Avoid Amazon Lead-Time Chargebacks (10 PRO TIPS)
If you’ve sold directly to Amazon for at least a year then you know that Amazon loves to make continuous upgrades to their systems and processes. They continuously challenge themselves, and you to improve. Their recent changes to expected lead time and ship/delivery windows could have you scrambling to keep up, and frustrated with chargebacks for missing those windows. Here are 10 PRO-TIPS to avoid those chargebacks and improve your own processes.
1. Know the difference between PO Ship Windows and Delivery Windows. If Amazon pays for the freight (called by the term “Freight Collect”, which is actually 3rd party freight billing), then your Purchase Order dates are Ship Windows. You have an earliest ship date and latest ship date that creates the window. There isn’t a cancel date on the PO, as found with other retailers. When you confirm a PO within the Ship Window, you must pick, pack, and submit a Routing Request at least by 10am Pacific time the day before the last day of the Ship Window. If you, the vendor, pay for shipping to Amazon fulfillment centers (FC), then your terms are “Freight Prepaid” and your PO has a window for delivery to the Amazon FC. This is defined as the date the carrier asks Amazon to deliver to the FC. You have to pick, pack, and ship while accounting for the transit times of your carrier between your warehouse and Amazon’s FC’s. Your carrier must make an appointment with Amazon to deliver the shipment on or before the latest delivery date on the PO.
2. Determine transit times between your warehouse and Amazon FC’s. Prepaid vendors have to closely monitor when items are shipped. If shipped too early or late, they run the risk of a chargeback. Review how you prioritize picking shipments and consider prioritizing Amazon’s POs. If your terms are Prepaid, and you can’t meet the Delivery Windows, you should consider other process changes or switch to Freight Collect to simply meet a ship date with an Amazon selected carrier.
3. Eliminate hand-entered data. Every time you have to enter data by hand you introduce the opportunity for a mistake, wait time, and worker movement that may be excessive. Look at your information flows and the walking that your workers have to put in to input data. Using a map of the facility, track and draw footsteps to create a “spaghetti chart” of movement around hand-data entry. Count the steps, cut out the steps, cut out the need to take steps to enter data.
4. Improve pick accuracy and speed and invest in Pick-by-Gun Systems. Do you know what your pick accuracy is? Amazon does. “Fast, Cheap, or Accurate, which do you want?” has been a common reply from the picking floor. This statement is patently false. You can have it all by picking with an inexpensive scanning gun and the appropriate warehouse management software.
5. Release smaller groups of picking requirements in “waves” multiple times per day. Shorten your pick cycle and release smaller batches of pick orders to the warehouse. These changes can result in much shorter overall cycle time and a much shorter overall lead time. Mature your pick system using a LEAN work leveling (Heijunka) system as the next step.
6. Use EDI if it is connected to an order processing system. The more POs you get, the longer it can take to process shipments. EDI feeds connected to order management systems and shipment and warehouse systems avoid hand and manual entry, or downloading and uploading spreadsheets. They streamline the PO management process, significantly reducing the time it takes to confirm POs, create a ship notification, create carrier routing requests, and create invoices. EDI feeds that are disconnected from your other systems don’t help much, and may create additional points of error and hand entry. Take a bigger picture view of your information flow within your organization to truly shorten lead times and the wasted time of information waiting around to be hand-entered into a system. The hidden waste of “batch processing” of orders can significantly lengthen your order processing lead time.
7. Eliminate secondary “Amazon Only” preparation whenever possible. It’s inefficient to have Amazon-specific processes for prep. Amazon’s lead time and ship/delivery window changes require a higher level of warehouse efficiency. Most Amazon prep requirements are best-in-class requirements: UPCs must be easily readable, products must be able to meet safe shipment guidelines, products shouldn’t get damaged in transit; liquids can’t leak in transit when sent to the consumer. All of these requirements can benefit all of your eRetail channels. Consider making Amazon’s requirements a standard.
8. Be prepared to efficiently break master packs. Master case packs are irrelevant to Amazon since they usually end up shipping only one unit to a customer. Amazon wants to stock as many units as they need–and no more–rather than stocking specific vendor-required minimums. Pre-package individual items to Amazon specifications so that you can pick and pack in non-standard quantities.
9. Get an Amazon B2B 3PL warehouse. Third-party logistics warehouses are a lower-cost alternative to setting up your own fulfillment solution. Some are very effective at shipping to multiple retailers but others struggle with Amazon’s evolving requirements. Amazon should be one of your top 5 retailers, so it’s important to have the right warehouse partner. Many 3PLs advertise they “work with Amazon,” when in fact they only work with Sellers/Merchants, not Vendors. Amazon Vendor requirements for labelling, routing, ship notification, and invoicing (Amazon B2B) are different than Seller requirements. If your 3PL fails to comply with Amazon, incurring chargebacks week after week, either hold them responsible for the chargebacks or find a new 3PL.
10. Temporarily backorder until you can improve your processes to hit the PO windows. If you have backorder capabilities you can avoid lead-time chargebacks by pushing back ship/delivery dates. Make sure to ship/deliver the last unit on the date(s) you confirm, or else you’ll get a chargeback. We caution you to use this method only when absolutely necessary and temporarily. Amazon can take away backordering if it’s used too often. If you’re able implement many of the changes we’ve outlined, you shouldn’t need to backorder as often or at all.
BONUS TIP: Implement LEAN Process improvement for continuous improvement. LEAN process improvement, combined with Six Sigma and a healthy dose of Goldratt Evaporative Cloud thinking, can significantly alter the performance of any process and any organization. LEAN can also fall flat on its face and just be another “improvement plan of the current (on the way out) administration.” LEAN requires a firm, long-term management commitment, and the idea of continuous improvement and employee empowerment need to become core values of the organization. Toyota, GE, Lockheed Martin, and yes – AMAZON all have surpassed themselves by leveraging LEAN Sigma. You can find LEAN SIGMA trained personnel as well as implementation expertise almost anywhere in the world. LEAN isn’t about supply chain or manufacturing improvement either, LEAN applies to any process you have in your company. We can’t emphasize enough the transformational value of LEAN (we drank the Koolaid when we were at Amazon).