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White House Aims to Fix Supply Chain Bottleneck: Will it Help Amazon Sellers?

Will Fixing the Supply Chain Bottleneck Help Amazon Sellers?

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On October 13th, the White House announced that Walmart, UPS, and FedEx will implement around the clock service to alleviate the supply chain bottleneck. Likewise, the Port of Los Angeles will implement 24/7 service, after recent photos showed dozens of cargo ships idling in nearby waters waiting for their turn to offload. A White House official also said that Target, Home Depot, and Samsung are planning to implement 24/7 service.

Will Fixing the Supply Chain Bottleneck Help Amazon Sellers?

The short answer is yes, but not with everything.

The extent of the benefits will depend in part on how many supply chain facilitators adopt the 24/7 service. The higher the adoption rate, the more impact it will have. To this end, President Biden threatened to call out companies that don’t “step up,” saying, “If the private sector doesn’t step up, we’re going to call them out and ask them to act.”

Tom Wicky, the co-founder of MyFBAPrep, commented on the news: “Given the FBA inventory restrictions at Amazon and the number of ships on anchor in the ports unable to bring cargo into the U.S., online sellers have been facing massive inventory and stock-out challenges for some time. Massive labor shortages and COVID-19 outbreaks are further compounding the issue. Walmart, UPS and FedEx move almost half of the country’s package volume so anything they can do to keep delivery flows moving will help. As these players signal commitments towards a 24/7 schedule, they are sending a message to the rest of the country’s supply chain to keep up. We expect this to have positive effects on MyFBAPrep customers’ businesses.”

Even if there is widespread adoption, however, it will not solve all the problems facing Amazon sellers. Rising shipping costs pose a challenge further upstream, and FBA inventory caps remain a problem further downstream. One link in the chain is getting fixed, but every link needs attention.

What is Causing the Global Supply Chain Bottleneck?

Think of the global supply chain as a literal chain composed of five links:

  1. Manufacturing
  2. Shipping
  3. Ports
  4. Transportation
  5. Storage & Fulfillment

Each of these links is currently strained, struggling with shortages and rising costs. The White House’s call on major players in the supply chain to work together to fix this problem is addressing only a few of these links, primarily #3 and #4.

Manufacturing Delays

Today, a huge number of goods sold in the U.S. are manufactured overseas. Due to the global pandemic and its far-reaching effects on social and economic forces, manufacturing timelines have lengthened and, in some cases, costs have risen.

Shipping Costs

When products are manufactured overseas but intended to be sold in the U.S., they typically come by ship. These cargo ships are loaded with shipping containers, the costs of which have increased by more than 5x in the last year.

Port Delays

All those ships have to dock somewhere, and their goods must be processed through customs. Delays in manufacturing and shipping, coupled with sellers preparing for holiday sales, has resulted in a massive surge of cargo ships arriving at ports at the same time. Even processing ships as fast as they can, ports are overwhelmed.

The Port of Los Angeles and the Port of Long Beach working 24 hours a day seven days a week will help process the imports quicker, but the backlog is vast.

Transportation Delays

Once through customs, products must then be transported to warehouses for distribution and fulfillment. Goods are transported via trucks, trains, planes, or even more ships, depending on the final destination. As ports clear more goods more quickly, there is a risk that the bottleneck will simply move down one link in the chain. The White House’s call on Walmart, UPS, FedEx, and others to support the supply chain is intended to mitigate this risk.

Storage & Fulfillment Constraints

Once products are received at warehouses for distribution or fulfillment, they wait there until a retailer or an end-consumer purchases them. The product is then delivered to the buyer. FedEx and UPS will play a key role in this stage for online orders.

All of these issues are compounded by labor shortages. While this news will alleviate some strain on businesses, it means already-strained supply chain workers will have to shoulder the burden.

Fixing the Supply Chain Bottleneck Won’t Fix Amazon FBA Inventory Limits

Of course, the call to remove bottlenecks from the supply chain doesn’t fix one of the biggest challenges brands that sell on Amazon currently face: FBA inventory restrictions.

Even if sellers can move goods through port before the holidays, they may not be able to store the inventory in FBA centers. Instead, they must utilize non-FBA warehouses to store any excess inventory. The inventory in these warehouses can be used to resupply FBA and/or fulfill orders directly to consumers via a Fulfillment by Merchant (FBM) model.

How to Get More Inventory Space

If you’re struggling to capture enough inventory space at FBA for the holidays, you have a few options:

  • Partner with a third-party logistics provider (3PL)
  • Enable dropship
  • Partner with third-party retailers

Third-Party Logistics Provider (3PL)

You can partner with a 3PL to use their warehouses for storage and fulfillment. Goods will still be sold on Amazon through your seller account, but they will show “shipped by” your company instead of “Amazon.” 3PLs handle all inventory management and customer returns, but they can cost slightly more than FBA.

Dropship from Your Own Warehouse

If you have your own warehouses with an inventory management system, you can fulfill products via dropship. This means that you will package and ship goods directly from your warehouse to end consumers.

Third-Party Sellers

Amazon allots inventory space for each seller, so if you need more inventory space, one way to get it is by adding another seller. Approach this option with caution, as any seller carrying authentic products will be able to edit the product listing and engage with customers. You should only partner with credible sellers who you trust to uphold your brand standards and pricing policy.

Kaspien can assist with dropshipping and partner with brands as a third-party seller. If you’re interested in discussing options with us, drop us a line.

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