2021 Guide to Amazon FulFillment Centers
Ever wonder how Amazon ships products over the world? Read this 2021 Guide to Amazon FulFillment Centers and learn the magic behind Amazon's shipping empire.
So you've landed your manufacturing contracts, picked your products, and now you're ready to put in an order from your supplier and need to ship them to an Amazon fulfillment center. But how do you know which fulfillment center to send it to and how much of your stock to send? When you do find the right center, how should you ship your products? What packaging should you use? And what else do you need to include with your products?
To understand how and where to ship, you need to understand Amazon's shipping process in relation to their expansive fulfillment center network. In this guide, we'll also cover Amazon's fulfillment center network and why every seller needs to understand Amazon's shipping structure.
Amazon Fulfillment Center Locations
With over 100 fulfillment centers in the United States alone and over 185 centers around the world, Amazon has created one of the strongest and most efficient fulfillment center networks ever made. These shipping centers allow sellers to store, package, and ship products to customers without ever having to touch physical merchandise. Each fulfillment center can span over 800,000 feet and can employ over 1,500 workers per site. Amazon has tested and perfected one of the most technologically advanced and efficient fulfillment networks in the world. This process has created countless job opportunities and is the foundation for Amazon's beloved Prime Shipping feature which includes their signature same-day, 1-day, and 2-day shipping standards.
For a full and comprehensive list of all 185 Amazon fulfillment centers, you can check out that list here:
How Do Fulfillment Centers Work?
Amazon has a ton of resources written about their fulfillment centers and shipping procedures they follow when a customer buys a product on Amazon.com.
The process begins when sellers ship their products to a fulfillment center. Upon being delivered to their warehouses, the products are meticulously stored in yellow totes that are barcoded and scanned into their management system and randomly placed within one of their warehouses. When an order is placed on Amazon, warehouses use large machines and robotic arms to pluck the tote with the corresponding barcode and bring it to an associate to pick the right product from the tote and move it along the shipping process. The product then undergoes a quality assurance process by associates and once approved, the product is packed by more associates in a production line format. Before packages are sent out, they go through the "SLAM" machines, which scan, label, apply, and manifest shipping labels and organize the packages for shipments
While this process may seem boring to some sellers, this procedure has been perfected and reorganized countless times to maximize both efficiency and cost-effectiveness.
Not only is this good for Amazon, but for sellers, particularly Fulfillment by Amazon (FBA) sellers, this means your products are being sent out to your buyers in a quick and time-sensitive manner.
Amazon Shipping Center Benefits
While we discussed the benefits of Fulfillment by Amazon (FBA) for sellers in our previous blog on Amazon FBA vs. Amazon FBM, it is important to acknowledge those benefits again if you are considering shipping your products through an FBA center. Here are some of the key benefits sellers obtain by using the FBA model:
Prime shipping: By having your inventory stored at fulfillment centers, your products will most likely be eligible for Amazon Prime shipping, which includes free two-day shipping, free shipping, and more. Prime members value this added perk and may lead to higher sales and profit margins for third-party sellers.
Prime Customers: While all sellers have access to Amazon's plethora of customers, FBA sellers get direct access to Prime members who pay Amazon a monthly fee in exchange for additional perks such as Prime shipping, Prime video, etc. Prime customers are heavy online shoppers who more than likely shop on Amazon multiple times a month, By using fulfillment centers, sellers get access to this elite group of customers who buy more products leading to a higher return on investments.
Amazon Customer Service: Amazon's customer service network employs workers all over the world. Regardless of which Amazon marketplace you're selling from, all FBA sellers and their products are supported by Amazon's customer service network. This means that business owners do not have to interact with customers at all! All issues about products and purchases will be handled by FBA customer support.
Returns: Amazon's customer service also handles all returns from buyers. Whether it is about a defective product or warranty, Amazon will collect returned products and even send customers a new one if needed.
Fewer storage costs: With Amazon warehouses, FBA sellers do not have to store or handle any more physical merchandise or inventory. Everything gets sent and stored within the Amazon fulfillment centers. This means sellers have less upfront cost such as warehouse rentals, employees, or other associated storage costs making it more cost-effective than having a physical storefront.
Business scaling: With less overhead to worry about, Amazon business owners can redistribute resources towards scaling up their business. Sellers can start with a small inventory and build their businesses at their own pace.
Fulfillment by Amazon Fees
The last topic we want to discuss are the potential costs that come along with using Amazon FBA. These costs can vary depending on the amount of stock that is stored at the warehouses along with the size, weight, and duration of storage. Each of these fees can impact the profitability of your business, so be sure to consider all these costs before purchasing inventory or starting your business.
We've already discussed the fulfillment fees associated with the individual plan ($0.99 per item sold) and professional plan ($39.99 a month) in our previous blogs, so this guide will be focusing on the other fees that sellers may encounter using Amazon FBA and the fulfillment centers.
Amazon FBA Monthly Storage Fees
The first standard fee that sellers come across is the monthly storage fees. Monthly storage fees are charged to accounts on the 7th and 15th day of each month and charges for the month prior (ie. January fees are charged in February, and so forth). Fees vary by 2 factors: product storage/packaging size and time of the year, with January - September fees being lower than October - December.
For standard products in the months between January - September, Amazon charges $0.75 per cubic foot and $0.48 per cubic for oversized goods. During the months between October - December, Amazon will charge $2.40 per cubic foot and $1.20 per cubic foot for oversized goods.
For dangerous goods (goods with specialized handling/storage such as hazardous goods) between January - September, Amazon charges $0.99 per cubic foot for standard size and $0.78 per cubic foot for oversized products. Between October - December, Amazon will charge $3.63 per cubic foot for standard size and $2.43 per cubic foot for oversized items.
To calculate the size of your products, you can multiple the length x width x height to the get volume of your product packaging size. Then simply divide the volume by 1,728 (12 l x 12 w x 12h) to obtain the cubic feet.
Amazon provides this example using a box that is 47 x 12 x 10 (5,640) then dividing the volume by 1,728 to obtain 3.3 cubic feet. The cubic feet would then be used to calculate the monthly storage fees.
Please note that long-term storage (items stored for more than a year/365 days are subject to higher storage fees up to $6.90 per cubic feet or $0.15 per unit. Sellers using long-term storage will be charged whichever method costs more and will be charged every 15th of the month.
We recommend for all sellers to try to avoid long-term storage fees by being careful about overstocking on poor performing products.
Amazon Inventory Overage Storage Fees
The next potential fee that sellers may get is the inventory overage storage fees. In short, all sellers have a maximum limit of 100 cubic feet of storage at any particular warehouse. If a seller overstocks and goes over the 100 cubic feet limit, they will be charged an additional $10 per cubic feet used up to $1000 total per month. Even if the seller can reduce the amount to less than the limit, they'll still be charged the fee regardless.
Again, we want to stress how important it is for sellers to stay on top of their inventories. The last thing anyone wants is to pay extra fees and waste potential capital that could have been used to grow your business. Make sure to manage your inventory levels to prevent any overage fees!
Amazon FBA Removal Order Fees
Removal fees are fees incurred when a seller wants their items removed from a warehouse for any reason. Removal fees can be particularly dangerous because Amazon charges this fee per unit, not per cubic feet. If you have hundreds of products that you want to remove, you will have to pay for each item to be removed individually. Depending on the weight of each item, Amazon may charge as low as $0.25 per unit between 0 to 0.5 pounds and up to $2.10 per unit over 10 pounds.
These removals can take anywhere between 14 to 30 business days depending on how busy the warehouses are. In some situations, this fee may cost less than the overage fee, so sellers nearing the 365-day deadline for long-term storage may want to consider the removal fee. In general, sellers should try to avoid this fee as much as possible since it can be the most costly when trying to reduce inventory. Our best recommendation is to monitor inventory levels to prevent too much stock or the abundance of poor-performing products.
FBA Returns Processing Fee
Amazon charges a return fee for all products that Amazon offers free return shipping on such as apparel, watches, jewelry, shoes, bags, and luggage, and end up being returned to Amazon. Essentially, sellers are paying Amazon back for the service cost of shipping the returned item to the customer. The return fee is equal to the fulfillment fee Amazon paid, which is dependent on the type of product, dimensions, unit weight, and shipping weight. For small items, this can be as low as $2.50 and for large items, can be as high as $5.95 or potentially more if the product was exceptionally heavy.
While sellers can't control if a buyer wants to return an item, there are a couple of tips that sellers can implement to reduce the number of returns. This includes performing due diligence to ensure no products have defects or even discussing with the supplier about quality assurance.
FBA Unplanned Service Fee
The last potential fee that sellers face is unplanned service fees. These unplanned service fees range from boxes missing a label to safety issues regarding boxes or pallets. Similar to the removal fee, these fees are incurred on a per-unit basis, which means the risk is significantly higher. Depending on the severity and dangerousness of the problem, Amazon will review and solve the problem, then charge the seller the overall cost of the issues. For small problems like a missing label, Amazon may charge $0.20 per unit for standard items, but this figure can increase to $0.40 per unit for critical issues. There are also safety-related service fees if there are issues with boxes, pallets, or the products themselves. Based on the issue, this fee may be as low as $25 per unit or as high as $150 or more for critical issues.
While sellers can dispute and be reimbursed for unplanned service fees, we encourage all sellers to be extra careful before they ship their products. In the next coming blogs, we will be discussing standard practices and procedures for packaging and shipping to prevent any potential issues that can cause unplanned service fees, so stay tuned in!
Visiting an Amazon Distribution Center
If you're still unsure about using Amazon FBA and their fulfillment centers, you can now take virtual tours of the Amazon distribution centers at https://amazonfctours.com/virtualtours
After you take the tours, you'll have enough knowledge of Amazon's FBA network to start your own Amazon business! For more tips and tools on growing your Amazon business, visit our website and blogs!