Understanding Amazon Fulfillment Models: FBA, FBM, SFP, and Vendor Central

Oct 17, 2024

We’ve been getting a lot of questions lately on Amazon selling options… which one makes the most sense for your business and what do all the acronyms mean? When selling products on Amazon, choosing the right fulfillment model can greatly impact your business’s success. Amazon offers multiple ways for sellers to get their products to customers, and the four primary fulfillment models are Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), Seller Fulfilled Prime (SFP), and Vendor Central. Each model has its advantages and trade-offs, depending on your business size, product types, and logistics capabilities. Let’s break them down.

1. Fulfillment by Amazon (FBA)

FBA is one of the most popular fulfillment options, where sellers send their products to Amazon’s fulfillment centers, and Amazon takes care of storage, packing, shipping, and customer service.

How FBA Works:

1. You send your products to Amazon’s warehouses.
2. Amazon stores your inventory in their fulfillment centers.
3. Amazon picks, packs, and ships orders directly to customers.
4. Amazon handles returns and customer service on your behalf.

Pros:

• Prime Eligibility: FBA products automatically qualify for Amazon Prime, which provides fast and free shipping to customers, increasing sales potential.
• Scalability: FBA allows you to scale without worrying about warehouse space, logistics, or shipping.
• Amazon’s Customer Service: Amazon manages all post-sale services, including returns and refunds, reducing seller workload.
• Trust: Customers trust Amazon’s fast shipping and reliable service, which can enhance your brand’s credibility.

Cons:

• Fees: FBA fees include storage fees, fulfillment fees, and additional fees for inventory that stays too long in Amazon’s warehouses. These can add up, especially for larger or slower-moving products.
• Less Control: Sellers lose direct control over their fulfillment and shipping processes, which might be an issue if you want to manage specific aspects of the customer experience.
• Inventory Management: Amazon charges long-term storage fees, which can increase if you fail to move inventory fast enough.

2. Fulfillment by Merchant (FBM)

FBM allows sellers to list their products on Amazon, but they handle all aspects of storage, shipping, and customer service themselves.

How FBM Works:

1. You list your products on Amazon.
2. When an order is placed, you pack and ship it from your own warehouse or fulfillment center.
3. You handle customer service and returns directly.

Pros:

• Lower Costs: Since you’re not using Amazon’s fulfillment centers, you avoid FBA fees. This can make FBM more cost-effective, especially for larger or slower-moving products.
• Control: You have complete control over inventory management, shipping methods, and the entire customer service process, allowing for customization.
• Profit Margins: FBM allows you to retain a larger portion of the profits as you control the shipping logistics.

Cons:

• No Prime Eligibility: FBM products are not eligible for Amazon Prime shipping, which may reduce visibility and appeal to Prime customers.
• Shipping Burden: Managing your own shipping logistics can become complicated and time-consuming, especially as order volumes grow.
• Customer Service: Handling customer service, including returns and complaints, falls entirely on you.

3. Seller Fulfilled Prime (SFP)

SFP combines the benefits of FBA’s Prime badge with FBM’s control over fulfillment. With SFP, you ship products directly from your own warehouse but offer Amazon Prime shipping to customers.

How SFP Works:

1. You store and ship products from your own warehouse.
2. You meet Amazon’s strict shipping requirements, including fast delivery times.
3. Your products are eligible for Prime, just like FBA products.

Pros:

• Prime Eligibility: Like FBA, SFP products get the Prime badge, increasing your chances of winning the Buy Box and reaching Prime members.
• Inventory Control: You maintain control over your own inventory, which can be a significant advantage for businesses that want to manage their logistics.
• Brand Trust: Offering Prime shipping without using Amazon’s warehouses can boost customer trust while allowing you to maintain more control over the fulfillment process.

Cons:

• Strict Shipping Requirements: You need to meet Amazon’s high standards for shipping speed and reliability, which may require investments in logistics and staff.
• Cost of Infrastructure: While you avoid FBA fees, the cost of running a fulfillment system that meets Prime standards can be significant.
• Complex Setup: SFP requires a strong fulfillment operation in place, which may not be feasible for smaller sellers.

4. Vendor Central

Vendor Central is an invitation-only program where you sell your products to Amazon wholesale. Amazon then resells the products to customers, taking complete ownership of the process.

How Vendor Central Works:

1. Amazon buys your products in bulk.
2. Amazon manages storage, pricing, and fulfillment.
3. Amazon sells your products directly to customers under the “Ships from and sold by Amazon” label.

Pros:

• Amazon Takes Over: Amazon handles everything from fulfillment to customer service, which reduces the workload on your end.
• Brand Trust: Products sold directly by Amazon may benefit from additional customer trust and potentially better visibility on the platform.
• Simplified Logistics: You don’t need to worry about shipping individual orders—just sending bulk shipments to Amazon.

Cons:

• Loss of Control: You lose control over pricing, marketing, and even how your product is presented on Amazon.
• Lower Margins: Selling wholesale to Amazon usually results in lower profit margins compared to selling directly via FBA, FBM, or SFP.
• Invitation Only: Vendor Central is invitation-only, so it may not be an option for all sellers.

Conclusion: Choosing the Right Fulfillment Model

• FBA is ideal for sellers who want to scale rapidly, leverage Amazon’s Prime shipping, and offload the logistical burden. However, the fees can be a drawback for large or slow-moving products.
• FBM is great for businesses that already have efficient logistics in place and want to maintain control while avoiding Amazon’s storage fees, but the lack of Prime eligibility might be a downside.
• SFP offers the best of both worlds by allowing you to retain control while still benefiting from Prime, but the logistical demands can be tough.
• Vendor Central is suitable for larger brands looking for Amazon to manage everything but comes at the cost of reduced control and potentially lower margins.

Each fulfillment model has its pros and cons. The best choice depends on your business’s size, growth ambitions, and operational capabilities. By understanding these fulfillment options, you can make a strategic decision that aligns with your goals and maximizes your success on Amazon.

Navigating the Storm: Insights from Ed Katz, President of AP Express, on the Potential Impact of an East Coast Port Strike

Sep 18, 2024

As the president of a third-party logistics (3PL) company based on the West Coast, I’ve witnessed the highs and lows of global trade firsthand. Few events have been as disruptive as the 2002 West Coast port lockout. With the looming threat of an East Coast port strike, the lessons we learned from that challenging time are more relevant than ever. Port disruptions can have a ripple effect across entire industries, and this potential strike could cause severe damage to commerce, perhaps even exceeding the chaos of the 2002 lockout.

A Look Back: The 2002 West Coast Port Lockout

In 2002, the West Coast faced a 10-day port lockout that brought shipping to a standstill. Over 29 major ports were shuttered, resulting in billions of dollars in losses and massive supply chain disruptions. The effects on industries reliant on just-in-time deliveries were profound, and the backlog of containers took months to clear. For those of us in the logistics sector, it was a stark wake-up call.

During those ten days, my team and I had to pivot rapidly. We sought alternative shipping routes, managed growing inventory bottlenecks, and worked tirelessly to keep our clients’ supply chains moving. It was a reminder of how critical flexibility and preparedness are in logistics, especially in the face of unforeseen disruptions.

The Looming East Coast Port Strike: A New Threat

Now, with the threat of an East Coast port strike on the horizon, I can’t help but draw comparisons to 2002. But unlike the West Coast lockout, this time the stakes are higher. East Coast ports like New York, New Jersey, Savannah, and Charleston handle a tremendous volume of goods, and businesses that shifted their supply chains to the East after the West Coast’s volatile labor history are at risk of facing major disruptions once again.

If this strike occurs, we could see:

1. Widespread Supply Chain Disruptions: East Coast ports are critical gateways, and a strike would instantly create a massive backlog. Rerouting through Gulf Coast or West Coast ports may not fully alleviate the impact. The sheer volume of shipments passing through the East Coast could overwhelm alternative routes, much like in 2002.
2. Inventory Shortages: The delay in processing and unloading goods could lead to significant inventory shortages across multiple industries, particularly for businesses dependent on timely deliveries.
3. Soaring Costs: As companies scramble for alternative shipping methods, costs will rise—whether through air freight or increased demand for warehousing. During the 2002 lockout, those that relied heavily on ocean freight were hit with exorbitant costs as they sought alternatives.
4. Warehousing Shortages: As inventory builds up, the demand for warehousing will surge. Companies that secure storage early will be better positioned to manage the overflow. In 2002, warehousing became a hot commodity, and I expect the same to happen if East Coast ports shut down.
5. Reputational Damage: Companies that can’t deliver on time may face lasting reputational harm, especially as customers today expect quicker, more reliable fulfillment.

Preparedness Is Key: Lessons from 2002

Looking back on the 2002 lockout, one of the biggest lessons was the need for supply chain diversification. Businesses that relied solely on West Coast ports faced much more disruption than those with diversified strategies. The same is true today for companies heavily dependent on East Coast ports. Diversifying shipping routes and leveraging different ports can provide a much-needed buffer in case of a strike.

Equally important is communication and collaboration. In 2002, we found that businesses that communicated openly with their 3PL partners and suppliers were better able to adjust to changing circumstances. The same will hold true now—timely, clear communication with logistics partners will be critical in navigating the potential strike.

Investing in technology also played a huge role in mitigating the impacts of the 2002 lockout. Real-time tracking, inventory management, and data analytics allowed businesses to make informed decisions and stay nimble. Today, those tools are even more advanced and essential for any company looking to minimize disruption.

Helping Our East Coast Counterparts: The West Coast Advantage

As a West Coast-based 3PL, AP Express is uniquely positioned to assist businesses and other 3PLs on the East Coast that are facing potential challenges from a strike. We’ve experienced the pain of port disruptions, and we’re well-prepared to help those on the East Coast find alternative solutions to keep their supply chains flowing.

West Coast ports, which have stabilized in recent years, may become viable alternatives for East Coast companies seeking to reroute shipments. Our team has extensive experience working with these ports and can help streamline the transition for businesses in need of swift adaptation. Whether it’s rerouting through West Coast ports, securing warehousing, or finding alternative shipping methods, we’re ready to step in and offer solutions.

We understand that East Coast businesses might not have a robust network in place on the West Coast, and that’s where we come in. Our connections, relationships, and expertise can help bridge the gap and provide much-needed support during these uncertain times.

The Role of 3PLs in Navigating Disruptions

As a 3PL provider, we thrive on managing uncertainty. The 2002 lockout proved that agility and resilience are key to surviving port disruptions. Our ability to pivot quickly, leverage our networks, and find creative solutions kept our clients’ supply chains moving then—and we’re ready to do the same now.

Working with a 3PL that understands the complexities of port operations on both coasts is crucial during times like these. At AP Express, we’re committed to helping businesses reroute shipments, secure warehousing, and navigate the many challenges that a port strike could present. Our West Coast presence gives us a distinct advantage in helping East Coast companies find solutions, ensuring that goods continue to flow smoothly despite the looming disruptions.

Moving Forward with Confidence

While the possibility of an East Coast port strike is daunting, it’s not an unprecedented challenge. The 2002 West Coast lockout provided valuable lessons in how to manage port-related disruptions, and those same lessons apply today. By diversifying supply chains, investing in technology, and collaborating with logistics partners who have experience on both coasts, businesses can prepare for the worst while hoping for the best.

At AP Express, we’re ready to help. With our West Coast expertise, extensive networks, and commitment to client success, we’re here to support businesses on both coasts as they navigate the potential storm ahead. Together, we’ll find solutions, minimize disruptions, and ensure that commerce continues to thrive, no matter what challenges arise.

AP Express Origin Story from Jeff Pont, Founder and CEO

Sep 17, 2024

How did AP Express Logistics come to life?

My journey into logistics began in an unexpected way. I initially worked in law enforcement and coached high school football. However, after a serious back injury, my career as I knew it ended. Faced with the need for a new path, my entrepreneurial instincts kicked in, and I started exploring various business ideas.

I quickly saw the potential in the transportation industry, especially in Southern California, where the demand was high due to the influx of shipments from the port and a thriving commercial printing sector. I leased a truck, started with just $50 for fuel, and began approaching local warehouses. My first client trusted me with their local deliveries, which allowed me to build a small fleet of seven trucks. The inspiration behind my business was simple: to provide exceptional service and always find a way to say “yes” to customer needs.

When I launched AP Express, my initial focus was on providing reliable freight and trucking services. I noticed that many customers were frustrated with the lack of visibility and communication from their 3PL providers. This inspired me to do things differently.

My goal was to leverage technology to enhance tracking and provide real-time updates to our customers. I wanted to give them complete transparency about their shipments, which led to our customers referring us to others and our rapid growth. Over time, our mission evolved to focus on performance metrics and exceptional customer service, which continue to drive our business today.

What key strategies have you implemented that significantly contributed to the growth of AP Express?

One strategy that fueled our growth was focusing on a niche market. After securing our first client, word spread quickly, and within a year, we were handling transportation for over 90% of the commercial printing industry in Southern California. This niche focus allowed us to deeply understand and cater to the specific needs of our clients.

Another pivotal moment was our expansion from transportation services into 3PL. Many of our transportation clients needed help with smaller shipments, so we expanded our fleet to include smaller vehicles. This shift allowed me to step back from driving and focus on managing and growing the business. We also expanded our facilities, moving into a larger office and dispatch center, and later securing additional warehouse space as customer demand grew.

Listening to our customers and always finding a way to say yes has been crucial to our success. For instance, when a client needed to expand their warehouse space from 100,000 to 500,000 square feet, we doubled our space. Soon after, another customer needed a million square feet of space, and we made that happen too. These decisions weren’t made lightly, but they were essential for meeting our customers’ needs and ensuring our growth.

How have you stayed competitive in the dynamic logistics industry, and what strategies keep you ahead?

Our competitive edge comes from investing in our people. We have a dedicated team with many employees who have been with us since the early days. Their experience and commitment to accuracy and timeliness are invaluable. We offer competitive pay, great benefits, and a collaborative work environment, which helps us attract and retain top talent.

Our strategic locations also set us apart. We’re positioned near the LA ports for efficient transportation to our facilities, and we have operations in Las Vegas, Nevada, to offer the business-friendly benefits of that state.

Speed is another critical factor, especially with the rise of e-commerce and the demand for faster deliveries. By staying on top of technological advancements, we’ve been able to maintain the speed and efficiency our customers expect.

What differentiates your company from other 3PL providers, and how do you maintain that distinction?

Our company stands out because I’m personally involved in the day-to-day operations. I know my customers and am on the floor daily to ensure we exceed their expectations. My team shares this commitment, which is why we act quickly in any logistical emergency. We’re not just a service provider; we’re a partner to our customers, helping them grow and solve problems.

We also offer value for money by being large enough to handle significant operations yet small enough to provide personalized service. Our nimble, problem-solving approach allows us to operate more efficiently than larger competitors, giving us an edge in the market.

What major challenges have you encountered in the 3PL industry, and how have you overcome them?

One of the biggest challenges has been finding the right people. The success of our business hinges on having a team that understands our customers’ needs and can execute tasks efficiently. We’ve addressed this by creating a work environment that values and retains talent.

Another challenge has been securing competitive pricing on equipment, leases, and materials. This has been crucial for maintaining profitability and offering competitive pricing to our customers.

Finally, staying ahead in technology has been a continuous challenge. Providing customers with real-time visibility into their inventory and key performance metrics has become a standard expectation, so we’ve invested heavily in technology to meet these needs.

What advice would you give to someone looking to start their own 3PL business?

Be prepared for hard work and long hours. Get involved in every aspect of your business and lead by example. Your customers are your top priority, so focus on being a solutions provider rather than just a cost to them. Help them grow by offering efficiencies and ideas that add value to their operations.

It’s also essential to be adaptable. The logistics industry is constantly evolving, and your ability to stay ahead of trends and meet changing customer needs will be critical to your success.

How do you see the future of logistics and 3PL evolving, and how are you preparing for it?

The demand for faster delivery times will only increase, so we’re continually looking for ways to move products more efficiently. At AP Express, we’re excited about the potential of new technologies and automation to make processes faster and more cost-effective.

Artificial intelligence, in particular, is a game-changer. We’ve already seen significant improvements in efficiency through AI, such as speeding up EDI coding for retailer specifications. We’re committed to staying ahead of the curve and anticipating future trends to remain competitive.

What tools and technologies do you rely on to run your 3PL operations effectively?

We use a robust tech stack that includes Cart Rover and Extensiv for e-commerce and pick & pack operations, and Ramp Logistics for real-time inventory visibility. For EDI, we rely on SPS Commerce, which is well-connected to the retailers our customers work with. Staying connected with industry communities like Fulfill.com, Clutch reviews, and publications like Supply Chain Dive keeps us informed of the latest trends and best practices.

Personal Reflections

What has been the most rewarding aspect of your journey as a 3PL founder?

For me, the most rewarding part has been creating jobs and fostering a work environment where people feel valued. Our workplace is more than just a place to work; it’s like a second home. It’s important to me that my employees enjoy their time here and feel appreciated.

I also take pride in the long-term relationships I’ve built with my team. Some of my employees have been with me for over 30 years, and that continuity has been crucial to our success. I make it a point to stay connected with former employees, attending their family events and milestones, because relationships are at the heart of our business.

Can you share an inspiring story from your time as a business owner?

In 2017, I faced a life-changing event when an off-roading accident left me paralyzed. Doctors told me I’d never walk again, but I refused to accept that prognosis. Through sheer determination, countless stem cell treatments, and a lot of hard work, I defied the odds and am now part of the 1% of walking paraplegics. Since then, I’ve pursued new challenges, becoming a helicopter pilot and a certified scuba diver.

During my recovery, the AP Express team stepped up and ran the business without missing a beat. Their dedication and support were incredible, and it reinforced the importance of building a strong, capable team.

What leadership principles do you follow, and how do you keep your team motivated?

My leadership philosophy centers around partnership. I see my leadership team as partners, and we share an owner mentality—everyone is responsible for results, and we win as a team. Leading by example, working hard, and showing empathy are core values we all share.

Motivation comes from recognizing and appreciating your team’s efforts. We offer excellent benefits, performance-based bonuses, and regular team-building events to maintain a positive work environment. Our company culture is like a family, and that’s why we have team members who have been with us for decades.

How did you choose the name “AP Express,” and does it hold special significance?

The name “AP Express” originally came from combining the initials of my business partner and me—”P” stands for my last name, Pont. Over time, the name took on a deeper meaning, aligning with our company ethos: “Anything is Possible.” This phrase embodies our commitment to solving problems, adding value, and always finding a way to say yes to our customers.