Amazon’s new service aims to capture more value from its fulfillment network

The news: Amazon rolled out a new service called Amazon Warehousing & Distribution that lets sellers store long-term inventory in Amazon distribution centers to enable them to “seamlessly replenish” fulfillment centers, wrote Gopal Pillai, vice president of Amazon distribution and fulfillment solutions, in a blog post.

  • The so-called “supply chain-as-a-service” offering, which is set to launch next year, aims to help address Amazon sellers’ inventory management challenges by offering operational efficiencies.
  • “For many businesses, managing logistics and operations—such as inventory storage, distribution, and order fulfillment—is a source of complexity and cost,” wrote Pillai. “These challenges have only been amplified in recent years as constrained supply chains caused global inventory backups and fulfillment challenges.”

Good timing: Amazon is seeking to wring value out of the excess capacity it built up when it aggressively expanded its warehouse footprint throughout the pandemic in response to the surge in ecommerce demand.

  • The timing is right given that warehouse vacancy rates are among the lowest they have been in decades. That’s due to a confluence of factors, including retailers stocking up early on goods to avoid supply chain-related outages, and softening demand for items such as consumer electronics, which has left merchants with excess inventory.

The big takeaway: Amazon is making a savvy move that, not surprisingly, should bolster its business by luring sellers deeper into the Amazon ecosystem.

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