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.
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.
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.
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.
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.
Please remember to do the math and see if Inventory Placement makes sense for you.
Infographic and Photo Credits: Diana Poisson