By james art This audio is automatically generated. Please let us know if you have any feedback.
Brief description of the dive:
- Amazon is experiencing limited capacity at some West Coast facilities due to high demand, the company said in a message to third-party sellers on Thursday.
- The restrictions result in longer processing times for the seller’s inventory at inbound and palletized freight locations. “We continue to monitor the situation and are working hard to ensure your inventory is placed before your transactions begin,” Amazon said.
- The e-commerce giant said it was rerouting shipments to other regions to ease capacity. It also extended the auto-close and abandoned shipment windows for shipments created between August 7 and October 31.
Dive Insight:
Ahead of the peak season in 2024, Amazon had sellers release products on its network earlier than last year to ensure fast shipping speeds during the holidays. Sellers who haven’t done so may need to brace themselves for delays due to Amazon’s recent capacity constraints.
“The congestion stems primarily from inefficiencies in Amazon’s cross-dock network, where distribution from national and regional cross-docks to fulfillment centers has been severely delayed, potentially adding weeks to standard inbound times,” John Elder, founder and CEO of the Consulting Amazon seller company Black Label Advisor, said in a LinkedIn post.
Amazon has had sellers transport their inventory to its network in one of two ways this year, leading to cross-docking inefficiencies, said Rob Hahn, Pattern’s COO and former Amazon executive, in an interview with Supply Chain Dive.
One method is by delivering inventory to Amazon’s nearest national cross-docking facility for a fee, after which Amazon distributes the products to various locations. Hahn said this adds an extra touch to the process and adds lead time.
The other approach is for sellers to ship inventory to multiple locations themselves to avoid the fee. That results in more shipments with fewer facility trucks to handle because many sellers don’t have the volume to fill a truck destined for a particular regional facility, Hahn said.
“It slowed down the efficiency in those buildings, which really had knock-on effects on the capacity of those buildings,” Hahn said.
To ease capacity constraints, Amazon also provides an additional incentive for sellers to ship their inventory to areas with more available space.
The company has temporarily reduced its inbound placement service fee for sellers using its “minimum split shipment” plan — or sending inventory to one location — if their products are going to the eastern U.S., an Amazon spokesperson said in a statement. The fee range is now 5 cents lower per unit.
Even considering Amazon’s mitigation efforts, sellers should maintain emergency inventory at third-party logistics facilities on both the West and East Coasts to mitigate their exposure to Amazon-related delays. Elder said.
Larger sellers may look to use truckload carriers to deliver products on time, while smaller volume businesses may choose to use parcel carriers for inbound delivery, although this may result in higher shipping costs. costs, according to Khan.
“That’s the cost of doing business at this peak,” Hahn said.