Taylor Smits, co-founder of the largest Amazon prep and e-commerce fulfillment network in the United States, shares his thoughts on the technology need for supply chain optimization and the e-commerce trends dominating today’s marketplace.
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It goes without saying the last two years of e-commerce trends have been marked by upheaval. Sellers on Amazon and other major marketplaces faced immense hurdles in an e-commerce race that, despite the pandemic, isn’t slowing down any time soon. Supply chain obstacles, fulfillment difficulties, unpredictable inventory fluctuations, and other factors increased the need for better logistical technology and visibility to make sound business decisions during uncertain times.
Taylor Smits, co-founder of Amazon fulfillment company, My FBA Prep, shares his insights, advice, and predictions regarding this crucial pivotal period for sellers large and small.
Tell us a little bit about My FPA Prep and what you do.
My FBA Prep is the largest Amazon prep and e-commerce fulfillment network in the United States. We provide Amazon FBA prep, merchant fulfillment, and e-commerce services to optimize logistics and help sellers stay flexible as the industry evolves. We serve as an enterprise-level provider of prep and warehousing services.
We focus on companies whose revenue comes at least 50% from Amazon. Because we’re specialized in Amazon prep, and all our warehouses are trained on Amazon, we bring that value to warehouse partners. We use our platform, Preptopia, to handle the incoming volume and report back where that prep is and what stage it’s in when it’s gone into Amazon. Essentially, we’re allowing our clients visibility through our system, which handles hundreds of thousands of units in our warehouse network across the country.
What role does technology play in what you’re trying to solve regarding supply chain optimization?
By using our system, our clients are going to be able to have better forecasting ability to move inventory around in virtually real time. So that helps a lot for managing large clients who have lots of inventory to process.
When it comes to the other side of our supply chain technology, we’re seeing more and more that the largest companies need enterprise resource planning (ERP) reporting. That’s becoming incredibly important, not just for Amazon sellers, but all e-commerce sellers, who often have taken a sliver of their total inventory and applied it to Amazon. It’s not the most fun part of the Amazon supply chain, but it’s incredibly important for people to make sound business decisions.
In the last couple of years we’ve seen tons of supply chain issues, many of which continue to persist. Are you seeing increased demand from customers around more sophisticated supply chain technology?
Technology is not something a successful Amazon business can do without. When looking under the hood of an organization, so to speak, we have to determine how the technology will integrate. In the biggest conversations we’re having right now, it’s not just the question, “Are you able to handle your current volume?” or “Can you get goods through the Amazon supply chain and to customers?” If it’s direct-to-consumer, it’s also, “Can you show us that the integration will be smooth? Will we be able to see the reports we need to run our business?”
So these concerns are certainly something that we want to stay ahead of, and I don’t think they’re going away anytime soon. I think the pandemic, like many things, has made supply chain technology more of a necessity.
Given the turbulence of the last couple of years and the pressing need for supply chain optimization, are you seeing increased demand from customers for more sophisticated logistics technology?
When I speak to my clients on the supply chain side of their business, they tell me that they don’t forecast any changes in 2022, and that it will continue to take a long time for goods to get here — at least, longer than normal. Of course, we’re all crossing our fingers and hoping that the container and shipping rates from Asia will come down. But the Amazon supply chain has been incredibly affected in ways that some people aren’t privy to, so I don’t think we’re fully out of the woods yet. But it’s not as bad as it was 12 months ago.
Another thing that we saw related to the supply chain issues at the start of the pandemic were the Amazon inventory limits put on several product categories. Are you seeing those restrictions getting lifted? Are you able to send more inventory into Amazon at this point, or do you have to fulfill direct-to-consumer through your warehouses?
That’s a great question, because for over a year, those limits were the primary thing we were dealing with. I’m happy to say that now, many of our customers have reported their inventory returning to pre-pandemic levels. However, there are two takeaways that I think most clients have felt and won’t forget anytime soon.
The first has to do with FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant). Without going into a long example, it’s always important to be nimble with the balance between the two.
Secondly, one area that has not come back to pre-COVID levels is oversized storage. For clients that sell items over a certain size or weight, Amazon feels it will incentivize clients — meaning e-commerce sellers — and fulfillment centers like us to take that inventory and fulfill it ourselves. There’s lots of easy ways to do that through Seller Central or 3P, but oversize storage limits have not come back the way that standard size has.
Can you define the difference between FBA vs FBM?
FBA is when an Amazon warehouse sends a customer’s order to the customer’s home. FBM is when a warehouse, such as my FBA Prep, sends the item to the destination. Another component of that is customer service. In the FBA case, Amazon does the customer service. On the FBM side, the seller handles it. So, you’d be emailing an employee of the company you bought the product from, rather than Amazon.
What are the pros and cons of each? Is one better than the other?
There are pros and cons. It’s a scenario where one size does not fit all. If you’re selling something like coolers or canoes, for example, you’re probably going to want to sell FBM because the storage rates are too high to keep that inventory in Amazon’s warehouse. You’ll probably get better shipping rates as well.
However, most sellers want to and should be using FBA. With that said, the percentage that Amazon takes from you if you’re an FBA seller is higher than an FBM, but when you sell FBA, it’s widely known that your traffic and your sales will be higher because Amazon is very consumer-centric and incentivizes its Prime users. So, I would just say, in most scenarios, that you should be selling FBA, with only certain exceptions.
What are some other things a brand or e-commerce seller should be thinking about when setting up their e-commerce or Amazon-specific prep?
For newer sellers, there’s some obvious ones like price and speed. Some not-so-obvious questions to ask next would be: Can you actually perform the service? Do you have the capacity? When can customers expect that inventory to go out? Those are incredibly important as well.
At a higher level, for larger companies, the first specific service that customers forget to ask about is client services. Who can they pick up the phone and call (or email) if they have a question about their inventory? Who can tell them what’s going on with that shipment? If it’s landed yet? Did it clear customs? Did it arrive within its appointment time? Were there any damages? That client service aspect is important to recognize.
To close out this discussion, what trends are you seeing in this space right now?
The first is omni-channel. A lot of sellers are finding success taking what they’ve done on Amazon and mirroring it for other marketplaces. So omni-channel remains a huge consideration for growing companies. It’s good to diversify because hurdles from Amazon could come at any time.
The other popular thing every Amazon seller has heard about by now are the aggregators. On the good side, aggregators are providing a way out for private label sellers who have been building their business and want to exit. Taking a step outside of supply chain for a second, the aggregators are directing more attention to Amazon, which is a good thing. So if you are into supply chain optimization, an aggregator might be a good place to look for a job relevant to e-commerce work. We’re also seeing the aggregators, following this omni-channel strategy we were just talking about, looking to grow. It’s interesting to see how COVID has accelerated this.
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