Practical Ecommerce

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?

TomTaylorAmazonTaylor: “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

Practical Ecommerce

Practical Ecommerce

Bio   •   RSS Feed


email-news-env

Sign up for our email newsletter

Get the Practical Ecommerce RSS feed

Comments ( 5 )

  1. Nate Gilmore December 2, 2008 Reply

    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](http://www.Shipwire.com) 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

  2. economine January 13, 2009 Reply

    Very helpful article and comments !
    I have been searching for a fulfillment company to warehouse and ship my orders for almost two months now.

    There are a number of companies that offer these services, and fees vary quite a bit.

    I found some very useful information, including a fulfillment guide that explains the pros & cons of outsourcing, as well as definitions of fulfillment related terms at http://xpertfulfillment.com

    I hope this helps others as much as it has me.

    -Jack Johnston
    -EconoMine

  3. SandorN April 2, 2009 Reply

    I’ve had excellent success with Professional Distribution (http://www.professionaldist.com) which is a thrid party logistics provider. They have a unique offering since they have a warehouse on the canadian border in Buffallo and on the US border 30 minutes away. They stock and ship our Canadian orders. We send truckloads of product to their US warehouse, they are able to take one truck to the Canada warehouse and ship out the products much easier than when we shipped directly to canada from our single facility in the USA.

    Our ecommerce provider (http://www.orderdynamics.com) integrates directly with them and are able to route our canadian orders from our normal fulfillment process (our warehouse in the USA) through to the Canadian warehouse via Professional Distribution. it is a great cost saver to ship canadian orders from canada and also enables you to offer faster fulfillment to customers.

  4. Don June 17, 2009 Reply

    A comment about Amazon FBA. Amazon FBA is the biggest scam. Its a tactic to lure in vendors and then steal their sales for the product. How does it work? Well basically its really very simple. Once they receive your product, the amazon retail dept drops their price to a point that makes it impossible, due to all the fees involved, to ever sell your product which now they have control of. Yes you have the option of them shipping it back to you but after reviewing those costs you end up loosing even more money than if you just sold at a huge loss in the first place and that is IF, huge if, they even allow your product to be sold. Hmm what do i mean by that? ahh ok here is another game they play. They have absolute full control of their product page, which means, they can and do knock every other vendor/seller out of the "buy box" and only allow their product to be sold. BTW they say its an algorithm that determines who can obtain the "buy box". Thats an absolute lie and they know it. So its a way to justify their militant practice. Furthermore they have so much control that they will and do shutdown vendors product because a manufacture has contacted them and told them to. The economy is going down the drain due to the manufactures of this world playing their Price Fixing games with consumers. There has never been a more unfair market than todays day in business. Its a dog eat dog in business and the only one that looses is the consumer.

    Just an FYI for any "consumer reading this post. If you ever see a product for sale at the same exact price being sold by ONLY the Large Retailer, and i say ONLY the large retailers to be specific with that statement, it is because the Manufacture will purposely not sell the product to any other company and has Price Fixed the product which is illegal. Further more you should know that if you cannot find a specific product at any other retail company except for the BIG known companies it also means the odds are you are paying double the true cost price of the product. Basically what im saying is ALways ASK for a discount before you buy and shop around.

  5. fredfock March 16, 2012 Reply

    Amazon FBA is not all it’s cracked up to be. It looks like a great deal in the beginning and prices are competitive however signing up for FBA is allowing Amazon to meddle with details of your business that should be no concern of a simple outsourced fulfillment company.

    Amazon FBA can destroy your business just as easily as help you build it. For example they may arbitrarily determine your product is "prohibited" for no apparent reason and then ban you from selling it… EVEN ON YOUR OWN WEBSITE. All detailed on my blog: http://www.amazonscam.com/