Pointers

Supply chain management of amazon

1)Fulfillment by Amazon (FBA)
2) Fulfillment by merchant (FBM)

Fulfillment by Amazon (FBA)

(The FBA cycle pic)

Benefits and Drawback of FBA

Benefits
1) Subsidized Shipping Fees
2) Subsidized Shipping Fees
3) Multi-Channel Amazon Fulfillment Center
4) Multi-Channel Fulfillment
5) Shipping Standardization
6) Access to the Prime Audience

Drawbacks
1) Costly Fees
2) Product Handling Issues by Amazon
3) Precise Product Guidelines
4) Sticker less Commingling
5) More Returns

FBA price
1) Standard Seller Fees
2) Fulfillment Fees
3) Inventory Storage Fees
4) International Shipping

FBM
(I don’t know which pic to add yet)

Advantages of Amazon FBM

1) Access Amazon’s customers with fewer fees
2) Avoid Amazon’s strict FBA requirements
3) Retain greater control of your business
4) Get better support
Disadvantages of FBM
1) No Amazon Prime badge
2) Spend more time on fulfillment (if self-fulfilling)
3) Costs of warehousing and in-house fulfillment (if outsourcing)

Amazon FBM fees

1) Referral fees
2) Monthly subscription fee
3) Per-item selling fee
 As a third party seller selling on the Amazon Marketplace you have the option
to use Amazon’s fulfillment services:
 Fulfillment by Amazon (FBA) 
 Fulfillment by merchant(FBM) 

Fulfillment By Amazon (FBA) is a service provided by Amazon that provides storage, packaging, and
shipping assistance to sellers. This takes the burden off of sellers and grants them more flexibility in their
selling practices. The program allows sellers to ship their merchandise to an Amazon fulfillment center,
where items are stored in warehouses until they are sold. When an order is placed, Amazon employees
physically prepare, package, and ship the product(s).

The Benefits of Using FBA Services

Sellers can take advantage of all of the resources and benefits associated with Amazon when they sign
up for Fulfillment By Amazon. These include:

Having Amazon’s Name Associated With Their Products: This is a quality guarantee that most buyers
will appreciate, making them more prone to patronize a seller because of it. Having the Amazon name
associated with their products will help sellers gain the trust of consumers, who expect excellent
customer service and rapid delivery with FBA.

Amazon’s Customer Service Management: Amazon’s 24/7 customer service management handles
inquiries, returns, and refunds on behalf of FBA sellers. The service is free, except for the Returns
Processing Fee that is applied for select product categories.

Subsidized Shipping Fees: Because Amazon has a relationship with the shipping companies, sellers using
this service will be able to pay less in shipping than if the items were being delivered from an individual’s
account. Also, sellers can offer free shipping over a certain amount since products sold through FBA are
eligible for Amazon Prime and FREE Super Saver Shipping.

Multi-Channel Amazon Fulfillment Center: FBA sellers can store their inventory at Amazon’s fulfillment
centers. Amazon is able to ship products quickly while handling inventory that is being sold on multiple
channels, not just on Amazon’s marketplace.

Multi-Channel Fulfillment: Amazon can ship and handle inventory that is being sold on multiple
channels, and not just through the Amazon marketplace.

Shipping Standardization: All FBA orders are processed in exactly the same way Amazon handles its own
merchandise. This means that when someone purchases an item, Amazon picks the item from their
inventory, packs the item, and ships it to the buyer. A seller can feature an item on his own website,
and, through the Fulfillment By Amazon service, still have Amazon take care of all of the heavy lifting.

Access to the Prime Audience: Qualified FBA listings are Prime-eligible and displayed with the Prime
logo. This enables the seller to reach new and existing customers who seek out free one- or two-day
shipping, filter specifically for Prime-eligible products, and only convert if the Prime badge is visible.

Drawbacks to FBA
Costly Fees: Fulfillment and storage fees, including long-term storage fees, can pile up quickly, especially
with slow-moving or oversized products. Sellers are also charged removal fees for defective, damaged,
and unsellable products as well as disposal fees to get rid of unsellable inventory.

Product Handling Issues by Amazon: Sometimes inventory can get lost or damaged in the fulfillment
process. Oftentimes, the error is on Amazon’s end, not the seller’s. In these cases, Amazon will
reimburse the seller proactively. However, some cases might go unnoticed, during which inventory is
damaged and sellers’ money is lost. Sellers should keep records of their shipments in case Amazon short
receives inventory.

Precise Product Guidelines: Amazon has specific requirements for certain products (i.e. poly bagging
and bubble wrapping) to ensure they arrive at Amazon fulfillment centers in optimal condition. Sellers
can also choose to have Amazon do the prep for a per-item fee.

Stickerless Commingling: Amazon’s default inventory setting is to commingle the same products
together from a manufacturer. That means if a seller is selling the exact same product as other retailers
or sellers, their inventory will be mixed together. Sellers should be wary of commingling, as low-quality
products from less reputable sellers may be pooled together with their own products, which can lead to
fraud and account suspensions.
More Returns: Given that Amazon handles returns with FBA, sellers may experience higher return rates
once customers understand how easy it is to return a product on Amazon

. FBA Fees
Amazon charges several kinds of fees to FBA members.

Standard Seller Fees: Amazon takes approximately 15-18% of the product price as a seller’s fee when an
item is sold. How much will vary depending on the product. Amazon says they charge 15%, but there are
some hidden costs such as refunds that are not fully charged back, which increases the overall charge to
the seller.

Fulfillment Fees: These fees are per unit, vary depending on if the product is standard size or oversized,
and include picking and packing, shipping and handling, customer service, and product returns.

Inventory Storage Fees: Based on the calendar month and daily average volume, sellers are charged a
monthly storage fee per cubic foot of inventory. These fees also vary by the product size tier. Long-term
storage fees apply to units that have been stored in an Amazon fulfillment center for longer than 365
days and are in addition to any monthly inventory storage fees.

International Shipping: Amazon now offers Global Export, which allows sellers to send their inventory
all over the world.

FBM
Amazon Fulfilled by Merchant is a fulfillment method in which an Amazon seller is responsible for
fulfilling their products purchased on Amazon. FBM can be managed through a seller directly or by
partnering with a third-party logistics service provider.

Instead of your products having Prime status and you using either Amazon to handle fulfillment or the
Seller Fulfilled Prime program, the merchant is responsible for inventory storage, order fulfillment,
returns, and customer service.

The pros and cons of Amazon Fulfilled by Merchant

Amazon Fulfilled by Merchant is often the fulfillment method of choice for sellers just getting started on
Amazon and even common for those whose primary sales are made on their ecommerce store.

Advantages of Amazon FBM

With Fulfilled by Merchant, Amazon sellers can still take advantage of the valuable real estate on
Amazon’s high trafficked site.

Access Amazon’s customers with fewer fees

Amazon FBA fees are far heftier than FBM. With Amazon Fulfilled by Merchant, sellers primarily have a
monthly subscription fee, a small fee per order placed, and a referral fee for each order.

Avoid Amazon’s strict FBA requirements

Amazon is known for changing its FBA requirements without giving sellers enough time to adapt to
changes (and they get much higher during Q4). These requirements can be a hassle for merchants
fulfilling on Amazon. With FBM, there are fewer rules and penalties for failing to hit their strict standards
for each Amazon Prime order.

Retain greater control of your business

With Amazon FBA, your branding takes a hit. Customers receive a box with Amazon’s branding — not
yours. Customers may associate your products with Amazon and will communicate with Amazon’s
customer support if there are issues. When you use FBM for the order fulfillment process, you can
better ensure you are providing the customer experience you want.

Get better support

For support, Amazon is known for being hard to get in touch with a human being. Canned water brand
Open Water really likes having direct contacts with their retail fulfillment provider, ShipBob. While they
lost some sales moving to FBM, they now have better service and reduced lead times

Disadvantages of FBM
Amazon is the best at fulfilling Amazon orders, so giving up their perfected process may be tough.
Additionally, FBA sales do not always translate to Amazon FBM sales.

No Amazon Prime badge

The main downside to using Amazon FBM over FBA is not having Prime-eligible products. The point of
Amazon Prime is to get orders delivered in two days. However, during the coronavirus pandemic, long
delays for non-essentials are still present and consumers don’t want to wait over a month.

Spend more time on fulfillment (if self-fulfilling)

If you’re managing your Amazon FBM orders, you can end up spending a lot of time packing boxes.
There are hidden fees in self-fulfillment including the opportunity cost of you not completing higher-
value tasks.

Costs of warehousing and in-house fulfillment (if outsourcing)

Outsourcing fulfillment to the pros can be costly, especially if you have a lot of inventory sitting and not
selling. You can potentially reduce shipping costs by splitting inventory to multiple strategically located
fulfillment centers.

Amazon FBM fees

Amazon FBM works on a fee-based structure, and there are three main fees: referral fees, a monthly
subscription fee, and a fee for each item sold.

Referral fees

Since your products are listed on Amazon and not your own site, each sale made is considered a referral.
The total referral fee will depend on the type of product you sell, and can range from 6% to 45%. To
view the fees for each product type, you can check out the referral fee table on Amazon’s website.

Monthly subscription fee

Amazon offers a subscription fee for the Pro FBM service that costs $39.99 per month. By subscribing to
this plan, you can waive additional fees when a product is sold.

Per-item selling fee

The per-item selling fee is $0.99 for each item sold. This fee can be waived if you sign up for the Pro FBM
plan.