How the Amazon Supply Chain Strategy Works
For a buyer, the process of shopping on Amazon is as simple as clicking a button. Their order lands on their porch within two days, as if by magic. However, a complex system runs invisibly behind the scenes, getting everything done.
Many people and machines, including workers, goods robots, truckers, Prime Air, and courier services, make this work between picking and delivering orders. Millions of third-party sellers also profit from Amazon’s supply chain machinery. Third-party sellers sell about 50% of all products available, and you can do that too!
This article explores the Amazon supply chain strategy, its different elements, and how you can benefit by selling on the platform.
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What Is the Amazon Supply Chain?
The Amazon supply chain handles the process of finding and shipping items to customers. It includes all the steps between a customer placing an order on the website and receiving the order delivered to their doorstep. The online retailer handles everything, like procuring products from suppliers, storing and tracking items, marketing, shipping, and more. Third-party sellers also send their products to Amazon warehouses for storage and shipping. Amazon's supply chain management has fine-tuned each step of its supply chain to guarantee the best possible performance.
Elements of the Amazon Supply Chain
The effectiveness of the Amazon supply chain strategy directly depends on two main elements.
Amazon’s fulfillment network is made up of state-of-the-art technology and a variety of building types and sizes to support processing orders. There are nearly 185 fulfillment centers in the US alone and more than 500 around the globe. Apart from its many warehouses in or near large cities and population centers, there are also small warehouses in more remote areas. The warehouses are optimized to improve operations. There are several different types of fulfillment centers.
- Sortable fulfillment centers store small, sortable, and packable items like books, toys, and stationery.
- Non-sortable fulfillment centers - store bulky or larger-sized customer items like outdoor equipment, furniture, or rugs.
- Sortation centers - for sorting packed orders by final destination and consolidating them onto trucks for faster delivery.
- Receive centers for taking in large orders of inventory that sell quickly and must be processed faster.
- Delivery stations for preparing customer orders for last-mile delivery.
- Specialty buildings that handle specific categories of items or are pressed into service at peak times of the year, such as the holiday season.
Amazon Delivery Fleets
Amazon works with several transport and logistics partners to meet logistics requirements and send orders on time. Company vehicles transport several thousand boxes from the warehouses to their sorting facilities as a first step. From there, customer packages are sent to the appropriate locations at cost-effective rates.
The company uses various kinds of vans, trucks, bicycles, and robots to deliver packages locally. It is also trying out drone deliveries in areas close to its warehouses. In addition, it has a fleet of planes that helps the company meet its promise to deliver to Prime members in one or two days. There are over 15 airports in the United States, and each jet can transport over 30 containers.
What Happens After the Buyer Makes a Purchase?
When your customer orders your product on Amazon, it triggers the following steps.
When customers purchase your goods, trained staff check to see if the product is in inventory and shippable. They also track the shipment, update the order status, and manage any returns.
Picking and Checking Orders
Before your goods are ready for shipment and sent out the door, they will go through several quality control steps. The warehouse staff starts working on packing as soon as the payment is processed. They search for the item among millions on shelves in the center. They find the item with the same barcode as the one on order.
Packing and Shipping
Orders go through different fulfillment centers before being handed over to the US Postal service to deliver to you. Depending on your choice of shipping, the order takes different paths - as shown in the image below.
How Amazon's Supply Chain Benefits Third-Party Sellers
If you decide to sell on Amazon, you'll get more than just a platform to display your products. You’ll also have access to the Fulfilled by Amazon (FBA) service. FBA is an effective Amazon supply chain integration. You only have to ship your products to a warehouse. You can also ask your supplier to send the items in bulk to the warehouse. Amazon handles packing and shipping to individual customers for you. Although you pay a fulfillment fee, the benefits make it worth it. Some benefits of using FBA are below.
There is a long list of obligations when you fulfill orders yourself. And it's expensive to hire and train employees, manage stock, negotiate with shipping companies, stock up on packing materials, ensure deliveries arrive on time and send the correct items.
Amazon’s state-of-the-art fulfillment system takes this cost off of you. It also ensures processing and shipping of your items are as timely as possible. In addition, the FBA system makes it easy to scale your business in response to changes in the number of orders without spending money on new infrastructure or hiring more people.
Amazon handles any returns or issues with customers when using FBA. So even though you can't meet with customers face-to-face, you won't have to spend time answering shipping inquiries or making refunds because Amazon has you covered.
As a merchant on Amazon, you can access Seller Central anytime, any day. And with Seller Central, you can monitor and manage your business from any global location. You can sell products internationally without leaving the comfort of your own home. You can set your hours and work at your convenience.
Moreover, you also gain access to resources that help you increase your sales, and it’s free to use.
How to Find New Products for Amazon's Supply Chain
Knowing your supply choices as an online retailer makes it simpler to find new products to sell on Amazon. Also, it's even easier with the right tool, like the Product Research for Amazon tool by Semrush App Center. The tool can instantly generate several low-competition and high-profits ideas for any given keyword. Additionally, there are three effective ways to source new products for Amazon’s supply chain.
Take Advantage of Retail Arbitrage
Retail arbitrage involves buying things from regular stores at a low price and selling them on Amazon for a profit. Although seemingly effortless, getting your target profit requires effort.
Retail arbitrage is a great option if you’re good at finding low-priced or clearance items in stores and putting them up on online marketplaces like Amazon.
Produce and Market Your Handcrafted Wares on Amazon
Do you work as a craftsman or an artisan to sell items you make? Is this supply source you’re keen interest in investigating? If any of your answers were positive, "Amazon Handmade" is the perfect place to list your products.
Discover Things at Low Wholesale Prices to Resell on Amazon
The wholesale selling strategy entails buying bulk directly from the manufacturer or a supplier to resell on Amazon. Buying wholesale or in bulk is a typical strategy for finding low-priced Amazon merchandise, especially if you’re still figuring out which product niches could be the most lucrative to enter.
What Are FBA fees?
When you ship your items through FBA, you have to pay a pick-and-pack fee to cover logistics costs. The FBA fee is separate from the usual cost of selling on Amazon. It consists of the following:
- Fulfillment Fee
- Storage Fees
- Long-Term Storage Fee
- Disposal Order Fee
- Removal Order Fee
- Unplanned Service Fee
- Returns Processing Fee
Amazon will simply assess your storage costs when your goods are in their warehouses and charge you the amount due. Not all of the above fees apply to every seller. You are only charged based on your specific situation
Can I Sell on Amazon without FBA?
If you want to avoid Amazon's FBA fees, you could use the Fulfilled by Merchant (FBM) model. It's a form of order processing in which you, as the merchant, handle everything from stock maintenance to distribution. You can store and ship products yourself or outsource to a third-party logistics company. FBM vendors face several challenges, such as:
FBA model is preferable because it gives a badge of credibility to your products. Your products also become Prime eligible, so Amazon’s premium customers can order your products with a same-day shipping guarantee. The FBM badge doesn't inspire customer trust, as third-party vendors cannot guarantee shipping times.
There Are No Search Engine Optimization Benefits
Amazon search results are better when you use FBA. You want your products to show up on the first page of search results to get the maximum buyers. FBA products get more sales and tend to rank higher. You can use a tool like Search Insights for Amazon to analyze and improve your search performance.
Responsibility for Returning Items and Assisting Customers
With FBM, you’ll be responsible for time-consuming customer support and making refunds when necessary. Small mistakes can lead to lower seller feedback and poor product reviews. Customers may also complain about you to Amazon. Too many reports and you could be banned from the platform before you know it!
A complex network of warehouses and delivery fleets make up the back end of Amazon operations. Amazon’s supply chain strategy continuously evolves as it upgrades distribution hubs, cutting-edge software, and skilled workers to reduce shipping times further. Anyone can join the platform as a third-party seller and take advantage of the network. You have to find a product idea, make the listing, and ship the items to the warehouse.
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Ready to get started with your own FBA business? Learn how to ship your products to an Amazon FBA warehouse.