eComEngine was well-represented at CPC Strategy’s 2018 Amazon Virtual Summit where Jay Lagarde, Founder and President, and Ken Furlong, Director of Product, presented their Secrets to a Lean Amazon Supply Chain.
Drawing from more than a decade of experience, Jay and Ken discussed how adopting Lean strategies can increase business agility while giving owners more freedom to make good decisions. While the discussion is much more in-depth in the webinar (watch it here), here are some highlights!
The Impact of Long Lead Times
As an Amazon seller, the ability to pivot and change direction in a short amount of time is essential. If your lead times are too long, though, you might feel like your hands are tied at moments when you need or want to take action.
“If you have very long lead times, you are walking a tight rope between two problems – one is lost revenue,” Lagarde explained. “You might be leaving a lot of revenue on the table by not trying to seize an opportunity.” This is especially relevant for those times when you notice a new trend or fad and want to ride the wave. Capitalizing on these moments can make or break your business.
It’s understandable that taking risks is scary but playing it safe might not always be the best choice. “You could go ahead and place a big order with your supplier, thinking the demand will still be there when the supply arrives and low and behold the demand dries up and you’ve got lost capital,” Lagarde said. “You’ve got a lot of inventory, low demand. You’re going to have to discount, liquidate in some way. The longer your lead times are, the more you’re going to have to choose between those two risks.”
Another thing to consider, according to Lagarde, is that “the further into the future your forecast goes, the less reliable it’s going to be.” That lack of predictability and flexibility can have serious consequences for your Amazon business.
Consider the Options
There are things you can do to drive down lead times and improve your agility as a seller. This, of course, largely revolves around how your inventory gets from the supplier to the Amazon fulfillment center. There are three main ways this can happen and each comes with its own benefits.
From Your Warehouse to Amazon
If you order product from your supplier and have it sent to a warehouse (a common scenario for FBA sellers) consider automating the shipment to speed up the process and avoid errors. This is especially important since Amazon.com, Inc. (“Amazon”) has very rigorous prep rules.
Among other things, Lagarde suggests synchronizing the way your purchase order is structured with your supplier in order to “to minimize the amount of processing you need to do and minimize the amount of errors you may potentially have in your warehouse.” This will improve the overall efficiency of your process, which can save you time and money.
From Your Suppliers to You
One thing that should never be underestimated is the importance of learning to speak your supplier’s language. As Lagarde said, “Communication is critical to having a really smooth supply chain.” Take the time to understand how your supplier prefers to receive orders. This will not only improve processing time and reduce problems, but it will also go a long way to strengthening your partnership.
At the same time, he also advises caution when considering large orders. Even if you are offered a great discount, it’s important to remember that it can come with more risks. “Smaller orders are faster to process and come with less friction and less chance of error,” Lagarde said.
From Your Suppliers Directly to Amazon
“Having your inventory ship directly from your suppliers into Amazon is really a great idea if you can do it,” Lagarde said. “You are saving time and money which is the name of the game when optimizing your FBA supply chain.”
To make this method most successful, you should devote a lot of time to training your suppliers. “You want to give them everything they need to know to meet Amazon’s rules,” Lagarde explained. “They may not know what is expected of them or that you, as a seller, could be penalized if guidelines are not followed.” It might be time-consuming, but training suppliers will pay off in the end.
If you’re thinking about going directly from supplier to the Amazon fulfillment center but are hesitant because you’ve got a few SKUs that need to be stickered, Lagarde suggested that vendors “consider paying for Amazon to sticker those SKUs for you (if your supplier can’t), rather than endure all the cost of bringing all of those items into your own warehouse.”
Improved Business Agility
As an Amazon seller, you need to have the flexibility to capitalize on opportunities as they arise while avoiding the pitfalls associated with falling demand. The idea is to take full advantage of the dynamic nature of the Amazon FBA platform where the ability to be very agile and lean amid rapidly changing conditions can reap immense benefits for business owners.
Watch the Secrets to a Lean Amazon Supply Chain presentation to learn more, and look for part two of this recap on the eComEngine blog. Be sure to also check out RestockPro, FeedbackFive and eComSpy to see how these automation tools can improve efficiency and save you money!