An Amazon Supplier Case Study
The labor associated with managing all of the moving parts associated with drop shipping for Amazon, plus the potential cost (if used) of EDI document set-up, translation and transmission seriously impacts the profitability on shipping just one or two items. If the price per item is reasonably high it’s not so bad, but low cost items often lose money and need to be made up from the sale of higher priced items.
Below is an example of one real supplier that found themselves in exactly this situation before discovering OPAL.
Here were the steps they went through to ship an $8.95 order through Amazon (fortunately, they were making up the difference on other product lines):
- Log into the Amazon Portal
- Click on each order and print it
- Manually enter that data from the printout into the ERP system
- Print a Picking Ticket
- Put products into USPS packaging
- Log into the USPS website and re-enter that name and address – AGAIN – and print out the label
- Go back into the ERP “Shipping Data Entry” and create an invoice
- Manually type in the tracking number from the postal web site into the ERP
- Print out an Invoice / Packing List for shipment
- Go back to the Amazon Portal and re-enter the tracking number – AGAIN – for payment.
All of this took about 10 minutes per order. This is the cost computed:
- Order Total: $8.95
- Minus Cost per Item: $1.57
- Equals Gross Profit: $7.38
- Minus Order Processing Labor: $3.67 (10 minutes per order @ $22.00/hr. + benefits)
- Minus Materials $ .58
- Minus Amazon Commission (15%): $1.34
- Profit Before Overhead $1.79
After subtracting all other Overhead Costs, it was determined that nearly $3.00 was being lost per order.
This is an extreme example, but using an approach that is configured to each individual company’s process, OPAL enabled this company to have an adequate margin – even on this item – by implementing a self-driving, touchless order process that eliminated the $3.67 labor cost per order, PLUS provided the necessary communication with Amazon at no cost, communicated with their shipping carriers and processed each order in less than 8 seconds 24 hours a day, including creating invoices in their ERP. All they needed to manage was Pick, Pack and Shipment.