The landscape for Amazon sellers has recently transformed with the introduction of the new Inventory Placement Service fee. This change has left many sellers scrambling to understand its implications and develop strategies to mitigate its impact.

What is Amazon Inventory Placement Service?

Amazon's Inventory Placement Service (IPS) is a feature offered to sellers using the Fulfillment by Amazon (FBA) service. When a seller ships inventory to Amazon's fulfillment centers, Amazon typically decides to which centers the items should be sent. This could mean that a seller needs to split their inventory and send it to multiple different centers around the country.

Here's a breakdown of the key points:

However, with the Inventory Placement Service, Amazon allows sellers to send all of their inventory to a single receive center. Amazon then takes responsibility for distributing the inventory across its network of fulfillment centers. This can simplify logistics for the seller, but it comes at an additional cost, which varies based on the size and weight of the items.

Random Warehouse Distribution: Amazon's FBA warehouses across the United States are assigned randomly, regardless of the number of boxes shipped. Even if you ship just one box, you may still incur the Inventory Placement Service fee (for example, the fee for a warehouse in the Western US, SCK4, is $102!).

Low Probability of Western US Warehouse Assignment: The majority of the assigned addresses are in the Eastern and Central US, with only a small percentage in the Western US. Often, these are smaller warehouses that are difficult to reach with regular shipping services.

Optimal Shipment Splitting: According to Amazon's optimized shipment splitting, you can avoid the Inventory Placement Service fee if you divide your inventory across four or more warehouses. However, the distribution is random, both in terms of the number of boxes and the warehouses.

Partial Shipment Splitting: If you split your shipments between 2-3 warehouses, you may be able to reduce the Inventory Placement Service fee. However, the option to choose between Eastern, Western, or Central US warehouses seems to be unavailable at the moment, possibly due to a bug.

Most Expensive Shipping Method: Consolidated shipping to one warehouse, particularly in the Western US, is the most expensive option. Even if you ship only one box without splitting, you will still need to pay the Inventory Placement Service fee.

The introduction of Amazon's Global Logistics new product, Amazon Managed Delivery (AMP), has added another layer of complexity to this situation. While it offers the promise of avoiding the Inventory Placement Service fee, its cost is significantly higher than standard Amazon Global Logistics.

The new policy has undoubtedly increased costs for sellers, whether they choose to use Amazon's logistics or coordinate with third-party logistics providers to increase shipping volumes and routes. With the current economic challenges of inflation and increased competition, it's crucial for Amazon sellers and third-party logistics providers to quickly develop strategies to adapt to these changes.