Supply chain disruption and inventory stock-outs
Like many Amazon sellers, you probably source most or a lot of your products from China. By planning ahead to ensure you didn't run out of inventory during the Chinese New Year, you might have stocked up on your product to make sure you could fulfill orders. What you probably didn’t plan for was the outbreak of a novel coronavirus, COVID-19. Now, factories have extended shutdowns, with little to no information as to when they’ll resume production runs, and that stockpiled inventory you thought would last the downtime during Chinese New Year is running severely low. Sound familiar? Trust us, you’re definitely not alone.
Amazon sellers’ account performance at risk: what to do?
Amazon has issued a warning to sellers that advises them on certain measures to take to avoid a negative effect on their Amazon account health. They suggest sellers reach out to them directly if they have been affected by the coronavirus in China, and they will even consider the operational impact the virus has had when evaluating sellers’ performance. However, you can’t rely entirely on Amazon to absolve you of not fulfilling orders on time due to the outbreak. At the end of the day, the best solution is to be better prepared for the next inevitable international emergency.
What are some things that you can do to mitigate the effect the coronavirus has on your online business? We’ve compiled some strategies to help you reduce the chance of stock-outs and avoid penalties from Amazon.
The best thing to do at this point is damage control. Unfortunately, Amazon has made it increasingly difficult for sellers to interact with customers using the review functionality so as a last resort to protect your account performance during the stock-out period, it may be necessary to cancel orders and de-list products until your supplier resumes production.
Chinese factories continue to stay quiet
To make matters worse, there’s a lot of uncertainty as to when factories are re-opening across China. Some have reopened and production is underway again, so recovery from this downtime can begin soon for many FBA sellers. Nevertheless, many factories are still struggling to get back up and running. Even if production facilities are gradually returning to their regular capacity, they may be experiencing an overload of work orders.
The timeline of when you expect to receive your stock is further blurred when you take into consideration when your orders will actually be shipped to either your own warehouse or Amazon fulfillment centers.
Finding alternative product sources and managing inventory
So, what are Amazon sellers doing to mitigate production delays due to COVID-19? One of the main solutions circulating that seems obvious enough is finding another supplier outside of China. That seems easier said than done, but this idea shouldn’t be disregarded entirely just because it seems too complex or unrealistic.
Although the idea of finding a new supplier may seem daunting and unnecessary given that factories are beginning to reopen, there’s something to be said about having a diversified approved vendor list. By having alternative suppliers in varying geographic regions, you can hedge your risk against other major disruptions in your supply chain in the future.
This doesn’t necessarily mean you need to implement an entirely separate supply chain but could just be diverting the manufacturing of certain parts to another region. However, switching suppliers is not as simple as going to a different grocery store. It's just not an option for many FBA sellers, especially on such short notice.
Perhaps you sell through different channels or have multiple warehouses? Being able to move excess inventory from one location to another can help alleviate demand from an Amazon fulfillment center. If you have excess inventory in one location, you could consider moving that inventory to a location that is closer to a more popular fulfillment center.
Planning a contingency for the next emergency
At the end of the day, production delays, whether from a disease outbreak like coronavirus or other natural disasters, are inevitable. You cannot avoid being affected by them. What you can do though is be ready with a contingency plan to act upon when they arise, shifting your strategy to being proactive rather than reactive. Some of the things we mentioned above can’t simply be done overnight at the whim of one decision-maker. So, how can you be better prepared for the next catastrophe?
Situations like these require full transparency in your supply chain and a deep understanding of who is dependent on what. You need as much information as possible to see where your inventory is, how many orders you have, and to set up potential alternative vendors as a backup plan. Having a clear flow of data in one system that is connected to your store gives you the visibility you need into your operations in order to respond to emergencies in a timely matter.
Maybe you weren’t severely affected by the coronavirus and you were able to keep things relatively under control. In that case, you may not need a robust system to handle complex workflows. But what if your business model involves hundreds of SKUs, geographically diverse sources, and products that are dependent on multiple suppliers? Things can get out of hand quickly when Plan A fails. There’s no one foolproof way to handle unexpected events and come out unscathed, but you can better equip yourself by strengthening the weak or uncertain parts in your supply chain with more visibility and a strategized backup plan.