Order fulfillment is a key factor that determines how efficiently products move from the warehouse to the customer. Amazon Fulfillment Services, like Fulfillment by Amazon (FBA), gives sellers access to a large logistics network that can handle storage, picking, packing, shipping, customer service, and returns. Choosing the right Amazon fulfillment services requires ecommerce businesses to carefully consider fees, inventory levels, product dimensions, delivery speed, and the geographic location of inventory.
5 Key Facts Ecommerce Businesses Should Know About Amazon Fulfillment Services
Here are some important facts ecommerce business owners should know about Amazon Fulfillment Services.
- Fulfillment Fees Only Make Up a Fraction of the Cost
Ecommerce entrepreneurs should look beyond basic fulfillment fees when calculating profitability. Amazon’s costs can include fulfillment, monthly storage, aged-inventory charges, returns processing, and removal or disposal fees. Storage expenses can also vary by season, product size, and the amount of inventory being stored. Therefore, calculating the complete fulfillment cost for each product is essential before setting prices or forecasting margins.
- Product Size and Weight Matter
Amazon calculates fulfillment costs using factors like product dimensions and shipping weight. Bulky or heavy products can therefore have significantly different fulfillment economics from small, lightweight products. Ecommerce business owners should understand the
necessary size tier and actual shipping weight before enrolling a product in the FBA program. Improving packaging design without compromising product protection can also help businesses manage logistics costs.
- Strategic 3PL Warehousing Can Improve Delivery Efficiency
A strategic third-party logistics (3PL) provider can give your ecommerce business additional warehouse capacity and more control over inventory distribution. Using strategically located 3PL outsourced warehousing solutions can improve delivery efficiency by positioning inventory closer to customers and reducing unnecessary shipping distances.
For example, the Packageman 3PL company operates strategic warehouses in New Jersey and California, with its bicoastal network helping businesses reduce shipping costs and speed up deliveries. This type of multi-warehouse strategy can be especially useful for growing ecommerce brands that sell through Amazon as well as their own websites and other marketplaces.
- Inventory Management is Critical
FBA doesn’t eliminate the need for inventory planning. Overstocking can increase storage expenses and potentially lead to aged-inventory costs, while understocking can create missed sales opportunities. Businesses should monitor sales velocity, seasonal demand, lead times, and inventory levels. Amazon also provides tools that can help sellers estimate fulfillment costs and compare them with alternative fulfillment methods.
- Multichannel Fulfillment Can Expand Your Options
Ecommerce businesses increasingly sell through multiple channels. Amazon’s Multichannel Fulfillment service can use inventory within Amazon’s network to fulfill orders from other channels, including direct-to-consumer stores and marketplaces. This means business owners should evaluate fulfillment based on their entire sales operation.
Amazon fulfillment services can simplify logistics and give ecommerce businesses access to a sophisticated fulfillment network. Combining Amazon’s fulfillment capabilities with strategic 3PL outsourced warehousing solutions may provide additional flexibility, especially for rapidly-growing ecommerce brands. Partnering with 3PL providers such as Packageman, with their strategically-positioned warehouses, can help improve fulfillment efficiency across the US. The key is to regularly compare fulfillment costs and performance so your logistics strategy continues to support healthy margins and customer satisfaction.
