How the Supply Chain Can Prepare for Changes to the Amazon Marketplace

If you are a manufacturer or wholesaler, being removed from Amazon Vendor Central might be one of the most stressful things that can happen to your business. That nightmare appeared to become a reality for thousands of companies last month, when Amazon suddenly stopped sending orders for wholesale products from many of its vendors – sending them into a state of panic. While it turned out to be a false alarm, a scenario where Amazon shifts how it interacts with its various suppliers and retailers is quite possible.

Last month’s scare underscored how vigilant Amazon’s supply chain partners must be in anticipating adjustments the e-commerce giant makes to the Amazon Marketplace – especially regarding Amazon’s trading requirements for participating vendors. After all, mandated requirement changes can have a huge impact on vendors (and, by proxy, their supply chain partners) – look no further than Walmart’s decision in 2002 to move to the EDIINT AS2 protocol for electronic data exchange with its national and global suppliers.

This is where integration technologies can make or break a revenue stream. Because without a flexible, dynamic integration platform, these small changes can result in missed deadlines, impacted SLAs, fines, chargebacks for electronic data interchange (EDI) – leading to “death by a thousand cuts,” rather than the doomsday scenario Amazon’s vendors envisioned in March.

To help illustrate the ramifications of these potential changes for supply chain organizations, we’ll examine the two primary components of the Amazon Marketplace.

Amazon Vendor Central

Amazon Vendor Central (AVC) is the web interface used by suppliers that allows Amazon to sell suppliers’ goods. Access to this platform has traditionally been by invitation only, which means Amazon enforces stringent guidelines for fulfilling their orders. AVC is highly dependent on EDI for purchase order, advance shipping notice, and other fulfillment data, and it’s highly punitive towards late or inaccurate data. Vendors using this platform need reliable and resilient integration to remain EDI-compliant with Amazon – otherwise they risk chargebacks from Amazon, and even a one percent chargeback can torch a retailer’s entire profit margin.

Amazon Seller Central

Amazon Seller Central (ASC) is the web interface used by brands and retailers to sell their products directly to Amazon customers, and it’s open to anyone. The Amazon Marketplace serves as a “digital shelf” for these products, and Amazon collects a fee on each transaction. Vendors using this API-based method are considered “third-party sellers” and handle the shipping, customer service, and returns for each individual order – or they can enroll in the Fulfilled by Amazon program, so Amazon can handle all of it.

While using ASC helps brands because they can bring their products to market faster, control the pricing, and offer more flexible logistics services, there is significant downside without the right integration – mostly in the form of internal teams’ time and resources spent trying to build an API connector.

Hypothetical: Why modern integration technology matters

To help paint the picture of why this matters to supply chain organizations, here's a hypothetical scenario for a supply chain partner: a large trading partner (the ecosystem power broker) has changed their requirement for an advanced shipping notice (ASN), and there is a ticking clock for your vendor partner to meet the new mandate. If the vendor is relying on outmoded, legacy integration that is rigid and struggles to enact changes to specific trading partner requirements, meeting the mandate will be next to impossible.

Now imagine that for every ASN that doesn’t meet the mandate, there is a $1,000 fine (not unheard of). If the trading partner is a national retailer, it could have hundreds of locations representing hundreds of truckloads weekly. The inability to effectively meet the new integration requirement, if unsolved, will quickly become a seven-figure issue for your vendor partner – well beyond the cost of updating the integration infrastructure.

The arguments for updating the integration infrastructure are many:

  • There is an opportunity cost associated with vendors not modernizing their integration infrastructure: their business may end up like a standing rock in a river, with competitors rushing past and eroding the vendor’s foundation.
  • Legacy integration is inevitably costly, as it requires a rarer skillset from the IT manager, the retention of on-premises infrastructure, and complex, manual maintenance.
  • If the vendor finds itself in a situation where it is over a barrel because of a new mandate, integration can be coupled with services to ensure even aggressive timelines can be met.

Preparing for change: Next steps for supply chain

As one of the largest e-commerce marketplaces in the world, any adjustments to the Amazon Marketplace business model will massively affect supply chain organizations. Vendors that don’t proactively upgrade their integration infrastructure will miss out on countless revenue opportunities, which directly impacts their supply chain partners.

This means that reliable and seamless integration with the Amazon Marketplace is a must for vendors aiming to unlock and optimize new revenue streams. And this is true for not just Amazon, but also Walmart or any other business partner – vendors must be capable of rapidly adapting to evolving ecosystem integration requirements of any flavor, whether they be communications protocols, EDI document formats, or application programming interfaces (APIs).

Given these ever-evolving marketplace requirements, supply chain organizations would be wise to check in with their vendors and partners to determine their Amazon Marketplace integration strategies. Whether they realize it or not, vendors and their supply chain partners are tied at the hip with Amazon, and tight integration with the Amazon Marketplace is the pathway to continued prosperity.

1 comment on “How the Supply Chain Can Prepare for Changes to the Amazon Marketplace

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    April 24, 2019

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