Amazon did a beta launch of their Forward-Looking Order Workflow (FLOW) to help brands better manage Amazon Order Forecast and recover Lost Sales due to Out of Stock (OOS). As per test reports, FLOW-based Advanced commitment from Amazon has helped to drive incremental sales, which is otherwise lost due to Out of Stock. This is a continuous improvement and tweaking of the Amazon model to reward the partner’s most popular and money-making brands and ASINs.
Amazon FLOW is their way of committing ahead of time to forecasted demand and giving brands more certainty of Amazon PO behavior.
From what I understand, this Advanced PO is designed to work as a regular PO but with a difference. Instead of the normal PO, the new FLOW program will allow Amazon to place Purchase Orders with shipment windows that open in a future week for the top best-selling products.
Suppliers have long struggled to forecast Amazon orders. That’s why Amazon is launching this new method of continuous buying to help-
- improve their production forecasting
- improve safety stock level management
- reduce out of stocks (OOS)
- guarantee that adequate inventory is in the right place/ right time for fulfilment.
CUSTOMER DEMAND is FULFILLED = FIRST by ADVANCED PO (FLOW)
and then TOPPED OFF BY REGULAR (JUST IN TIME) REPLENISHMENT PO
HOW BRANDS CAN BETTER PREPARE FOR ADVANCED PO:
- For certain high-selling ASINs, Amazon may issue advance purchase offers for your review that covers part of quarterly demand. This new process will help manufacturers to plan their production for upcoming demand. Things to keep in mind to better prepare for these advanced PO are –
- Keep adequate inventory for bestselling products with high Sales velocity
- update product availability in your catalog
- Let Amazon be aware of any OOS or supply-demand issues in advance.
- Anticipate demand in line with factors like seasonality, trends, New Product Introduction, promotions, etc.
- These advanced PO offers are available on Vendor Central, are issued up to 8 calendar days in advance, and allows the manufacturers to accept only the offers they can fulfill satisfactorily.
- There are options to accept partial quantity that could be shipped/delivered within the advance PO future ship/delivery dates.
- 8 days to accept (or reject) the advance PO offers and then 5 days to agree on the corresponding PO.
- Amazon issues the PO at the end of the offer review period.
- Amazon continues to place additional regular replenishment orders to support shifts in consumer demands
BENEFITS OF FLOW:
- Amazon’s Predictive Replenishment Program (F.L.O.W) enable brands to better predict Quarterly demand and improve the issue of Stockouts.
- Using FLOW, Amazon will send Purchase Orders with a shipment windows for a future week for your best-selling product. This way, Amazon can send commitment ahead of time for forecasted demand and more certainty in demand planning.
- FLOW can definitely help improve in-stock rates, superior ability to plan for fairly unpredictable Amazon inventory needs. This also helps in better management of safety stocks, and gain signification traction in Sales and Consumer demand.
- The winning ASIN will receive future-dated shipment windows and arrive alongside regular replenishment orders. The list is dynamic and go along with Sales and Demand trends!
REMEMBER…
Amazon will continue to request Regular Just In Time (JIT) Replenishment which has the following characteristics:
- Probability Level Demand Forecast is shared Just in Time (Usually Weekly PO.
- Forecast Demand analyzes glance views, sales history, and projected demand for planned promotions, which won’t change. However, with the update, vendors will choose from either of the three probability forecasts:
- P70 – indicates a 70% chance Amazon will place a PO for the stated demand & 30% chance to purchase more.
- P80 – indicates an 80% chance Amazon will place a PO for the stated demand & 20% chance to purchase more.
- P90 – indicates a 90% chance Amazon will place a PO for the stated demand & 10% chance to purchase more.
It is noteworthy to remember that the metrics are all forecasts and not guarantees from Amazon. So, there is an element of risk for the manufacturer and supplier. Consider scenarios when Amazon finds the product available from a different supplier at a lower price, more profits or with less Vendor lead-times. In those cases, Amazon can buy from other vendors as they look to maximize profitability and manage customer demands.
As I have said earlier, Amazon will continue to order inventory through JIT buying. FLOW will preferentially fulfil Customer Demand and the just-in-time buying will fulfil the spillover demand.
FUN FACT: DOES AMAZON DELIVER TO PO BOXES?
Amazon mostly uses UPS for Prime/FBA shipments and will not ship to a PO Box. Only USPS can ship to a PO Box.
As a workaround you can add in the physical address of the Post Office and mark it for your Box number. That way, UPS (Or, Fedex) delivers to the Post Office and the Post Office in turn, puts it in your PO. 🙂
