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Using Amazon FBA’s Inventory Placement Service

One of the services that I’m very grateful for is Inventory Placement Service.  I enabled it during my third month as a Seller and it has saved me a lot of time and stress from having to pack boxes. Let’s just say that packing boxes is my least favorite Amazon FBA activity and I dislike it more than doing sales tax returns.   In this post, I’m going to go over Amazon’s Inventory Placement Service in more detail and compare it with Distributed Inventory Placement.

What is Distributed Inventory Placement and Inventory Placement Service?
Distributed Inventory Placement is the default inbound shipping setting.  This means that Amazon will send your inventory to one or more fulfillment centers.  For example, if you have ten cameras to sell, Amazon may have you send three to California, three to Indiana and four to Florida.  Having inventory spread across the country benefits customers because they’ll receive their products quicker and also because they’ll have a later cut off time to place 2-Day or expedited shipping orders.  Unfortunately, sending out multiple boxes can be frustrating for sellers.

Inventory Placement Service helps sellers because Amazon will send all quantities of a single Merchant SKU to the same fulfillment center.  In addition, they will include most standard sized items in the same shipment.  This means that your shipment of ten cameras will all be assigned to the same warehouse.  If you’re also selling a small camera bag, a toy and a box of cake mix, there’s a good chance that these items will go to the same warehouse as the cameras.  The downside is that a per-unit service fee applies.

Cost
Amazon charges a per-item fee for Inventory Placement Service.  Here are the current fees as of the date of this post (Feb 27, 2015):

  • Standard Size: 1 pound or less:  $0.30
  • Standard Size: 1 to 2 pounds:  $0.40
  • Standard Size: over 2 pounds:  $0.40 + $0.10/pound above the first 2 pounds
  • Oversize: 5 pounds or less:  $1.30
  • Oversize: over 5 pounds:  $1.30 + $0.20/pound above the first 5 pounds

Using the example in the above section, your fees for the 10 cameras and 3 misc items will be at least $3.90 (13 x $0.30).

Keep in mind, the fees may change so it’s always good to review them on Amazon’s site from time to time.

These charges will show up in your Payments -> Transactions View page as FBA Inventory Placement Service Fee.  I always see my fees within 2 or 3 days after dropping off my box at UPS. However, I have seen other people post on the Amazon FBA Facebook Group pages that their fees show up 30 days later.

Signing Up for Inventory Placement Service
If you’re interested in using Inventory Placement Service, signing up is easy.  All you do is log into Seller Central and navigate to Settings -> Fulfillment by Amazon -> Inbound Settings.

Amazon FBA Settings Screen

Next, press the Edit Button and select Inventory Placement Service.  If you ever want to switch back to Distributed Inventory, then this is where you do that too.  Be sure to press the Update Button to save your new settings.

Inv-Placement-3-SHD

Also, while you’re in there, click on the “Learn more” links and you’ll get more detailed information about the two options.

Which Option is More Expensive?
It depends on different variables involved.  Some of you may ship to fulfillment centers close to home (less expensive) and some of you may ship heavier boxes (more expensive).  Besides those variables, you will be charged a per-item fee with Inventory Placement, so the number of items that you are sending in is also a factor.

In my case, my shipments cost about the same when using either option.  My typical shipments are:

  • Small items that weigh less than one pound
  • Between 10 and 35 items
  • Quantity of most Merchant SKUs are between three and eight.

I live on the west coast and here are the costs for two of my recent shipments:

  • Distributed Placement
  • Shipped 34 items
  • Sent to 3 warehouses – two on the east coast, one on the west coast
  • Total cost: $5.75 (box 1) + $10.62 (box 2) + $4.81 (box 3) = $21.18
  • Inventory Placement
  • Shipped 28 items
  • Sent to one warehouse on the east coast
  • Total Cost: $8.85 (box 1) + $8.40 (IP Fees) = $17.25

I believe that Inventory Placement Service is the better option if:

  • You have a small number of items to ship.  Unfortunately, per-unit fees can add up if you have lots of items to ship.  For example, if you have 100 products, you’ll be paying at least $30.00 in Inventory Placement fees on top of your shipping fees.
  • You can’t fit all of your items (due to quantity or size) in one box.  To me, that’s the purpose of using Inventory Placement – to ship one box to one warehouse.  If I’m shipping two or more boxes to the same warehouse, I may as well use Distributed Inventory and save on the Inventory Placement fees.

However, I don’t let shipping cost alone determine my decision.  I also take into consideration:

  • The profit of the items versus the shipping cost.  For example, with Distributed Inventory, I don’t want to spend $6.00 on shipping a box containing only two items that will give me a total profit of $15.00 once they sell.  However, if my profit will be over $100.00, then yes, I will send in the box.
  • My energy level and time.  Sundays are my day off from my regular job and I need to consider if I want to spend it packing one box or two, three, four or more boxes.  As I mentioned, I do not like packing boxes and I’m very slow at it.  If I can get away with packing only one box, then I have more time to do other things during my time off.

I always compare the two options before I finalize my shipping plan.  I’ll see how many warehouses Amazon wants to use with Distributed and then I’ll check Inventory Placement to see if Amazon will ship all products to one location.  Since I have a rough idea of how much each box costs to ship due to past shipments, I’ll make a decision at that point on which option is better.

Another note is that I never include oversized items in my Inventory Placement shipping plans.  Since they normally go to a separate warehouse anyway, I don’t want to pay for both shipping to a special warehouse and for Inventory Placement Service fees.

Infographic
I made a infographic that describes how Inventory Placement Service works.  Please feel free to share it and as always, I would love to hear from you!  Leave me any questions or comments in the form below or on my Facebook page.

Inventory Placement Service

Please remember to do the math and see if Inventory Placement makes sense for you.

Diana

Infographic and Photo Credits: Diana Poisson

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{ 12 comments… add one }
  • Nate March 17, 2015, 7:40 pm

    Great post! Loving your tips so far.

    Reply
    • Diana March 18, 2015, 12:00 am

      Thank you Nate!

      Reply
  • Isabel April 8, 2015, 2:10 am

    Hi Diana,

    Thank you soooo much for your fantastic blog. It has been so helpful to me and I’m sure many others feel the same way 🙂

    I am getting ready to process my first tiny shipment and will likely use Inventory Placement to save some money on the shipping. I was wondering if you can help clarify two things for me.

    The fees charged for Inventory Placement, if I have ten of the same item (say toothbrushes) and I am packing them in multi-packs of 2 toothbrushes per pack, will I be charged $0.30 for each of the 10 toothbrushes, or will I be charged $0.30 for the toothbrushes as one group? I’m so sorry, but the “MSKU” thing is not clear to me yet, and I’m not sure how the MSKU is generated. I’m guessing (MSKU) it is created in Seller Central somehow, but the mechanics are foreign to me right now.

    Also, I already created a UPS account and wasn’t sure how I would connect my first shipment to UPS via Seller Central. Or is that something I do when I drop off my first box at the UPS store near my house? I haven’t listed my first set of items yet in Seller Central, but I will be once I have a better understanding of what it will cost to use Inventory Placement.

    On a side note, I did order 50 free self-stick shipping labels from UPS and realized I can’t use them because I have an inkjet printer, not a laser printer. I could only afford to purchase a Dymo label printer as a first investment. As hard as a try to keep costs down, it seems that I have to accept that I will be spending more than I make in the beginning of my FBA journey.

    Thank you again for your time and for creating such a fantastic website!

    Sincerely,
    ~Isabel

    Reply
    • Diana April 8, 2015, 2:51 am

      Hi Isabel, I think the hardest part of Amazon FBA is getting through your first shipment. There’s so much to learn and a lot of rules to follow. I also struggled with the mechanics of it and almost gave up on Amazon FBA before sending in my first shipment. But after you’ve done it a few times, it’s very simple as it’s the same steps over and over again. I’ll try to answer your questions:

      If you do multi-packs of 2 toothbrushes, then each pack is considered one item. So, you’ll be shipping in 5 items. Make sure you label each bag with a “This is a set, do not separate label” so Amazon knows that it’s a pack of two. Then, as long as the weight is under a pound, you should be charged $1.50 if you send in all five multi-packs.

      When you list your items, you have the option of leaving the “Seller SKU” field blank and Amazon will create the MSKU for you. Some people enter their own with the date they bought the item, the cost and where they bought it from.

      There’s not much you need to do with UPS. When you are finishing up your shipping plan, Amazon will have you print your shipping labels. You just put them on the boxes and drop them off at UPS. You don’t need to give them an account number or setup your own account for that. Just drop the boxes off. Amazon will deduct the UPS shipping fees from your Seller Account with Amazon. So, with your first payout, you may end up owing Amazon money for the shipping charges. Once you start selling, then your sales revenue will cover your shipping charges.

      You should be able to print the UPS self-sticking shipping labels to your inkjet. They are the size of a regular piece of paper, so it should fit in your printing tray. I used an inkjet at first for my shipping labels and no problem. Amazon will print the two labels you need so both labels on each sheet will be used.

      I also spent a lot on supplies when I first started FBA, so I know what you’re going through.

      The Amazon Boot Camp (I have a review) has videos to get you through the listing and prepping. If you don’t want to buy it now because of the cost, you should sign up for the 3 free videos. I do not know if the listing videos are included in the free lessons, but it’s worth checking out.

      Good luck and let me know if you have any more questions!

      Diana

      Reply
      • Isabel April 8, 2015, 8:03 pm

        Thank you so much for your comprehensive reply Diana! I have to admit that giving up has crossed mind many many times. Knowing that the challenges that I’m facing are not unique to me alone is consoling in a way. Thank you for putting things in perspective. I really appreciate it. ~Isabel

        Reply
  • Michelle Crawford February 13, 2016, 7:36 pm

    Hello Diana Great Post!
    I have one question? For the inventory Placement Service, do we still have to label and package our items or does Amazon do this with the Service?

    Thank you!
    Michelle

    Reply
    • Diana February 13, 2016, 9:28 pm

      Hi Michelle,
      Yes, with Inventory Placement, you still list, label, prep and ship as normal. The difference is that Amazon will assign multiples of the exact same item to the same warehouse. Usually though, you’ll find that they’ll assign everything in your shipment to the same warehouse. I can’t guarantee that the same will happen wit you, but that was my experience when I was using IP.

      Diana

      Reply
  • Jacquie July 21, 2016, 4:46 pm

    Hi Diana,
    Loved your explanations! Very clear, however, until I reached the bottom — I have textbooks to sell. Am I supposed to individually wrap each textbook in brown paper or a small box? How do I label the outside? Perhaps I have more reading to do, but if you could clarify that specifically I would truly appreciate it.

    Thank you.

    Reply
    • Diana July 21, 2016, 7:14 pm

      Hi Jacquie,
      Textbooks are pretty easy. Just cover up any barcodes with blank labels or your Amazon FBA Barcode label….That’s about all you need to do. I sometimes poly bag my nicer textbooks, but that’s not required.

      Diana

      Reply
  • Brock Richards September 7, 2016, 2:35 pm

    Hey Diana!

    Thanks for a great post. So IPS is not a good option for slightly oversized items? I’ve got boxes of this type of product going close by and across the country and getting hit with dimsensionall weight.. looking for a cost effective option…

    Reply
    • Peter September 7, 2016, 10:07 pm

      Yes Brock, the fact that Amazon decided to calculate their charges for premium placement fees in Feb 2015, based on dimensional weight, is one of the big Amazon mysteries. We live in New Zealand and our product is rated as oversized ( by 2 inches on one side) and actually went to the trouble of setting up our manufacturing in the US, in close proximity to an Amazon FC in Pennsylvania. The charge previously was $1.30 per unit, but went up to $3.60 once Amazon changed to calculating on dimensional weight. The stupid thing about it all, is that we still have to pay the trucking charges to get the product to the warehouse, and these costs are just calculated on top, which for the life of me, and after numerous emails trying to get an explanation out of Amazon, I never got an explanation from them. Very frustrating. Personally, I would have thought that Amazon would work to make things easier for products made in the US. Maybe Trump will sort things out!!!

      Reply
    • Diana September 11, 2016, 4:18 am

      Hi Brock,

      I think Inventory Placement might work if you can stuff a few of those items in the same box. If you can reduce the number of boxes that you’re shipping out, that should more than make up for the cost of the Inventory Placement fees.

      Diana

      Reply

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I am working towards creating a full-time income by selling on Amazon. It's a lot of work but very fun! If you're interested in selling on Amazon, be sure to follow my blog as I'll be providing you with lots of tips!

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