Distributed Inventory Placement vs Inventory Placement Service for Amazon FBA Sellers

By Erik Matthes

Did you know that Amazon has the right to move your FBA inventory between its fulfillment centers without alerting you? And, that Amazon can split up your FBA shipments between up to three different fulfillment centers? No, we’re not making this up. And, yes, this has probably happened to you already. It has to do with something called “distributed inventory placement,” a standard setting on all FBA accounts.

If you haven’t edited the “Inbound Settings” in your Amazon account, you’ve likely had your products shipped to multiple fulfillment centers instead of just one.

“Why on earth would Amazon do this?” is what you must be thinking to yourself.

The good news is that several logical reasons exist for Amazon Distributed Inventory Placement and fulfillment center transfers.

According to Amazon:

“By default, when you create a shipping plan, your shipment may be divided into multiple shipments, each directed to a different fulfillment center. This division is called distributed inventory placement.

“Units of an ASIN will be sent to a maximum of three destination fulfillment centers in the U.S. The destination fulfillment centers are selected based on the products you’re shipping and where you are shipping from.

“By having your inventory spread across multiple fulfillment centers across the country, the person who buys your product will receive it faster than they would if your inventory was in a single fulfillment center farther away from the buyer.”

We’ve had many customers ask us about this, and we’ve seen questions about this in Amazon’s Seller Forums. So, we decided to help sellers understand Amazon’s rationale behind the process.

Read on to learn more about Amazon Distributed Inventory Placement, how you can work around it, and how Appeagle is helping Amazon sellers make the most of it with our enhanced “Get the Buy Box” algorithm.

Amazon Distributed Inventory Placement explained in a story

The best way to understand why Amazon does Distributed Inventory Placement is the story of Amazon seller Andrea G.

Based in Maine, Andrea uses FBA to fulfill orders on a variety of outdoor products, including several for warm weather. These include some of her best-selling charcoal grills, typically used for summer cookouts.

When Andrea signed up for FBA, Amazon gained the right to make executive decisions on where to ship her inventory. The “Distributed Inventory Placement” setting is the default on every FBA account, allowing Amazon to split shipments into up to three destination fulfillment centers.

Once winter arrives, most of the U.S. is not looking to buy Andrea’s grills. But, thereare some regions that stay warm enough for outdoor grilling year-round. So, if Andrea sends a shipment of grills to FBA before the winter, Amazon will likely split that shipment across multiple fulfillment centers instead of just storing it in the one nearest to Andrea.

Unfortunately, Amazon passes this cost back to Andrea, who must pay for shipping to up to three fulfillment centers instead of just one. Clearly, this can have a severe impact on costs and margins.

And, if Andrea has grills already in FBA inventory in a fulfillment center close to her home in Maine, Amazon has the right to transfer them to fulfillment centers closer to the areas where more people are likely to purchase them during the winter, like Florida and Southern California. So, when customers in Miami or L.A. go to purchase a grill on Amazon in January, they’ll receive it super fast because Amazon transferred it to a closer fulfillment center.

For these transfers between fulfillment centers that occur after her initial FBA shipment, Amazon (thankfully) covers the cost.

Why Amazon splits FBA shipments and transfers products to different fulfillment centers

There are three main reasons why Amazon will split FBA shipments and/or transfer your items to different fulfillment centers:

• Seasonality

• Demand

• Demographics

In the example of Andrea G., you see how seasonality can play a part in this process. The grilling season ends in most of America after September. But, Amazon understands that certain parts of the country will see people barbecuing year-round, and it adjusts the inventory at its fulfillment centers to reflect this.

Amazon also understands that demand may differ from region to region. So, Amazon may transfer products from a NY-based seller to fulfillment centers near the west coast if it finds that those products sell better in California.

Lastly, demographics may also lead Amazon to transfer your products to another fulfillment center. For example, if more people are purchasing your winter coats in Minnesota than New Jersey, Amazon may shift some of your inventory from a Northeast fulfillment center to one in the Midwest.

The common thread between these examples is that Amazon thinks shifting your inventory will result in you making more sales.

How Amazon sellers avoid extra shipping costs from Distributed Inventory Placement

Sellers who want to avoid the cost of shipping to multiple fulfillment centers do have a workaround called “Inventory Placement Service,” but it’s limited. With Inventory Placement Service, you’ll only have to ship each ASIN to one fulfillment center. 

To switch your settings to Inventory Placement Service, follow the steps below:

Doing this switches your account settings from Distributed Inventory Placement to “Inventory Placement Service.” As Amazon puts it:

“If you sign up for the Inventory Placement Service, we will assign you a single Amazon fulfillment center to which you can send all units of a specific ASIN in a shipment. A per-item service fee applies.

“When you use the Inventory Placement Service, the destination fulfillment center is determined by Amazon. You cannot choose the fulfillment center to which you send your shipment. The destination fulfillment center may vary from shipment to shipment. When your shipment arrives at the fulfillment center, it may be split and sent to different fulfillment centers for you.”

So, even if you opt for this change of service, Amazon will still select the fulfillment center at which your shipment will arrive.

And, with the way Amazon constructed its Inventory Placement Service policy, it will likely split your shipment up upon arrival anyway and ship portions to different fulfillment centers.

Amazon also only guarantees that they won’t separate individual SKUs, which is different from everything going to one fulfillment center.

Lastly, Amazon charges fees for Inventory Placement Service.

Here’s the breakdown of the fee structure:

It all boils down to this:

→ With Distributed Inventory Placement, you may have to pay added shipping costs upfront.

→ With Inventory Placement Service, you’ll only have to ship each ASIN to onefulfillment center. But, you incur a per-item fee on each shipment.

To determine if you should use Distributed Inventory Placement or Inventory Placement Service, figure out the costs of each.

If the per-item cost of Inventory Placement Service fees is less than the shipping costs you typically pay to ship your FBA products to multiple fulfillment centers with Distributed Inventory Placement, then you should probably make the switch.

How inventory transfers between fulfillment centers affect Amazon sellers

At this point, you must be wondering how these transfers between fulfillment centers after your initial shipment affect you. After all, Amazon doesn’t have to alert you, so these product movements can feel like they’re happening behind your back.

While these inventory transfer won’t directly affect your finances, they will affect your inventory levels. 

Unless you constantly check them, you may think you have a certain amount of units in one fulfillment center when, in fact, you have less than you thought in that fulfillment center and you’re holding inventory in other fulfillment centers that you didn’t even know about.

Amazon will then hit your listings with “Backordered” status, although they’ll include an “expected restock” date. Unfortunately, you may miss out on sales in the near-term when this occurs.

How Appeagle’s “Get the Buy Box” algorithmic repricing strategy distinguishes between these two “Backordered” statuses

Appeagle’s Get the Buy Box algorithm strategically reprices your listings relative to the Buy Box price until you win the Buy Box yourself.

But, suppose you’re using this strategy on a listing that becomes Backordered due to Amazon transferring inventory between fulfillment centers.

In that event, Appeagle’s algorithm will recognize that your price should stay put until that listing reaches its final destination.

Your price will remain frozen until the item becomes shippable so that it doesn’t get priced down to its min while it was out of stock.

This price freeze helps you win the Buy Box at a higher selling price once you’re back in stock.

And for Amazon sellers, winning the Buy Box at a higher selling price is about as good as it gets.

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