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  • Writer's pictureBrian Cummings

Is Amazon Upstream Storage Right for Your Business?

Amazon Upstream Storage is quickly becoming a go-to for sellers facing storage challenges. It offers a simpler and often cheaper way to store goods compared to traditional Amazon warehouses.


This service is less about quick delivery and more about smart, cost-saving inventory management. By using the upstream facilities, sellers can avoid running out of space and reduce their storage costs.


Particularly useful for those who regularly max out their storage limits or have a lot of products that don't need to be shipped immediately, Amazon Upstream Storage offers a flexible pay-as-you-go system. It's a smart move for businesses looking to streamline their supply chain and save money on storage.


Want to learn how Amazon Upstream Storage can benefit your business? Read on to discover more.


What is Amazon Upstream Storage?

Amazon Upstream Storage is a warehousing option offered by Amazon that allows sellers to store their products in dedicated storage facilities before moving them to Fulfillment by Amazon (FBA) centers.


This storage solution is typically less costly than storing goods directly within fulfillment centers due to lower storage fees.


How Does it Work?

Sellers utilizing Amazon Upstream Storage send their goods to upstream facilities where they are held until needed at FBA centers.


By adopting a pay-as-you-go model, businesses pay only for the storage space they use without the burden of long-term contracts.


Inventory is transferred to FBA centers based on demand, ensuring Prime-ready availability.


Top Features and Benefits

  • Cost Savings: Upstream storage fees can be up to 63% lower than FBA centers, providing significant savings on warehousing.

  • Flexibility: With no long-term commitments, sellers can adjust their storage needs to their business demands.

  • Capacity Management: Helps alleviate capacity constraints in fulfillment centers by providing additional storage space.

  • Pay-As-You-Go Pricing: Offers a simple payment structure, so businesses only pay for the capacity they utilize.

  • Inventory Replenishment: Inventory is replenished to FBA centers regularly, maintaining stock levels for Prime-ready shipping.


Is Amazon Upstream Storage Right For You?

Amazon's Upstream Storage option could be a critical decision for sellers looking to optimize their storage operations and logistics.


Amazon Global Logistics plays a substantial role in managing complex distribution networks, and Upstream Storage is designed to provide a streamlined solution.


Sellers frequently faced issues such as high storage costs, complicated fee structures, and limited storage capacity.


Amazon’s Upstream Storage aims to address these pain points by offering lower storage fees, which are reported to be up to 63% less than those of fulfillment centers.


This cost efficiency arises from the use of secondary warehouses, which are typically smaller.


Storage Limits and Fee Structures:


  • Cost-Effective: Secondary warehouses offer reduced prices due to less demand for immediate inventory availability.

  • Pay-As-You-Go: This service model eliminates the need for long-term storage commitments.

  • No Inventory Storage Limits: Upstream facilities allow unlimited storage, circumventing the restrictions imposed in primary fulfillment centers.


To take advantage of this service, a seller must consider their volume of sales and the predictability of their inventory turnover.


With the integration with Amazon's fulfillment network, inventory can be moved on an as-needed basis, potentially reducing overheads in logistics management and improving the efficiency of distribution.


Reasons the Program Might Not Be For You

Some businesses may not benefit from Amazon Upstream Storage if:


  • They experience low turnover and would face higher FBA fees due to long-term inventory storage.

  • They have a streamlined supply chain requiring minimal storage.

  • They cannot afford the complexities of navigating multiple warehousing systems.

  • Their products have consistent demand, negating the need for extra warehousing steps.


Understanding Alternative Storage and Shipping Options

When considering storage and shipping for eCommerce, businesses should assess the cost-effectiveness, scalability, and integration capability of the solutions provided by Third-Party Logistics providers, supplier's own warehouse facilities, and specialized inventory management services such as PIPISI.


Third-Party Logistics (3PL) Providers

Third-Party Logistics (3PL) Providers offer comprehensive warehousing and shipping services, which can include handling of global inventory and raw materials.


They are equipped to deal with various aspects of inventory management and offer a scalable solution for businesses looking to expand their operations.


3PLs can streamline an eCommerce business's supply chain by leveraging their extensive logistics networks.


  • Scalable solutions for growing businesses

  • Integration with global supply chains


Your Supplier's Warehouse

Some businesses may opt to store their products at their supplier’s warehouse.


This can provide a cost-saving measure by reducing the need to transport goods to separate storage facilities.


It also simplifies the replenishment process since raw materials and products are already housed at the source.


However, it's vital to ensure that suppliers can meet the storage needs and that their facilities are properly integrated with the business's inventory management systems.

  • Shorter supply chain for raw materials and products

  • Potentially lower transport costs


Tracking Amazon Shipments

Efficient management of shipments is critical in ensuring that inventory levels meet customer demand and operations stay streamlined.


Amazon provides various tools aimed at enhancing visibility throughout the shipping process, from the placement of a purchase order to the point of delivery to fulfillment centers.


Purchase Order (PO) System with Lead Times

The Purchase Order (PO) System established by Amazon incorporates lead times, which are the anticipated time frames between the purchase order creation and the inventory receipt at the fulfillment centers.


This system is crucial for sellers in planning their inventory transfers and ensuring they maintain enough stock to meet customer demand.


By understanding and adhering to these lead times, sellers can prevent stockouts and overstock situations.


Order Tracker

Amazon's Order Tracker provides real-time updates on the movement of shipments.


This powerful feature allows sellers to monitor the journey of their inventory from the moment it leaves the supplier until it reaches the fulfillment center.


Users can obtain critical details such as tracking ID and order specifics, enabling them to ensure timely inventory storage and availability.


Inventory Tracking Dashboards

Inventory management is augmented by comprehensive tracking dashboards that utilize automation to present a panoramic view of the supply chain.


These dashboards reflect the current stock levels, inbound shipments, and sales velocities.

By leveraging data from these dashboards, sellers can make informed decisions on inventory transfers to avoid stock discrepancies and align with the ebb and flow of customer demand.



Strategic Uses of Amazon Upstream Storage

Amazon Upstream Storage serves as a strategic solution for sellers aiming to balance inventory availability and warehousing efficiency.


Deploying upstream storage strategically allows businesses to store bulk inventory, reducing the need for immediate space in Amazon's prime-ready fulfillment centers.


Cost Reduction:

  • Storage Fees: Upstream storage fees are significantly lower—up to 63%—compared to fulfillment center fees.

  • Bulk Storage: Allows for storing inventory in large quantities, potentially minimizing storage costs even further.


Inventory Management:

  • With upstream storage, excess inventory can be held upstream until needed, thus maintaining a buffer that enhances availability and prevents stockouts.


Supply Chain Optimization:

  • Enhanced Amazon Warehousing & Distribution capabilities aid in solving complex inventory management challenges.

  • The efficient transfer of products from upstream storage to fulfillment centers allows for smoother operations and operational efficiencies.

Seller Flexibility:

  • Sellers can manage supply more flexibly without the cumbersome process of moving inventory frequently.

  • Amazon's Warehousing & Distribution (AWD) service streamlines this by offering a pay-as-you-go approach to inventory transfer from upstream facilities to Amazon fulfillment centers.


Table summarizing strategic uses:

Strategy

Description

Benefit

Cost-Efficient Storage

Reduced storage fees for bulk inventory upstream.

Lower operating expenses

Enhanced Availability

Inventory is stored upstream to prevent fulfillment gaps.

Continuous customer supply

Supply Chain Streamlining

Simplified inventory transfer through AWD services.

Operational efficiencies

Flexibility in Management

Sellers maintain control over inventory without added hassle.

Responsive to demand changes

Conclusion

Amazon Upstream Storage offers a solution for sellers to optimize their inventory management and reduce warehousing costs. It's an advantageous system for those who frequently fill their storage quotas or need to manage large quantities of inventory without immediate shipping demands.


As a flexible pay-as-you-go service, it allows for better cost control and space management, helping businesses maintain a competitive edge by staying adaptable to market changes.


For businesses that are looking for even more support in handling their products, adding a third-party logistics (3PL) provider to work alongside Amazon Upstream Storage could be beneficial. A 3PL can handle extra tasks like shipping and order handling, giving you more time to focus on other parts of your business.


If cutting costs and having more storage space sounds good for your company, then using Amazon Upstream Storage and possibly pairing it with a 3PL service like PIPISI could be a great decision to support your business's growth.


Frequently Asked Questions


Is Amazon 3PL or 4PL?

Amazon operates primarily as a 3PL, or third-party logistics provider. They offer storage, picking, packing, and shipping services for sellers' products through their Fulfillment by Amazon (FBA) program.


Amazon takes on the physical logistics of warehousing and delivering goods to customers. Unlike a 4PL, which would manage and optimize the entire supply chain without owning any assets, Amazon directly manages the logistics operations using its warehouses and distribution networks.


How long before Amazon charges storage fees?

Amazon charges storage fees for inventory stored in its fulfillment centers. These fees are typically incurred monthly and are based on the calendar month and the daily average volume (measured in cubic feet) that the inventory occupies. Fees can start as soon as your items arrive at the fulfillment center; thus, there is no “grace” period before storage fees apply.


Can I sell on Amazon without using their storage?

Yes, you can sell on Amazon without using their storage by fulfilling orders yourself or through another service provider; this is known as Fulfillment by Merchant (FBM) or Seller Fulfilled Prime (SFP) if you meet Amazon's Prime eligibility criteria. With FBM, sellers list products on Amazon and handle storage, shipping, and customer service themselves or through a different third-party logistics provider.



Why is it costly to hold inventory?

Holding inventory can be costly due to several factors. These include storage fees, the risk of unsold stock leading to obsolescence or depreciation, and opportunity costs, where the capital tied up in inventory could have been used elsewhere.


Additionally, there are insurance, taxes, and the potential for damage or theft of the stored goods, which all contribute to the costs of holding inventory.


What is considered long-term storage at Amazon?

At Amazon, inventory that has been in a fulfillment center for more than 365 days continuously is considered long-term storage. Amazon charges long-term storage fees to encourage sellers to keep their inventory fresh and ensure that storage space is available for more in-demand items. These fees are typically charged on a monthly basis and are additional to the regular storage fees.

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