Amazon Split Shipments And What You Can Do About Them

It’s the number one question I hear from those who are new to selling via Amazon FBA: Why is Amazon forcing me to send my inventory to multiple warehouses all over the country? It’s expensive, inconvenient, and it’s cutting into my profit margins. What can I do to fix this?

brownbox2In a perfect world, Amazon sellers would be able to take all of the items they are selling, send them to a single FBA warehouse, and continue to see those items sell quickly. Unfortunately, we don’t live in a perfect world. Amazon has their reasons for shipping our inventory to multiple fulfillment centers, so it’s important for us to understand why Amazon wants to do this.

As you probably know by now, Amazon is the most customer-centric company ever. Everything Amazon does is to make the customer happy. In relation to inventory, Amazon wants to have as many items spread out across the United States as possible. The closer an item is to the buyer, the faster that item can get there, which helps secure a happy customer. If you have a toy to sell, and Amazon already has that toy in stock in Florida, Dallas, Tennessee, and Colorado, then maybe they’ll have you ship your toy to California, where that toy is currently out of stock. When a customer in California wants that specific toy, and that toy is priced competitively, then you have a great chance of winning the buy box and getting the sale.

article_icebreakerUnderstanding why Amazon splits up your inventory doesn’t always make split shipments any easier. It can be frustrating when the bulk of your inventory is going to Indiana, yet one item needs to go to Tennessee, two items need to go to Texas, and another item to Arizona. For many of us, the cost of sending just one or two items to a separate FBA warehouse can completely destroy our profit margins.

So what is a FBA seller to do? Well, you have two options: Distributed Inventory Placement or Inventory Placement Service. Distributed Inventory Placement is where you let Amazon pick where it thinks your inventory should be shipped to. This is the default for those who sell via Amazon FBA.

Screen Shot 2014-05-22 at 8.43.26 AMThe other option you have is called Inventory Placement Service (Click here for Amazon’s page outlining inventory placement options). Choosing Inventory Placement will generally create one shipment for most of your standard sized inventory. I say generally, because Amazon actually only promises that they will send all quantities of a single MSKU to a single FBA warehouse. They do not promise that all items in your shipment will be sent to the same warehouse, but more often than not, they will. There are exceptions, such as oversized items, clothes, shoes, and some media (books, DVDs, etc), which will still need to be sent to a specific warehouse other than the main one you usually send inventory to. The inventory placement fee is currently 30 to 40 cents for each standard-sized unit and $1.30 for each oversized item. Click here to see the current fee structure. Remember, this fee is paid for every item that you are sending in to Amazon, not just on the multiples that might get split up if you did not have Inventory Placement turned on.

Here’s how to turn on Inventory Placement Service:

1. Log in to Seller Central
2. Go to “Settings” and click “Fulfillment by Amazon.”
3. Under “Inventory Placement” click “edit.”
4. Choose your preferred option (The default is Distributed Inventory Placement)
5. Click “update.”
 

Before you head on over to Amazon to update your inventory placement settings, it’s a good idea to weigh the positives with the negatives of Inventory Placement Service.

shutterstock_128422982Positives:

1. Multiples of the same MSKU will not be split into different shipments and will all go to the same warehouse.

2. No more shipments of a single item to a different warehouse.

3. Your inventory will most likely be shipped to one of the warehouses close to you. This could mean lower shipping costs and less time your shipments are in transit.

4. Since your inventory will most likely be shipped to a nearby warehouse, you’ll get faster processing times, and your inventory could go live much quicker. The faster your inventory is processed, the faster it can be sold.

Negatives:

1. The cost of 30 to 40 cents per item could add up quickly and eat into your profit margins. If you have a shipment of 100 items, that could cost you $30 in Inventory Placement fees alone.

2. Inventory placement doesn’t promise that all items in a shipment will go to the same warehouse, it only promises that multiples of the same item (MSKU) will not be split into multiple warehouses. So, you still may have to send items to three different FBA warehouses.

3. Here is a little known secret: Amazon ships your inventory to different warehouses without you even knowing it. You might have shipped your inventory to Tennessee, but after it’s processed, it could easily be removed and sent to Florida. While Amazon is shipping your item to Florida it’s considered “inactive” and cannot be sold. I believe that Amazon takes the money it makes from the Inventory Placement Fees and uses that money to reallocate your inventory across the country.

Most Amazon FBA sellers don’t like shipping their inventory to so many warehouses, but it’s up to you to decide whether it’s worth it to pay the Inventory Placement Fees or not. I, personally do not. The fact that Amazon will temporarily deactivate some of my inventory while it moves those items across the country is a deal breaker for me.

To read more about Amazon split shipments and our strategy for how to minimize shipping costs and FBA fees, click here.

So what about you? Do you use Inventory Placement Service? If so, what do you like or dislike about it? Let us know if you have any questions about these options.

11 Responses to Amazon Split Shipments And What You Can Do About Them

  1. I just started trying to send small orders of slow moving product to one warehouse since I can wait for it to sell. Super hot items are most likey going to MF if I think the price will tank, but if I have a good size shipment, then I will let them place it wherever that choose.

  2. I was extremely frustrated with this when I started selling on Amazon a year ago. I bite the bullet and use Inventory Placement so I can pack and ship 1 full box at a time and get it done quickly. I don’t have the space or the patience to have 3 or 4 boxes partially full at any one time. The only time I really regretted it was in December when I got hit with a $350 Inventory Placement fee because I shipped so much into Amazon in November. Amazon has also recently switched to charging that fee by the box about 30 days after you ship a box as opposed to the big lump sum fee once per month. That seems to make it easier to take rather than seeing the big fee one time each month. Also, you can skirt around the fee sometimes if you wait until the very end of the shipping workflow to add the actual quantity of the item. I find this strategy works well if you are shipping say 7 Oversize items in 1 box and that’s all that’s going to be in the box. So I’ll approve the shipment with just 1 item and then modify the quantity at the very end. With this strategy you do have to turn off the Inventory Placement in your settings and then turn it back on again to do other boxes with a variety of items in them.

    There’s my 2 cents!

    Dave
    RockSolidDeelz

  3. Great article and explanation, I will refer our members to it for sure, very well done.

    We simply don’t send single items. We try to do at least 30 – 40 items per plan. Today we had 43 items. 19 went to Ky, 7 Items to Nevada, 16 to Indiana, and they wanted us to send 1 item to California. We sent 3 and deleted the shipment to California, and will add the item to tomorrow’s shipment.

    Thanks again for the the very informative article.

  4. I have noticed that some of my FBA items that were sent to one warehouse were shipped from a completely different warehouse. I wonder how this works when you send, let’s say, a book to a Arizona warehouse, but your books ends up being shipped from a warehouse in Kentucky? I don’t have a Nexus with Kentucky and am not signed up with that state to collect sales tax. So who does the tax go to? AND in many cases you would never know where it shipped from, so how in the world would you keep track of who owes who?

    • Jim,
      The process that Amazon uses to move our inventory across the country is very troubling for when it comes to taxes. I would assume that as long as you are doing your best to collect sales tax in the states you are registered for, then a few sales in states where you are not set up to collect would not be that big of a deal. I don’t think that those situations would create a red flag in the eyes of those who regulate taxation. Just do your best, and I bet you’ll be fine.
      Disclaimer: I am not a tax attorney and I am not giving out tax advise. Please do your own due-dilagence when it comes to what you do in all aspects of your business, especially taxes.

  5. In my experience, #3 (Positives) never happens. The closest I can get to any warehouse near me is if I use the Distributed Placement, then Amazon will likely have me ship 1 of the 3 boxes to a warehouse in the neighboring state. It is my belief that I will never ever see a shipment going to the warehouse closest to me, which is one county over. I live on the West Coast, and even though I may pay extra for the convenience of having items sent to a single FC, Amazon still wants the item centrally located to buyers, which means I still have to ship halfway across the country.

  6. Pingback: How to Make the Most of Amazon FBA Split Shipments | Full-Time FBA

  7. Thanks Stephen for the breakdown, don’t wan’t to overthink on this, looks like the default settings may be better for those who are not sure and probably cheaper for dozens in the long run and active inventory without waiting.

    • I think the default settings are best to start off with.. and then do the math on each shipment to see if it’s worth it to you to do it with IPS the next time.

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