient inventory. If you use Amazon FBA, it’s helpful to partner with a third-party inventory strategist to build in the necessary lead times and avoid out of stock scenarios.

Helping clients accurately forecast inventory in both an in-house and Amazon FBA environment is one of the hallmarks of an Amazon Seller Consultant. These agencies can help you maintain optimal inventory levels to meet continuous and sporadic demand. Like in this Amazon supply chain case study, your company can also achieve higher sales and profitability—with the right help.

  

Amazon Supply Chain Diagram

Supply chain terms can be confusing—so is Amazon a supplier? Amazon is a distributor since they buy products to sell to customers. Both Amazon Marketplace sellers and Amazon Retail purchase products from suppliers and then sell them. For example, if you source products from an Amazon wholesale website, they are the a distributor since they buy from a manufacturer. Sometimes the suppliers also are manufacturers, as is the case with AmazonBasics. You can see the suppliers Amazon uses for its AmazonBasics products on the Amazon supply chain map. This interactive document also touches on Amazon's policies on promoting sustainability and ethically sourcing products. It's a great resource for sellers looking to expand their product offerings on the site, learn what other brands are doing well, and learn more about Amazon global sourcing and procurement.

Selling Amazon 1P

From a selling standpoint, you can become an Amazon first party seller or 1P. Under this model, you sell your products to Amazon. You have to receive an invitation from Amazon if you want to pursue this route and it can be difficult to achieve 1P status. Alternatively, you can sell as a third party, which allows you to control your sales and market through Amazon. Choosing can be difficult, and you’ll have to weigh the pros and cons of each option.

In a 1P model, Amazon controls the pricing of your product and also holds ownership of the products, too. Additionally, they may charge you for advertising and other fees. 1P vendors operate in Vendor Central. Vendor Central is where you can find product information, payment, reporting, and advertising information. While Amazon's merchandising team handles many of the details, you do not have control over how your products are priced and may have to live with lower margins. You can also face extensive chargebacks if you have problems with order fulfillment or inventory levels.

Selling Amazon 3P

You can also sell your products on Amazon using a third-party or 3P model. In this scenario, you act as the retailer and control the pricing of your products directly on the Amazon marketplace. Using Seller Central, you create and publish product pages. This is also where you check on order status and manage your inventory. 

Selling under the 3P model, you have more control over your pricing and products. There are fewer direct charges from Amazon because you handle your advertising and set your pricing yourself. You can fulfill your products using Amazon FBA or handle it yourself, too. Choosing FBA offloads picking, packing, and shipping to Amazon, which also handles returns.

Learn more about Vendor Central vs. Seller Central.

One method may work better than the other depending on your situation. You can partner with an Amazon wholesale seller to help with your whole operation. If you only need help with a few things, like your Amazon marketing strategy, an agency partnership is a good option. Ultimately, a trustworthy partner will help you choose the best option for your needs.

  

Amazon Supply Chain Risk Management

There are many risks associated with shipping and fulfilling orders. Theft, damaged packages, returns, and even geopolitical risks are just some of the hard-to-predict factors that come with selling your products online.

Let's look at the major risks to identify before they chip away at your profit margin. We all want our packages to show up on time and in pristine condition, and it’s difficult to retain customers if you can't find reliable shipping carriers to deliver your products.

Partnering with a company through a wholesale partnership can help you eliminate shipping problems by providing reliable carriers and putting inventory control in the hands of experts. When you work with a trusted Amazon selling partner, you can also say goodbye to poor warehouse handling that can damage your inventory because your success is mutual.

Partnering with an organization to handle your fulfillment and logistics can also help you avoid dealing with returns yourself, and can eliminate other headaches that take your attention away from growing your business.

Using Amazon supply chain performance metrics and Amazon supply chain reports from Seller Central can also provide important insight when it comes to risk management.

  

Amazon Supply Chain Management Case Study

A partnership with Amazon experts can offer you access to smarter technology designed specifically to improve the inventory management and fulfillment processes. That partnership can allow you to take advantage of the Amazon value chain without being bogged down by time-consuming issues and competing vendors. Having a third-party partner that was invested in their brand helped Johnson Hardware see a 111% sales increase in one year through a single-seller model. Find additional SupplyKick case studies here.

  

How Amazon Is Changing Supply Chain Management

There's no question that Amazon is the number one online ecommerce retailer. However, it's important to evaluate whether 1P or 3P works best for your business. With the introduction of same-day delivery and FBA, Amazon has changed the supply chain management landscape.

Many companies want to retain control of their product pricing and advertising but also love the idea of featuring their products on Amazon. Having a partner like SupplyKick that can help market your products and facilitate supply chain logistics can take your ecommerce business to the next level.

If you want to grow your ecommerce business, putting your products on Amazon makes sense. However, it's important to make smart decisions early on to maximize your sales and margins.

It's important to create a sustainable supply chain, but that doesn't mean you have to do it all on your own. Keeping this task in-house can muddy the waters when it comes to concentrating on product sourcing, order fulfillment, and expanding your product line and other sales channels. Additionally, things like Amazon’s supply chain sustainability policy and inventory management techniques can change at any time, and having a team of experts to help you navigate changes can save you a lot of time. And of course, the impact of COVID-19 on the Amazon supply chain can spell trouble for in-house distribution.

Working with a company that specializes in all things Amazon, including advertising, marketing, brand management, and of course logistics and fulfillment, gives you access to a whole team of experts. You don’t have to go at it alone—SupplyKick can help.  When you’re ready to take your business to the next level on Amazon, let us know.

Related Resources

    

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Brand Management

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