Operations

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  • Demand Planning and Forecasting
  • Fulfillment Options
  • Operational Efficiency
  • CRAP / Profitability
  • Packaging
  • Chargebacks

Demand Planning and Forecasting

Amazon works on a just-in-time, demand-driven inventory model. Their goal is to minimize inventory while maximizing product availability. This is done by typically keeping less than three weeks of cover on hand. Each week, they create a new 26-week forecast for each item, taking into account customer traffic, pricing, profitability and conversion rates. We analyze this large amount of data and provide regular reporting to assist in inventory planning.

We also work with Amazon’s in-stock team regularly to make sure we have accurate and robust demand forecasts, especially in peak and/or high growth periods. Through diligent planning and communication, we ensure that your products are always in stock, thus maximizing top line volume. While Amazon strives to maintain lean inventory, there are still times they may become overstocked. In this event, we work with you to quickly reduce these overstocks through various strategies such as product returns, promotions and increased advertising.

Fulfillment Options

Amazon offers a variety of fulfillment options on both the Vendor and Seller Central platforms. We analyze our client’s needs, logistics, and financials to help strategize which methods are best on an item by item basis. Amazon’s major fulfillment options are as follows:

  • Seller Central – Fulfillment by Amazon (FBA)

    FBA is our most often recommended method to sell product through the Amazon third-party marketplace. While FBA is managed through Seller Central, Amazon handles all customer service and returns. This keeps your team free to focus on other areas of your business. With FBA your third-party listings are displayed with Prime badging, so customers receive the same Prime experience they would through a 1P offer. Compared with a merchant fulfilled offer, using FBA significantly easier and there is no minimum in the number of units that can be sent into inventory. Depending on your goals, we will help determine if incorporating FBA is a strategic addition for your business needs on Amazon.

  • Seller Central – Merchant Fulfilled

    Seller Central also offers the option to have the seller ship orders directly to the end customer. In this scenario, the seller lists on Amazon’s site but maintains physical control of the product. Amazon never touches the product, and the seller is responsible for all customer service and order fulfillment that stems from merchant fulfilled orders.

  • Direct Import

    Direct import (DI) can be an important part of doing business with Amazon. We are partners with some of the first vendors to ever do direct importing with Amazon and we pride ourselves on having an unprecedented level of expertise in this process. With the right execution and relationships, DI can provide a winning solution for all parties involved.

  • Direct Fulfillment (Drop Ship)

    Direct Fulfillment can be a key program for some clients – especially those with big, bulky, or highly seasonal products. We are skilled at rolling out and managing these programs and work regularly in the Direct Fulfillment platform and with the internal DF team. Adding items to the Direct Fulfillment network creates a “backup offer” in the event Amazon has not brought your item into their fulfillment centers in time, ensuring any customer who visits the site to buy your product is able purchase your product.

  • On Cycle (Normal Replenishment)

    Amazon turns much faster than a typical retailer by relying on sophisticated forecasting software coupled with streamlined warehousing. With on-cycle replenishment, Amazon’s systems re-evaluate product forecasts each week and place a just-in-time purchase order to ensure they have enough inventory to meet customer demand.

    On average, Amazon typically holds 3-4 weeks of inventory in their warehouses, in-transit from the vendor to Amazon’s warehouse, and on order. In comparison, most physical retailers hold 8-10 weeks’ worth. Given Amazon’s lower inventory levels, it is important that vendors accurately communicate any supply chain issues to Amazon so that they can order incremental inventory. Our team will monitor and communicate any concerns or issues regarding replenishment and inventory to Amazon before impacts your business.

Operational Efficiency

As Amazon scales, it has focused on streamlining its operations to both improve customer experience as well as reduced costs. Common operational efficiency programs include:

  • Pallet Ordering

    Instead of ordering in case packs, Amazon will order full pallet quantities for a given item. This approach typically streamlines vendor operations as well as the movement of goods due to individual units not being handled.

  • Perfect Inbound

    Amazon strives to receive goods as fast and efficiently as possible, so they’ve developed a metric called Perfect Inbound for those units that can be received with minimal to no human involvement. To qualify for Perfect Inbound, an inbound unit must have a scannable shipping label, an ASN (advance ship notification), a corresponding open PO matching the ASN, and no prep required.

CRAP / Profitability

Amazon will always provide the best price to their customers and as a result margins can sometimes get squeezed. We are very experienced in working through these issues and finding win-win solutions for our clients and Amazon.

Packaging

Due to the massive volume of shipments Amazon handles, certifications are offered for product packaging that meets various requirements. We are well versed in these requirements and the certification process involved. Benefits to having these Prep Free, SIOC or FFP certified items include additional merchandising and priority treatment for participating products, as well as reducing freight costs. These certification options include:

  • Prep Free Packaging

    Amazon fulfilment centers are optimized for the streamlined flow of goods both inbound and outbound. During inbound, Amazon ensures individual units comply with Amazon’s requirement for prep-free packaging. Most importantly, Amazon ensures products are safe to store and handle (ex. exposed knife blades), not exposing the final product to dust (ex. Apparel not in a sealed bag), and are not loose (ex. bolts in a box). If one of your products violates these requirements, Amazon will charge a fee to prep the item. Given the proper evidence and documentation, we are well versed in how to address these issues to reverse chargebacks and certify items as being prep-free.

  • Ships In Own Container (SIOC)

    The Ships-in-Own Container certification offers the same benefits of Prep-Free Packaging, but also indicates that products can be shipped without an Amazon overbox which significantly reduces packaging and transportation costs. Smaller, more protective packaging translates to lower transportation costs, less damage to the product in transit, and a lower cost spent on expensive retail product packaging.

  • Frustration Free Packaging (FFP)

    Frustration Free Packaging is the pinnacle of the Amazon packaging certifications. Products are shipped in recyclable, easy-to-open boxes. This method of packaging offers the same benefits of Prep-Free Packaging and Ships-in-Own-Container, but it also offers free Amazon Vine enrollment and additional Amazon marketing. Specifically, all Frustration-Free Packaging products will be included on the Frustration-Free Packaging storefront on Amazon’s website. The product will also receive additional messaging on the detail page and increased search relevancy.

Chargebacks

Regularly occurring chargebacks can be an unfortunate reality at Amazon. Amazon has been, and will continue, rolling out new chargebacks with increasing regularity. There are currently six different categories of chargebacks, with multiple chargebacks within each category. These can have a potentially serious financial impact on the business if not dealt with quickly. The following six categories comprise Amazon’s chargeback groups:

  • PO Related (Excessive backorders, PO On-Time Non-Compliance, PO Confirmation Rate)
  • Prep Related (bagging, boxing, taping, suffocation warning, etc.)
  • Receive Related (No Carton Content Label, Oversized or Overweight Cartons, etc.)
  • Transportation Related
  • ASN Related
  • Dropship Related

Our approach to all chargebacks is to work with our clients’ operations and customer service teams to ensure that we are fixing the root cause and preventing them from happening in the first place. We monitor operational performance on an on-going basis and work closely with clients to better understand their internal operations regarding functions such as picking, packaging and routing shipments. Our team then works to educate and coach our clients on Amazon’s procedures and policies for everything from accepting POs to submitting routing requests. In addition, we also help formulate processes for avoiding and minimizing chargebacks. In the unfortunate event that chargebacks do occur, our team will research and dispute the charges for our client in the format that Amazon requires.