Amazon Inventory Placement Service: A Comprehensive Guide

Managing inventory efficiently is critical for any business selling on Amazon, especially for those using Fulfillment by Amazon (FBA). One of Amazon’s powerful tools to help streamline this process is the Inventory Placement Service (IPS). This service can simplify logistics and improve seller efficiency, particularly for those who ship large quantities of inventory.

What is Amazon Inventory Placement Service?

Amazon’s Inventory Placement Service allows sellers to send all of their inventory to a single Amazon fulfillment center, instead of distributing it to multiple centers across different regions. Normally, when sellers ship inventory to Amazon, it might be split into several shipments destined for various fulfillment centers based on factors like demand and proximity to customers. With IPS, Amazon takes on the responsibility of redistributing the inventory to the appropriate fulfillment centers.

For sellers, this means that they can ship in bulk to one location, rather than dealing with multiple shipments.

How Does It Work?

Here’s how the service typically works:

1. Standard Inventory Distribution: Without IPS, Amazon assigns a destination for your inventory based on where demand is expected or needed. Sellers often find themselves splitting a shipment into several boxes, each going to different warehouses.
2. Inventory Placement Service: When IPS is enabled, you can consolidate your entire shipment and send it to one designated fulfillment center. After receiving your inventory, Amazon redistributes it internally to various fulfillment centers based on demand patterns.

While this simplifies the shipping process for the seller, it comes with an added cost, as Amazon charges a fee for consolidating and redistributing inventory internally.

Benefits of Amazon Inventory Placement Service

1. Simplified Shipping Process: One of the most significant advantages of using IPS is that it reduces the logistical complexity of sending shipments to multiple locations. Sellers only need to manage a single shipment, reducing the chance of errors, delays, or miscommunication.
2. Cost-Efficient for Bulk Shippers: For sellers dealing in bulk or larger quantities, sending a single shipment can save time and reduce the cost of handling multiple shipments. This can be especially beneficial for international sellers who might find multi-destination shipping particularly costly.
3. Improved Inventory Control: With IPS, sellers have more control over where their inventory initially lands. Instead of splitting shipments based on Amazon’s demand forecast, sellers ensure all inventory is at one location, simplifying restocking, tracking, and managing stock levels.
4. Better for Products in Specific Categories: Some products, particularly those that have stringent compliance regulations (e.g., hazardous materials, heavy items), benefit from centralized shipping last and first mile delivery. IPS can help ensure that these products are initially sent to one fulfillment center that is equipped to handle them.

Downsides to Consider

While IPS has many benefits, it’s important to weigh the potential downsides before opting in:

1. Additional Costs: Amazon charges a fee for this service based on the size and weight of the items shipped. Sellers need to calculate if these extra fees are offset by the savings in time, labor, and shipping costs. For low-margin products, these fees could eat into profitability.
2. Slower Distribution: Since Amazon is redistributing inventory from one location to others, the overall process may take more time compared to sending the items directly to their final fulfillment centers. This can result in delays before products become available for sale, which may affect sales velocity or cause stock shortages if inventory is not distributed fast enough.
3. Not Ideal for Seasonal or Time-Sensitive Products: If you’re selling products that experience surges in demand (e.g., seasonal goods), the delay caused by redistribution may not be ideal. For time-sensitive products, a direct fulfillment center placement might be more efficient.

Who Should Use Inventory Placement Service?

IPS is not necessarily for every seller. It’s most beneficial for:

• High-volume sellers: Sellers who frequently send large quantities of stock to Amazon can benefit from simplified shipping and handling including last mile delivery tracking.
• International sellers: IPS reduces the complexity of sending multiple international shipments by consolidating them into one, making it a valuable tool for overseas businesses.
• Sellers with specific logistical needs: Those shipping products in special categories (e.g., heavy, oversized, or hazardous materials) may find it easier to use IPS, as the redistribution process is managed by Amazon with different types of warehouses.

Product categories for Inventory Placement Service

Amazon Inventory Placement Service (IPS) is particularly well-suited for certain product categories where simplified shipping, bulk management, and centralized control are beneficial. It matters what kind of business you have, for example selling supplements or selling toys online. Here are the product categories where IPS can be a good fit:

1. Non-Perishable Products

IPS works well for non-perishable items that don’t have strict time-sensitive requirements. These products can be redistributed across Amazon’s fulfillment network without risk of spoilage. Examples include:

• Books
• Electronics
• Toys and games
• Office supplies
• Apparel

2. Standard Size Products

Products that are not oversized or bulky are easier for Amazon to handle and redistribute. These items tend to incur lower fees under IPS compared to oversized products. Examples include:

• Small household items
• Beauty and personal care products (non-restricted)
• Gadgets and accessories

3. Products with Steady Demand

For products that have steady, predictable demand throughout the year, IPS can be beneficial. Since the service might slow down initial distribution, having stable demand ensures that stock is replenished in time without significant fluctuations in sales velocity. Examples include:

• Supplements (those that comply with Amazon’s policies)
• Clothing and accessories
• Non-seasonal home decor

4. International Sellers’ Products

International sellers often find IPS useful as it simplifies the process of shipping inventory to the U.S. or other markets. By sending everything to one Amazon fulfillment center, sellers can reduce the complexities and costs associated with international logistics. This is especially useful for sellers shipping:

• Bulk consumer goods
• Non-restricted electronics
• Fashion and accessories

5. Hazardous Materials (Hazmat) Products

Some hazmat products, which require special handling, can also benefit from IPS. By sending all inventory to one center, sellers avoid the hassle of complying with multiple fulfillment center requirements. This is applicable for hazmat products allowed in Amazon’s program, such as:

• Certain cleaning products
• Batteries or items containing batteries
• Aerosols and sprays

6. Products with High Inventory Turnover

IPS is ideal for products that move quickly and are replenished often, as sellers can send them in bulk and rely on Amazon to redistribute as needed. These products tend to be lightweight, smaller, and easy to restock, such as:

• Health and wellness products (non-restricted)
• Popular gadgets and accessories
• Small electronic devices

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Categories that might be less suited for IPS:

• Perishable items: Due to redistribution delays, perishable items, including fresh foods or items with a short shelf life, are not suitable.
• Oversized or heavy products: These items incur higher fees due to their size and weight, making IPS less cost-effective.
• Seasonal goods: Products with sharp seasonal demand spikes may suffer from delays, affecting sales during peak periods.

In summary, IPS is best for non-perishable, small to medium-sized items with steady demand, making it a popular choice for sellers dealing with standard products, international shipments and split shipments or high-turnover items.

How to Activate Inventory Placement Service

To enable IPS, sellers need to:

1. Log into their Amazon Seller Central account.
2. Go to Settings > Fulfillment by Amazon.
3. Under the Inbound Settings section, click Edit.
4. Choose the Inventory Placement Service option and save the settings.

Once enabled, Amazon will automatically consolidate your shipments into a single fulfillment center. However, it’s essential to monitor the additional fees that come with this service, as they can impact your overall profitability.

Conclusion

Amazon’s Inventory Placement Service offers a streamlined solution for sellers dealing with complex logistics and multiple shipments. While it simplifies the inventory shipment process and offers better control, the costs and potential delays must be carefully considered. For high-volume sellers or those dealing in bulk, IPS can provide significant logistical benefits, but it’s crucial to weigh the service fees against the potential savings.

For sellers who rely heavily on a seamless and efficient inventory management system, IPS can be a powerful tool to improve operations and focus on scaling their business.