Amazon Logistics: Inbound

Taking a step back and looking, specifically, at inbound and how inbound was structured, originally, with only the first-party inventory. How did you look at organizing that process?

Not particularly differently from how it is today. The process of the inbound has always been structured the same way. There is a purchase order and you receive this purchase order in whatever country they are in. The classical one is that an Amazon order gives you the time to be delivered and the address to be delivered to, with a purchase order. You fulfil the order; for most of Amazon, you still organize most of the transportation. Over time, that has moved a lot, in the US, for example. We took a lot of ownership of the inbound so we came and picked up from suppliers but, nowadays, it’s a balance. It’s happening in Europe, as well but, in Europe, the tendency is still, you deliver to the fulfilment center, to the address you have been given. When the product arrives, we reconcile and scan every single item against the purchase order and put it in the inventory.

Before that, you have to make an appointment for your truck, for your delivery and you deliver, we reconcile against the purchase order. We take everything we have ordered and we reject things that have not been ordered. Ultimately, we pay the invoice and the product is stored in the fulfilment center. That has not changed. It has always been like that. The way that we store the product has slightly changed, over time. Also, the way that the scanning takes place, there are some processes that have been developed with vendors, where we had good accuracy on delivery, for example. It was called a license plate receive. When the vendor already has a good level of logistical optimization, they are able to tell you that, in a box, they put the items, they are able to deliver the box with a license plate number and they are able to give you, by EDI, what the contents of each box is. That enables you to start scanning only one box and automatically receive the inventory that is in the box. This means that the vendor has a very good level of accuracy, as well.

We have vendors, like that, where we have had a long-term connection with them and they have very strong logistics, as well. They are able to provide those numbers, which help a lot, with putting them in the inventory, in our fulfilment center, by streamlining the process and avoiding having to scan every single item.

They have always been scanned once and you need to also think about the fact that it is very rare for Amazon to receive 20 pallets of the same product. There are some products where we do receive them like that, but the reality of Amazon is that of the very large catalogue, where have we have very few items per SKU, which means that you always receive a few pieces of each product. It’s rare that boxes are full of the same product.

How did the inbound process change as you rolled out Fulfilled by Amazon?

It was interesting. It didn’t change much. The backbone of the process is still exactly the same. If you look at that purchase order, receiving the purchase order and storing, when you take the FBA, there is no purchase order in that case, obviously, because the vendor is sending the product. But the vendor has to create a shipment – I don’t remember the name exactly – but you could say it’s a purchase order. They are creating a shipment, basically, and saying that I am going to send all these products. For us, that will be the thing that we reconcile against, because that is the inventory which is given.

Therefore, it’s doing exactly the same thing. It’s creating those labels and it’s close to the FBA process, except that it’s the license plate process. It’s going to create these shipments and say, we got all this inventory to send to you. Every time that a vendor is assigned to a fulfilment center and they are going to deliver the product to. Now, it’s going to create this shipment, with everything on his own carrier and Amazon have a solution, as well. You have UPS or those kind of carriers that can come and pick up and deliver to us. Basically, you are going to create your shipment, with all your products; you’re going to record it in the vendor portal, from which Amazon automatically knows that they are going to receive those products. When your shipment arrives, we reconcile and scan everything, the same way that we receive 1P, except that it is not against a purchase order; it is just against your own shipment data. After that, we store it, in exactly the same way as we do the 1P, without any differentiation.