Being a seller on Amazon involves a lot of logistics tasks. All your sales and profit depend on whether you have enough inventory to fulfill the customers’ demands. But how much does it cost you to send your inventory to Amazon?
Distributed Inventory Placement
When creating a shipping plan, Amazon may, by default, divide it into several different shipments, each designated to a specific fulfillment center. Amazon chooses the fulfillment centers based on the product type and location. Customers who purchase your goods will receive them faster if your inventory is placed throughout numerous fulfillment centers across the country.
This sort of shipment uses the Distributed Inventory Placement method, and most sellers use this. It could be for two reasons:
- It’s more cost-effective for them
- They are unaware of the alternative option
Inventory Placement Service (IPS)
Amazon offers Inventory Placement Service (IPS) to manage your shipments. You can use this service to dispatch all of your units to a single fulfilment center. When your products arrive at the FC, Amazon staff will divide them into many boxes and ship them to other fulfillment centers on your behalf. The disadvantage is that Amazon chooses which fulfillment center you must send your goods to, and charges you a per-unit price for this service.
Is Using Inventory Placement Service Worth It?
This question is hard to answer and generalize as it depends on the products you sell, their volume, size, and profit margins.
On the one hand, sending all of your inventory to a single location may seem appealing, especially if you’re an international seller shipping to the USA. Because you won’t have to worry about delivering your boxes to more remote regions around the country, you can save a lot of money on shipping. However, sending products within the USA depends on where you send the products from and to. For example, sending products from NY to LA can be pretty costly.
Using Amazon Inventory Placement Service could save you money on freight if Amazon provides you with a closer destination. However, there is another disadvantage – when you use the Inventory Placement Service, Amazon chooses the fulfillment location for you, and you cannot select the fulfillment center to which your package will be sent.
This service also does not come without an extra charge. There is a per-unit fee when using the Inventory Placement Service, and this can accumulate fast if you have thousands of items to ship.
Check Amazon’s help page to ensure you are viewing the correct fees.
At first, the total sum of using this service may seem like a lot. But if your sales volume and profit margins are high, bearing this expense may be relatively easy. On the other hand, IPS may not be the best solution for your business if you’re selling products with a low profit margin. Simply put, you don’t want the extra IPS costs to eat into your already thin profit margin.
Ultimately, compare and contrast the cost and determine how much it would cost you to use or not to use this service. Consider the total cost of three shipments against the price of one shipment plus IPS costs when designing a shipping strategy to discover which is more profitable.
How To Enable This Service
To enable Inventory Placement Service, go to:
- Settings, select Fulfillment by Amazon.
- Under Inbound Settings, click Edit.
- Under Inventory Placement Option, choose Placement Inventory Service.
- Click Update.
Any in-progress shipments are not affected when you change your inventory placement option. The new setting only applies to shipments created after you update your settings. Delete the shipping plan, and then re-create it after you change your settings.
Enabling this service does not automatically apply to all previously created shipment plans. New settings will apply only to new shipment plans. To apply this update to an existing shipment, erase the shipping plan and then re-create it after making your changes.
In conclusion, Amazon Inventory Placement Service will either be more or less cost-effective depending on your company and product.
If you have additional questions, don’t hesitate to contact the BellaVix Team.
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