Why Supply Chain is Important for Amazon Sellers
Updated: Jun 1
It is safe to say that we are living in an unprecedented time: cities have turned into ghost towns as people have been ordered by government officials to stay home except when it’s absolutely necessary to go out, (most) stores are closed, businesses have shut down offices and instructed employees to work from home, almost 7 million people in the US have filed for unemployment benefits, and the list goes on and on.
Amazon and its third-party sellers have not been immune to the problems that the COVID-19 outbreak has created for the world. Even as Amazon continues to fill orders, it has had to stop accepting inventory shipments from sellers except for items that fall into the six categories of ‘essential items’ that are being prioritized.
The categories being prioritized currently are:
Health & Household
Beauty & Personal Care (including personal care appliances)
Industrial & Scientific
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This creates problems for sellers who need to replenish their stock at FBA warehouses, especially because going out of stock is a dreaded problem no seller wants to experience if they can help it. While this is certainly not ideal, there are ways for sellers to continue fulfilling orders on their own through Fulfillment by Merchant (FBM). Sellers have voiced concerns about how their best seller rank (BSR) in the forums on Seller Central, and their worries are not without merit. If you go out of stock, or even if you put your account into ‘vacation mode’ which makes your listings inactive so customers cannot purchase your products, you will see a decline in ranking. If you are fulfilling orders yourself, putting your account into ‘vacation mode’ will help your BSR decay more slowly and make it easier to bounce back once you have replenished your inventory. So it may be advisable to try to fulfill orders yourself and then use ‘vacation mode’ once you get low on stock versus just running out of inventory completely. Keep in mind that you’ll probably need and want to invest (or increase your investment) in advertising on Amazon in order to boost your sales and BSR faster once things get back to normal.
Some sellers are experiencing even more complications because they are unable to get more inventory from their supplier(s) due to factories being shut down in China. This is where supply chain comes into play. Supply chain simply refers to a system of companies, manufacturers, people, etc. that work in a “chain” to move products from the supplier to the customer. Because so many sellers depend on factories in China to product their products, and since many, if not all, of them were forced to close during the outbreak of COVID-19, sellers may have (or will) experience(d) issues getting their products made.
This has caused some sellers to look into other areas of the world as potential places to have their products made. Popular areas include: the US, Canada, India, Turkey, Vietnam, Mexico, and Taiwan.
Even if sellers have had orders filled by their suppliers in China, there are still other problems that could arise in the supply chain due to the constraints the outbreak has caused. One of these problems is in shipping orders of our China. Many ships have been stuck in ports waiting to set sail but have been unable to because of a lack of dock workers, customs issues/delays, etc. This illustrates another breakdown that can happen in the supply chain due to outside forces that are uncontrollable by the seller or supplier, much like the Chinese government forcing factories to shut down.
Some may think that those sellers “lucky” enough to have products listed in one of the categories being prioritized on Amazon are going to skate through this difficult time unscathed, but they’re likely wrong. Even with their products being prioritized, they are still at high risk for running out of stock and supply chain issues too. If their products are flying off the FBA warehouse shelves, but they cannot get replenishment stock from their supplier(s), they are in the same boat as the rest of the sellers who cannot get their stock into Amazon’s warehouses. They may see a delay in the effects because their products are being prioritized but eventually they will run out of stock if they are experiencing supply chain problems.
The key that many sellers overlook when it comes to supply chain management is controlling their supply chain. This pandemic may present an opportunity for sellers to figure out alternative ways of getting their products made that is less risky. Overseas manufacturers may be cheaper than domestic ones, but our current situation illustrates perfectly how sometimes paying more for your inventory may be worth the cost. Plus, some businesses who use domestic manufacturers have been able to pivot in their product offerings as the COVID-19 outbreak developed and the needs of the world and customers changed rapidly. They’ve been able to work with their manufacturers to have private label products like hand sanitizer under their brand name created and ready to sell quickly. This would be nearly impossible to complete with such quick turnaround using overseas manufacturers due to supply chain issues.
These examples depict why supply chain is important for Amazon Sellers. Without having complete control of your supply chain, you run the risk of having your business left without a way to get more products if your manufacturer closes (whether it’s because of a global pandemic or something less serious like bankruptcy, etc.) and/or if you are unable to get your products shipped. By constraining your business to one overseas supplier, you’re limiting your ability to control your supply chain and make changes dynamically when the need arises. There’s obviously no way to know well in advance that something likes the COVID-19 outbreak is going to have such wide-reaching impacts on nearly the entire world and having a domestic manufacturer won’t immunize you from all problems. But by diversifying your supply chain with perhaps a supplemental domestic supplier, for example, could give you more control over your supply chain and give you the ability to shift with changing times. As the world moves at a slower pace during this time, perhaps you could captialize on the extra free time we’ve all been given to explore how you can gain more control of your supply chain and safeguard your Amazon business from future problems.