FBA Inventory Placement Fees
Amazon’s introduction of Inventory Placement Fees is placing sellers (again) into a situation of dwindling margin. These fees can add up, especially for smaller sellers. However, there are ways to minimize or avoid them. Let’s explore some effective strategies:
1. Enable Inventory Placement Service
Amazon offers an "Inventory Placement Service" (IPS) that consolidates your shipments to a single fulfillment center. While this service does come with its own fees, they may be lower than the costs associated with shipping to multiple centers. It’s worth calculating whether IPS makes sense for your business depending on your product size, weight, and quantity.
2. Optimize Your Shipment Size and Frequency
Amazon often splits shipments based on factors like volume and product types. You can reduce the chances of split shipments by optimizing how much inventory you send at a time. Larger shipments are less likely to be divided among multiple fulfillment centers. Also, monitor your restocking frequency to send more significant shipments less frequently, which can help consolidate orders to a single location.
3. Use Case-Packed Shipments
Case-packed shipments, where all units are of the same SKU, can sometimes reduce the likelihood of split shipments. This is because Amazon may be more willing to store large quantities of the same product in one location rather than distributing them across several centers.
4. Strategic Inventory Placement Based on Region
For sellers who target specific regional markets, choosing fulfillment centers close to your customer base can help minimize fees. Amazon's algorithm often allocates inventory based on regional demand, so aligning your shipping strategy with that can reduce unnecessary splits.
5. Monitor Shipping Preferences
Amazon occasionally allows sellers to opt-in or out of placement services during specific times. Stay updated on your shipping settings and check regularly if any beneficial changes are introduced. Fine-tuning these settings could help you avoid unnecessary fees or split shipments.
6. Consider Third-Party Fulfillment Centers (3PLs)
Although Amazon’s FBA program offers significant advantages, third-party fulfillment centers (3PLs) might offer more flexibility. Some 3PLs can help you consolidate your shipments or offer lower fees for inbound shipments, avoiding Amazon’s placement fees altogether. Using 3PLs allows for more control over where your inventory is stored before sending it to Amazon, helping you avoid costly split shipments.
7. Review Product Dimensions and Categories
If Amazon repeatedly splits your shipments, it could be related to the product type or category. Products that are oversized, perishable, or classified under specific high-demand categories may need to be distributed across multiple centers. You may want to reconsider your packaging, adjust dimensions, or explore bundling smaller items to see if that helps keep your shipments consolidated.
8. Leverage Seller-Focused Software
There are numerous tools that provide insights into how Amazon manages your inventory and shipments. Software like ShipStation, InventoryLab, and others offer detailed reporting, which can help you analyze your current shipment patterns, costs, and opportunities to consolidate. These tools may provide actionable data to reduce inbound placement fees over time.
9. Leverage Amazon Global Logistics for Cost-Effective Shipping
Amazon Global Logistics (AGL) is an often-overlooked solution that can help sellers reduce inbound placement fees, especially for international shipments. AGL is Amazon's own shipping service that facilitates the importation of goods directly into Amazon fulfillment centers from overseas suppliers. Here’s how it can help reduce fees:
Consolidated Shipments: AGL helps in consolidating shipments from various locations into fewer fulfillment centers and Inventory Placement Fees are avoided.
End-to-End Visibility: With AGL, you get detailed tracking and visibility across the entire supply chain. This visibility can help you plan better and avoid unnecessary fees due to unexpected delays or misallocated inventory.
Competitive Shipping Rates: AGL offers competitive rates, especially for international sellers, as it removes the need for third-party logistics providers (3PLs), who often add their own markup.
Direct Fulfillment Center Access: By using AGL, you can ship your products directly into Amazon’s fulfillment network, which can simplify the importation process and reduce the chances of inventory being sent to multiple warehouses, and eliminate inventory placement fees.
Using Amazon Global Logistics not only simplifies international logistics but can also be a cost-effective strategy to streamline your inventory placement, helping you minimize the associated fees.
Conclusion
Minimizing Amazon’s inbound placement fees requires strategic planning around shipment size, frequency, and the services Amazon offers. Using Inventory Placement Services, optimizing case-packed shipments, and staying on top of shipment settings can help reduce these fees. Additionally, third-party fulfillment centers and seller-focused software provide alternative strategies to keep costs down while maintaining your inventory flow.
Staying flexible and adjusting your shipping strategy over time will be crucial as Amazon continues to evolve its fee structures.
