Amazon Exec On Outsourcing Fulfillment
Every ecommerce merchant must address, at least in some capacity, the issues of fulfillment. One merchant who does this in a big way is Amazon.com. Amazon now offers its fulfillment and warehousing expertise to any ecommerce merchant via its “Fulfillment by Amazon” service. To explain this service, and how it could help smaller ecommerce merchants, Practical eCommerce recently spoke with Tom Taylor, vice president of Fulfillment by Amazon.
PeC: Can any merchant outsource his fulfillment and/or warehousing to Amazon's fulfillment services?
Tom Taylor: Absolutely, yes. We originally started with the idea of Fulfillment by Amazon soliciting to our customers who really wanted to have a better shopping experience, but we realized that the sellers, ecommerce merchants, they sell on many different channels, maybe Amazon, maybe other channels and we knew that to make Fulfillment by Amazon compelling, we have enabled fulfillment for any channel.
PeC: Does a merchant have to use Amazon's other services to use your fulfillment services?
Taylor: No, they don’t, although . . . we certainly find that once you're already using Fulfillment by Amazon, perhaps you might as well sell on Amazon, but it's not required.
PeC: Walk us through the operational issues. A merchant has a shopping cart. How does order information go from the merchant (when a customer places an order) to your fulfillment services?
Taylor:: We have three different ways that an ecommerce site could communicate with us. They could get an order and process payment on their system and then come into what we call seller central, which is a user interface that a merchant could use sort of one by one orders. In addition, we also have feed support as well as APIs for some larger sellers that may want to integrate automatically with us.
PeC: Many merchants have third party order management software and/or accounting packages. Do you automatically sync with some of those?
Taylor: Through APIs or feeds, depending on the packages that they have, they can give us the request for the shipment. Also, we're working with some integrators to provide that support for some of the more popular packages.
PeC: You have a number of warehouses around the country and around the world. How do you determine which warehouse a merchant's products will reside?
Taylor: It's a fairly simple algorithm. We really look to reduce the cost to the merchant for their inbound transportation to us.
PeC: How does your pricing system work?
Taylor: Our pricing is always available publicly at Fba.amazon.com. It’s there. It’s driven around a weight and shipping speed. We don’t have any setup cost. We don’t have any receiving cost. So, it's in a very scalable pricing mechanism. I'll just give you an example. If you were selling, say, a 2-pound, $200 camera, it would cost you about $2 to do the fulfillment and if we were doing the shipping on your behalf, it would be $4.75 for standard shipping. So, if you look it up on the table, it's very predictable and very simple and easy to use.
PeC: With Amazon's volume of shipping, will a merchant save shipping costs?
Taylor: It depends on the situation. We certainly feel our pricing is competitive. It's not just the size of our organization or size of our shipping. You mentioned about the different fulfillment centers, which we have around the US and around the world. If Amazon can get your inventory very close to a customer, I can save on shipping and this is another big advantage of Amazon.
PeC: Anything else on your mind as it relates to fulfillment and ecommerce?
Taylor: There are two things. The first is . . . international growth. Fulfillment by Amazon works in Japan, Germany, U.K., and France where we have websites and fulfillment centers there and we're starting to see a number of merchants who are saying, "Wow. I never would have thought that I could have been going into the Japanese market and yet I can if I use Fulfillment by Amazon." Lastly, we are growing Fulfillment by Amazon and we have thousands of merchants today, we're going to continue to grow that, but it is available for merchants to try out for free after a rebate, at Fba.amazon.com.
Related articles
- Yugster.com Shares its Fulfillment Strategy
- Fulfillment Companies Offer Benefits
- Order Fulfillment: Keep It Simple And Beware Of All The Costs
Sponsored links
- Stone Edge Technologies, Inc. – Order Management And Order Processing With Order Manager
- Dydacomp – Mail Order Manager
- Endicia – Buy And Print Postage From Your Pc
This article is filed under Inventory & Shipping and has the following keyword tags: fulfillment, outsourcing, shipping, order management.
1 Comment
Shipwire eCommerce Order Fulfillment Service says:
Great article discussing the merits of outsourcing fulfillment. I very much agree with the cost reduction and hassle reduction benefits. Please also be aware that Shipwire is another provider of order fulfillment services.
I have a couple additional getting started thoughts for interested readers.
1) Location, Location, Location.
If you sell nationwide you will likely want to have inventory in more than one location. The benefit of multiple warehouse locations is that you can optimize your small parcel outbound shipping costs (shipping to buyers) by shipping from the warehouse closest to the end buyer. If you don't want to put all your SKU's in multiple locations, just do it for best sellers.
When considering location for storage of inventory you may want your inbound shipping costs to take a back seat to three considerations: Where target buyers are located, where you have existing facilities and what shipping port you may be using for import. If you Import into LA/Long Beach, you probably want at least one facility in LA to reduce your import to customer shipping timeline. Many readers with existing warehouses may be keeping existing facilities and looking to outsource East or West Coast fulfillment (West Coast company looking for an East Coast warehouse). Additionally, look at where the bulk of your target buyers are located. If you're selling 75% of your products to New York and Chicago buyers you probably want at least some inventory in warehouse on the East Coast to keep your outbound parcel shipping costs low - especially important for merchants offering free shipping.
Your order fulfillment solution should allow you to dictate where inventory will be stored and from which facility each shipment will be shipped. You should get fine grain control on all aspects of inbound and outbound shipping.
2) Projects, Kitting, Packaging and Master Cartons
As you look at your supply chain and placing inventory into your outsourced warehouses ("3PLs") you will likely come across a situation where you need to run a project on inventory as it is being received into the warehouse. Projects can be anything from putting new retail tags on merchandise for a distributor, kitting three products into 1 box for a holiday basket or breaking cartons into individuals or building cartons from individuals. Many of these could be to make B2B or distributor enabled sales easier. Make sure your order fulfillment company can do these staff projects to make sure you can grow into B2B easier, especially if your going to store large quantities of inventory. Work with the order fulfillment company to best understand how to keep your pricing low; most of us want to help you keep your warehouse footprint optimized to how your business runs to keep both our costs low for the long run. If you do ask your warehouse to run a labelling or kitting project on your inventory make sure you plan to have them do 1 or 2 samples. Inspect the sample before you have the warehouse do the entire inventory batch.
You should also confirm the receiving requirements of your outsourced warehouse. Confirm you understand how to label product so that it is properly received by the warehouse with minimal delays. Check the receiving requirements against what your supplier capabilities are. If you want to import directly from an overseas supplier to your new warehouse you will need to make sure the supplier, freight forwarder or the warehouse can properly label inbound merchandise for easy outbound shipping. A little preparation up front can save you a lot of hassles and maybe allow you to direct import into your outsourced warehouse and not have product routed through your home or warehouse.
3) International Storage, International Shipping and Freight
As Mr. Taylor notes ensure your order fulfillment company has a footprint internationally if your business plans include expansion. Having an overseas warehouse will help you act like a local company oversees. That said, make sure your overseas warehouse can handle returns to the warehouse. If they can't handle returns then you will have expensive international shipping to get returns back to you home facility. Also, work with your order fulfillment provider to get the right tax forms so you can clear customs with your inbound inventory.
If you are just getting into international, make sure your order fulfillment company can ship from the US to Canada, Europe, Asia or wherever you are shipping to. Remember there are inherent risks for overseas shipments (customs, duties, returns, not to mention payment); but, make sure you have the option if you need to take it.
Many businesses have overseas distributors. So ensure that your order fulfillment company will allow you to ship via freight out of the warehouses. If you need to resupply overseas distributors work with the order fulfillment company to inventory product in bulk so that it can be easily palleted for oversees freight.
4) More Automation for Less Money. Free Trial.
Mr. Taylor correctly points to integration with your shopping carts, inventory management systems and payment systems. Application Programming Interfaces (APIs) and Web Fulfillment Services are the norm now and Shipwire is no exception.
Make sure your fulfillment service connects to your shopping cart and can exchange all order, order tracking, and inventory information in a timely fashion. Inventory synchronization in particular is critical in a multi-channel situation; you don't want to sell the same individual unit to three different customers. Be wary of solutions requiring regular manual effort for routine inventory or order communication. Ensure your fulfillment service has a preexisting connection to favorite shopping carts like: ProStores, Yahoo!, Miva, Zen-cart, CREloaded, Shopify, 1ShoppingCart, PayPal, Volusion, Magento, etc. Additionally, they should be integrated into major marketplaces - eBay, Amazon, Google, PayPal.
Demand a free trial of their software and service so that you can get set-up, ship a few orders to yourself to check packaging and make sure your shopping cart works before you get charged.
5) B2B and Drop Ship/Direct Ship.
B2B is different than B2C order fulfillment. Ask your providers about pallet handling, outbound kitting, master cartons, EDI and the like if you are selling to big box retailers, online retailers or distributors.
As you investigate order fulfillment, some questions you may ask yourself.
-- Do I always ship to consumer buyers or do I also need to send containers or pallets to distributors/liquidators?
-- Am I just shipping inside the local country (U.S., Canada or UK) OR am I also shipping across borders?
-- How am I taking the order and what do I needed integrated with my fulfillment solution?
-- Do I need support and assistance from my warehouse for receiving, storage or shipping?
-- Do I need a bit of assistance getting product into the warehouse or growing into a new market like the U.K.?
I hope this helps. Thank you to the Practical Commerce team for keeping this issue at the top of their radar as we enter into the holiday season.
Nate Gilmore
Shipwire.com
