The Fulfillment by Amazon (FBA) program provides sellers with an expedited ramp up to sell products quickly and efficiently worldwide. Conceptually, this program appears as a benefit to consumer product companies, big and small. What can be better than tapping into the largest and most advanced supply chain ever created?
However, participation in the Amazon FBA program comes with the burden of following detailed labeling requirements. Following these requirements takes significant resources.
1. Eliminate Labeling Fees
Avoiding the 55 cent per SKU labeling fee is the most straightforward way to save money in the Amazon FBA program. Amazon prefers shipping products which are packaged following all their regulations (including labeling). They reward those who ship product ready to be placed directly into their warehouse infrastructure by not imposing added fees, such as the labeling fee.
Labeling products for the FBA program by hand is tedious, time-consuming, and labor intensive. The Amazon seller must correctly match each individual label with the correct case or pallet. Thus, to effectively eliminate the Amazon labeling fees, the Amazon seller should use an automated print and apply system directly integrated with the Amazon FBA program.
That system, if deployed correctly, should use scanners to remove products that do not belong to a given order. Additionally, it should verify the label was applied correctly to the matching product. Software links the scanner and print and apply machine to the Amazon order to make sure it all works together properly.
2. Avoid Out of Stock Fees
The FBA program also uses a similar carrot and stick approach to encourage the Amazon seller to keep efficient inventory levels. In the supply chain, we refer to this as keeping inventory holding costs low. To the Amazon seller, that means keeping just the minimum amount of inventory to prevent an out-of-stock situation where the seller is penalized with a fee. Through the base monthly storage fee, storage utilization surcharge, and aged inventory surcharge, Amazon creates significant financial pressure for their FBA program participants to keep inventories as low as possible at their distribution centers.
Amazon sellers must avoid these fees without incurring out of stock penalties. These include:
- Lost sales
- Additional low-Inventory fees
- Diminished search rankings
- Loss of buy box eligibility
Thus, they need to replenish their inventory quickly and often. To be able to ship more often and process the orders more quickly, they can mount the label print and apply machine and scanners onto a short conveyor. Linked with the right software, this creates an extremely fast way to create greater throughput.
Greater throughput at the Amazon seller’s facility means being able to get more orders out the door in less time. Thus, they can replenish Amazon inventories weekly or multiple times per week instead of over several weeks or monthly. More frequent replenishment means less inventory sitting at Amazon distribution center…which means lower FBA fees.
3. Lock in Early Preferred Shipment Slots
When shipping with Amazon, the seller must pack and label their shipment quickly to secure a “preferred carrier pick-up slot”. If the packing and labeling is delayed, the seller is forced to select a less favorable pick-up slot that could incur a higher shipping fee. If they miss shipment slots or cannot find one in time, alternative . These alternative shipping options include:
- Using a more expensive carrier
- Selecting a higher priority shipping
- Shipping to a different Amazon center
These problems compound on themselves because if the Amazon seller is forced to use later pick up slots instead of earlier ones, the risk of going out of stock increases since replenishment products may not arrive on time as planned.
Deploy Automation Easily and Cost Effectively
With a little help, Amazon sellers can deploy a small labeling automation cell that is easy to use, reliable, and cost effective. All it takes is:
- A short section of conveyor
- Two scanners
- Print and apply labeling machine
- Software
A new software app called Sigo Label Automation Center can effectively connect most scanners and print apply machines to the Amazon FBA program. The app can be installed either on premises or on the cloud. EBI is now helping clients to set up these systems. Give us a call if you think this might help you reduce your costs in the Amazon FBA program.
