If cross-border e-commerce were a marathon, Amazon's FBA storage capacity would be the hydration stations along the route. But what happens when those stations suddenly shrink or even turn negative? Recently, numerous Amazon sellers have faced drastic reductions in their FBA warehouse allocations, with some seeing their capacity drop from tens of thousands to mere thousands of units overnight. This unexpected change has severely disrupted inventory planning and shipping schedules. Simultaneously, Amazon has updated its supply chain standards, imposing stricter requirements on suppliers.
The Storage Crisis: Challenges for Sellers
Many Amazon sellers have reported sudden, dramatic cuts to their FBA storage allocations. Some saw their capacity reduced from 6,000 units to just 2,000 within a week, while others experienced even more extreme drops from over 10,000 units to just 2,000. In particularly shocking cases, sellers who showed 2,000 units of available capacity one day found themselves with negative allocations of over 10,000 units the next. Even high-performing sellers with Inventory Performance Index (IPI) scores as high as 900 weren't spared, with some seeing allocations drop from 30,000 units to just 3,000.
The sudden capacity reductions have created multiple challenges:
- Inventory headaches: Products already ordered and prepared now face the risk of being unable to enter Amazon's warehouses, severely impacting cash flow.
- Stockout risks: Inability to replenish inventory could lead to product shortages, affecting sales and customer satisfaction.
- Increased operational costs: Sellers are forced to seek alternative storage solutions like third-party warehouses, adding extra expenses.
Possible Reasons Behind the Capacity Cuts
While Amazon hasn't provided official explanations for the capacity reductions, industry experts suggest several potential reasons:
- Improving inventory turnover: Amazon may be trying to force sellers to increase sales velocity and clear stagnant inventory, thereby optimizing warehouse utilization. Some sellers who improved their sales rates did see their allocations restored after some time.
- Promoting alternative logistics services: Another theory suggests Amazon might be pushing sellers toward using its STAR (Satellite Warehouses), AWD (Amazon Warehousing & Distribution), and AGL (Amazon Global Logistics) services by restricting FBA capacity.
Amazon's Alternative Logistics Services
Amazon offers several logistics alternatives to traditional FBA:
- STAR (Satellite Warehouses): Sellers can use AGL to send goods to these satellite facilities. When FBA inventory runs low, the system automatically replenishes from STAR warehouses. Unlike FBA, STAR has no capacity limits or IPI requirements, offers more storage space, and typically charges lower fees.
- AWD (Amazon Warehousing & Distribution): Similar to STAR, AWD enables automatic replenishment while providing global inventory visibility. Sellers can manage worldwide stock levels through a single interface and even use AWD to supply their physical stores.
- AGL (Amazon Global Logistics): Amazon's international shipping service that transports goods from suppliers to Amazon warehouses.
While these services provide alternatives, any perceived forced migration through FBA capacity cuts could generate seller dissatisfaction.
Updated Amazon Supply Chain Standards
Concurrent with the storage changes, Amazon has updated its supply chain standards for US, European, and Japanese marketplaces, effective January 19, 2023. These triennial updates aim to enhance supply chain transparency and sustainability, focusing on three key areas:
- Worker protections: Suppliers must safeguard workers from exploitative hiring practices, provide clear employment terms, establish effective grievance mechanisms, prohibit child labor, and ensure safe working conditions.
- Environmental protection: Suppliers must prevent land exploitation and illegal use of natural resources while preserving ecosystems.
- Data security: Suppliers must comply with all applicable privacy and information security laws to protect user data.
These updates reflect Amazon's increased focus on corporate social responsibility while raising compliance requirements for suppliers.
Strategies for Affected Sellers
Sellers facing FBA capacity reductions and new supply chain requirements can consider several approaches:
- Boost sales velocity: Optimize product listings for better visibility and conversion, clear stagnant inventory, and participate in Amazon promotions to increase turnover.
- Diversify storage solutions: Explore alternatives like third-party warehouses, overseas facilities, or Amazon's STAR program to mitigate risks.
- Refine operations: Improve inventory forecasting to prevent overstocking or shortages, optimize logistics to reduce costs, and monitor IPI scores closely.
- Ensure compliance: Thoroughly understand and adhere to Amazon's updated policies and supply chain standards.
- Communicate proactively: Seek clarification from Amazon support regarding allocation changes and potential solutions.
Amazon's storage policy changes and supply chain updates present new challenges for sellers. Adapting operational strategies will be crucial for maintaining competitiveness in an increasingly demanding marketplace. Meanwhile, sellers hope Amazon will provide greater transparency about allocation rules and more support to foster a healthy, sustainable e-commerce ecosystem.